Global carbon price will drive mining windfall: study

A global carbon tax should accelerate the transition to a low-carbon future. With the mining industry set to reap huge profits, some say it’s time to back environmentalists

The mining industry would see a financial windfall from a global carbon tax, so why does it continue to fight change? It’s the contradiction that researchers at the University of British Columbia examined in a study that drew strong opposition from the oil and gas industry.

The research, published in the journal Nature Communications Earth and Environment last week, provides evidence that under a global carbon tax regime, mining companies would gain a competitive advantage on a variety of commodities in the fossil fuel industry, agriculture and construction.

At the best of times, the mining industry has remained fractured in its support for carbon tax regimes. Some companies have supported carbon prices, while many industry organizations, such as the Minerals Council of Australia, have called carbon taxes anti-employment.

As echoed in a Mining Association of British Columbia advocacy paper in October 2020, the carbon tax is “the single greatest impediment to the competitiveness of BC mining.”

It’s a message that the study’s lead author, Benjamin Cox, says he’s heard a lot.

“The mining industry as a whole has this sudden reaction to the carbon tax, much like a meat eater has a knee-jerk reaction to going to a vegan restaurant,” said Cox, a doctoral student at the Institute of mining engineer Norman B. Keevil of UBC.

“’How dare you say we’re going there? We have nothing to do with it. They are not our people. And what we’re trying to say is, ‘Yes, the environmental movement, the pro-carbon tax movement, it’s your people. Get behind them. Encourage them.'”

By cross-referencing public data on the carbon footprints and dollar value of 23 commodities — from aluminum and copper to pork and cheese and coal and oil — Cox and three other researchers have put a wrench in the narrative that all taxes are bad for business.

To make this transition to a low-carbon future, the mining of minerals such as lithium, cobalt and rare earth metals is expected to soar: the World Bank estimates that more than three billion tonnes of minerals and metals will be needed to deploy enough wind, solar and other green technologies to keep global warming below the Paris Agreement target of 2°C.

Today, the global mining and metals industry accounts for 8% of humanity’s carbon footprint. But comparing it to fossil fuels or the agricultural industry, the researchers found that mining generates significantly more value for every ton of emissions released into the atmosphere.

For every ton of C02 produced in iron ore mining, for example, the industry generates US$9,400. Those same emissions only produce about $250 of natural gas or $200 of cheese.

Perhaps most surprisingly, Cox said, mining and processing metals like palladium and bauxite produces more than double the value the solar panel industry produces for every ton of emissions.

Economic value per ton of CO2 emitted in USD for certain energy transition metals and construction materials (blue), energy industry raw materials (green) and certain agricultural products (orange). Benjamin Cox/Earth & Environment Communications

HOW COULD A GLOBAL CARBON TAX HELP?

To date, more than 40 countries and more than 30 subnational jurisdictions have adopted some form of carbon pricing. (The Canadian government plans to increase the federal carbon tax to $50 per tonne in 2022 and up to $170 per tonne by 2030.)

But that leaves more than 150 countries without some form of carbon pricing – a key financial mechanism experts say is working to spur economy-wide change.

Enter a global carbon tax. If set at $150 per ton of carbon dioxide, the study found that the cost would increase mining industry products between 2 and 30 percent of their current value. In comparison, a similar global carbon tax would increase the cost of natural gas by 60%, cement by 109%, beef by 120% and coal by 145%.

Today, Cox says, consumers end up choosing fossil fuel-based products or beef over their less carbon-intensive counterparts, primarily because they’re cheaper. But factor in carbon, and the scales would almost certainly tip in favor of products containing raw materials like copper, a key element in everything from wind turbines to power cables.

“From a GDP perspective, the mining industry has nothing to fear from carbon taxes, because it will simply pay less tax on a relative basis,” Cox said.

There are a few exceptions.

Steelmaking requires both iron and coking coal – the latter element for which the industry has yet to find a good large-scale substitution. So while a global carbon tax would not directly impact iron mining operations, steel makers and coking coal mining companies would be hit harder and would therefore likely lead greater fight against a carbon tax, notes the study.

Aluminum production, on the other hand, requires large amounts of bauxite and energy. Its high energy demands and low value give the metal a relatively high carbon footprint.

But even here, Cox mentions several Canadian operations, like the Rio Tinto aluminum smelter in Kitimat, British Columbia, that rely primarily on hydroelectricity.

Relying on hydropower means that while Canada’s nine aluminum smelters make it the world’s fifth-largest producer, the industry also operates with the lowest carbon footprint – about a third of other manufacturers, notes the study.

There are signs that industry leaders are taking climate change more seriously. According to PwC’s 2021 CEO survey, 76% of global mining and metals executives expressed concern about climate change and environmental damage. That’s up from 57% a year earlier.

Brendan Marshall of the Mining Association of Canada (MAC) says the organization supports the federal government’s current approach to carbon pricing, as well as improving the system over time.

“If you had a global price on carbon and you had a level playing field with carbon as a restraining factor, Canada would have a competitive advantage,” agrees Marshall, MAC’s Vice President of Economic and Northern Affairs and responsible for climate policy.

“Large segments of our mining community would benefit from a global carbon price.”

But Marshall says it’s not just the climate hanging over the mining industry. There are also huge national security concerns as global fault lines emerge between the United States and its allies, and China, where much of the battery-grade minerals and rare earth processing is located.

“There is a race to capture segments of these supply chains. And China is ahead,” Marshall said.

Many companies and governments take the current microchip supply chain crisis in the automotive industry as a wake-up call. They don’t want the same exposure to batteries, Marshall said.

Canada, says Marshall, is well positioned to step in as an alternative: the country has the “sustainability bonafides,” a fairly healthy trade relationship with the United States, and an abundance of minerals that big manufacturers want.

“The climate factor is obvious, but there is also a national security aspect,” he said.

CARBON TAX WILL NOT SOLVE OTHER MINING PROBLEMS

Three-quarters of the world’s mining companies are based in Canada, and many of them operate in other countries. No global carbon tax will solve the mixed and often tarnished record of Canada’s mining industry that tramples on communities and political systems.

Despite a long history of human and environmental abuse – including the eviction of villages, the contamination of water sources and its involvement in several murder cases – the Canadian Ombudsman for Responsible Business does not have the power to independently investigate allegations involving Canadian companies abroad, Human Rights Watch said last year. .

In January 2021, a groundbreaking Supreme Court decision ruled that three Eritreans, who claimed they were forced to work in a mine partly owned by a Canadian company, could have their cases heard in a Canadian court.

Human Rights Watch, which investigated the case, said “the landmark decision could open the door for victims of corporate abuse abroad to sue companies in Canada for violations of international human rights law. ‘man”.

Improving industry oversight could also have huge implications here.

Nationally, the Canadian mining industry remains massive, employing up to 719,000 people and accounting for nearly one-fifth of Canada’s national exports. As exploration expands, questions about environmental regulation remain.

Almost seven years after a four-square-kilometre pond breached its dam, spilling toxic tailings downstream, an internal audit into the Mount Polley mine disaster found that the changes the government promised to make to its regulatory framework were full of inconsistencies, errors and omissions.

Regardless of how the regulatory landscape changes, the pressures to extract highly sought-after metals will only grow. And with one of the highest per capita resource concentrations in the world, Cox says, that puts Canadian miners in one of the best positions to usher in an era of decarbonization.

“We had a lot of nasty reactions from the oil and gas people. They don’t particularly like it,” Cox said. “When the transition occurs, the [mining] the old guard will throw names at me [too].”

“The point is, the only way to get to a working climate change situation is to support positions where we have common ground.”

Richard L. Militello