Authors: Jay Leary, Partner and Global Head of Mining; Jesse Martino, Graduate
This article is part of our Future Cities Series, where our experts explore the pressures facing our cities in the post-Covid era and map out the key issues and industry themes in re-thinking urban life.
By now, it’s widely accepted that our cities of the future need to be cleaner, greener and technologically superior, conjuring images of renewable energy, electric vehicles and ‘smart’ everything. You’d be forgiven for thinking that the mining sector sits counter to this vision – but you’d be wrong. In fact, the green, climate-conscious globe that we strive towards will rely heavily on mined natural resources, and has already set in motion a transformation of the sector as we know it.
The next chapter for mining: Bigger, cleaner, and more crucial than ever for low carbon cities
The mining sector is not generally perceived as ‘clean’ or ‘green’. There’s no escaping that the sector is responsible for 4 to 7 percent of greenhouse-gas (GHG) emissions globally, generating between 1.9 and 5.1 gigatonnes of CO2 equivalent (CO2e) of GHG emissions annually. As the world scrambles to meet the targets established at the Paris Climate Agreement in 20151, and we begin to map out a more sustainable framework for our rapidly-growing (and heavily energy-intensive) cities, there is some suggestion that an expiry date for the mining sector is approaching. Putting aside fossil fuel commodities, this view is far from fact. The practical reality is that decarbonisation, energy transition and technological advancement – the crucial components of green cities – are heavily reliant on the mining sector. The increased focus on greener energy production heightens the need for more minerals, which will expand, rather than contract, the sector.
In light of this, the time is ripe for the mining sector to rebuild trust with society at large by re-articulating the role it will play in the global economy – as a supplier of critical and green minerals produced in a sustainable and ethical fashion.
New tech relies on new minerals
Net zero carbon emission agendas, most often being adopted and led by city governments at the frontline of climate change, will require the large-scale roll-out of renewable energy technologies. This technology is required to eliminate emissions from power generation and to decarbonise the world’s manufacturing and transport sectors, which currently rely on coal, oil and gas.
The necessary corollary to this is that most components of renewable energy systems require minerals in order to operate. A recent World Bank report estimates that over three billion tonnes of minerals are required by 2050 to match the energy production and storage demands of an economy that complies with the requirements of the Paris Agreement. This represents a predicted increase in demand of up to 500 per cent from current levels for certain minerals, such as lithium, graphite and cobalt, which are used in energy storage technologies (eg batteries).
Such ‘rechargeable’ solutions are critical for other cleaner technologies, too. Demand for electric vehicles has grown and will continue to grow, represented by the combined annual sales of battery electric vehicles and plug-in hybrid electric vehicles, which surpassed two million for the first time in history. There will also be increases in demand for minerals such as indium used in energy capture technologies like solar panels (estimated to increase production by 12 times current levels by 2050).
Emerging technologies such as hydrogen fuel cells and carbon capture will also boost demand for platinum, palladium, and other catalyst materials, while rare earths would be needed for wind-turbine magnets. The growth of these commodities is also likely to alter demand patterns for upstream mining commodities. Cumulatively, these developments will offer a significant opportunity for mining companies and countries rich with these sorts of resources – and in turn, play an integral role in shaping our cities of the future.
What will this mean for current mining practice?
Decarbonisation means reducing net GHG emissions to zero – implying an almost complete layoff of coal combustion (which currently accounts for more than 50 per cent of the sector’s revenue). Whilst decarbonisation presents opportunities for the mining sector, mining companies are mindful of the challenges associated with the transition to clean energy – such as moving away from thermal coal. Though thermal coal demand is still on the rise, it is now far more difficult to obtain capital investment in coal mines. Public sentiment is rising against thermal coal production, and financial institutions are pulling away from lending for major thermal coal projects.
To confront these challenges, mining companies will need to exercise agility to rebalance their portfolios – and this is already playing out across the world. Such agility could become a competitive advantage in enabling responses to mineral demand shifts in future. On the other hand, mining companies with copper-heavy portfolios, as opposed to coal, may benefit from demand growth related to widespread electrification. Iron ore and aluminium-heavy portfolios may see an upside from decarbonisation technologies, too. Demand for metallurgical coal, an essential – but often misunderstood – component in steel-making remains strong.
The future of mining
As our cities continue to transform and grow, so, too, will our reliance on mining. In order to meet crucial emissions targets, we will see an evolution in what, how and where commodities are mined. This transition won’t be without its challenges, but miners who can act to diversify now will be in a better position to take advantage of future mineral demands and help pave the way to a more sustainable future for our communities and their citizens.
- The goal of the Paris Agreement is to significantly reduce greenhouse-gas emissions between 2010 and 2050. Preferably a 78 to 89 percent decrease to ensure global warming caps at 1.5°C. Alternatively, a 41 to 72 percent decrease to ensure global warning caps at 2.0°C.