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LatAm gold mines on the path to decarbonization

Bnamericas Published: Tuesday, May 18, 2021
LatAm gold mines on the path to decarbonization

Latin America’s gold mining industry is well-positioned to meet its 2030 climate change goals amid a shift toward renewable energy, John Mulligan, the World Gold Council’s (WGC) director of market relations and climate change lead, tells BNamericas.

To meet the Paris agreement goal of limiting global warming to below 2°C – or the more ambitious target of 1.5°C – the gold sector must cut carbon emissions by 27% or 46%, respectively, by 2030, according to WGC calculations, and by 80% or 92% before 2050.

The industry is well placed to meet the 2030 targets, which can be achieved through a shift to renewable power, along with the decarbonization of local power grids and the transition away from older, higher emitting operations, according to Mulligan.

Latin America as a region is well-placed to deliver on the Paris goals, with current projects alone expected to cut emissions intensity in power by 21%.

BNamericas: What is the gold mining sector’s carbon footprint and is it growing or shrinking?

Mulligan: We estimate that the annual carbon footprint of gold is around 125Mt of CO2.

That’s an overstatement because we make a very substantial allowance for informal and artisanal production, for which there are no figures available.

If we focus wholly on formal, industrialized production, and that’s where we have a lot better transparency, the figure is closer to 80Mt/y.

If we are looking at 2020, the pandemic slightly reduced gold production, which will have caused a slight dip in emissions, but they are unlikely to have fallen substantially over the past year or two.

I would say there is every indication that they are going to start to fall substantially quite shortly.

The industry has now begun to embrace decarbonization of gold production, and very specifically how it consumes and generates electricity, which is where the bulk of its emissions come from.

BNamericas: How can the industry meet the Paris agreement climate goals?

Mulligan: If the industry is to meet Paris targets, the below 2°C rise in global temperatures or 1.5°C, we have calculated what that means in practice.

To reach the below 2°C target by 2050, we need an 80% emissions reduction. To meet the more ambitious 1.5°C target emissions need to be reduced by 92% between 2040 and 2050.

Looking at what is currently happening, we have started on the path.

By 2030, gold mining needs to reduce its emissions at least by 27% if it's going to be on track for 2°C, and at least 46% to be on track to meet 1.5°C.

That’s what needs to happen over the next 8.5 years.

There are current actions, immediate actions that have already been committed to, it is early days, but we are seeing those accelerate very fast.

There is also the prospect of the impact of grid carbonization.

We looked at 158 of world’s largest gold mines across 31 countries and found 57% of their power was sourced from the grids.

As the grids decarbonize, the gold mines inherit that emissions reduction, and that is quite substantial.

That is very localized. If you look at Nevada, Nevada’s grids are expected to reduce emissions intensity by 36% over the next decade, which is very substantial, and gets you a long way toward being aligned with your climate targets.

In other areas that’s far less the case, but globally we are seeing emissions reductions of grids, and that will benefit gold mining.

In some places, gold mining is one of the main drivers of grid emissions reductions. The industry is asking governments and power suppliers to decarbonize or it is committing to power purchase agreements which will have emissions reductions built in.

That’s why we are fairly confident the pathway is achievable, accessible, and the opportunity is fairly simple compared to some other mining sectors, in the sense that it is all about decarbonizing power.

We estimate that direct actions to move toward renewables, or changing the energy mix, takes us, at the moment, to a 6% reduction in emissions.

The current position with the [decarbonization of] grids takes us to another 9%, and then the mix in assets – the idea that current, large-emitting mine sites are often nearing the end of their life, and their replacement is likely to favor lower-emitting mines – that is going to produce a substantial emissions reduction, of around 19%.

The short answer is if you take all of those, and the energy efficiency drives that have been defining mining over the last half-decade or so, in terms of the move to automation and smart processing, electrification and so on, taking all of this on board we are fairly confident that extrapolating with reasonable expectations, we would expect the industry to be aligned to 2°C.

It needs a bit more ambitious action, specifically in terms of the use of renewables, to be confident to meet the 1.5°C target.

BNamericas: How is the industry performing in Latin America on this front?

Mulligan: Our analysis of the local impacts of these factors and trends suggests that Latin America is one of the regions likely to be most immediately impacted by current projects, with an expected 21% reduction in the emissions intensity of the power driving mining operations.

A further 11% fall in emissions from a shift in production slanted towards lower-emitting mines, and an additional 7% reduction in grid emissions, make the region well-suited to potential carbon reduction levels in alignment with Paris climate targets.

BNamericas: What role does the electrification of vehicle fleets play in meeting climate goals?

Mulligan: The bulk of fossil fuel goes on electricity generation for gold mining operations, but transportation and vehicle use is key too, with a lower percentage.

Electrification doesn’t necessarily generate emissions reduction unless you are plugged in to clean electricity.

If you look at [International Council on Mining and Metals] ICMM’s innovation initiative for cleaner, safer vehicles, it has brought together all the OEMs, all the big manufacturers and the miners, to say mining vehicles will move to lower emissions and they will be cleaner and safer.

The commitment is there, and the vehicles are being produced. Some gold mining companies were pioneers in this, and it is the trend.

It will deliver emissions reduction, but not the low-hanging fruit in terms of very substantial emissions reduction.

It is complementary and supportive.

BNamericas: What is driving the recent push for climate action in the gold mining sector, and what is the role of investors in this?

Mulligan: Mining has only really embraced this over the last 18 months or so, but it has been building from the investor side for some time.

Institutional investors have been key drivers in the whole climate agenda.

If we look at post-Paris, these large groups of investors have been defining specific expectations and requirements.

They have stated they will define criteria which will completely reshape how assets and investment products are selected and evaluated.

That means the whole investment landscape is changing, the regulators are adopting this perspective too, certainly in Europe, and you have now got a fairly detailed set of expectations and definitions for the financial markets and products, that is not only aligned but expressed in terms of Paris agreement objectives and broader sustainability goals.

There are now dozens of groups representing trillions [of dollars] of assets under management, and they are saying to any purveyor of an asset or an investment they might invest in, or anybody seeking to evaluate those investments, that we need you to consider climate, and disclose on climate risks.

The regulatory environment globally is moving very quickly in that direction.

That has driven any corporate leader, sectoral leader, anybody seeking to engage with investors of scale, it has changed how they have had to address the value proposition of their company and their product.

That is not just gold mining but in all sectors, but it has certainly caused the mining sector to not only pay attention but change how it is thinking too.

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