COP26, the United Nations Climate Conference, concluded on 13 November, one day after its scheduled completion date. In our journey toward a sustainable planet, COP26 was a major event. But did it achieve what it needed to and what happens next?
There have been many climate summits in the past (25 under this convention alone), so what made COP26 so important and what does it mean for the mining, metals, and minerals sector?
Put simply, COP26 was about gaining agreement to the commitments of the Paris Agreement, which put in place a target of achieving net-zero by 2050. It particularly sought to gain agreement to accelerated decarbonisation targets this decade to limit global warming to 1.5 C by the middle of the century.
The alignment of all nations to a consensus set of targets was never going to be easy. COP26 did finish with almost 200 countries agreeing to keep the 1.5 C target alive but, as noted by COP26 President Alok Sharma “its pulse is weak, and it will only survive if we keep our promises and translate commitments into rapid action”. It finished with an increased ambition for action this decade and an agreed position, for the first time, on phasing down unabated coal power. In getting to this agreed position there was much negotiation and a degree of compromise. But as with previous COP events, the question of what happens now, and will these ambitions be enacted remains unclear.
Each jurisdiction will have different circumstances. Different economic, political, social, and technological challenges exist in every country. As a result, how countries achieve the reductions required will, in most instances, be bespoke.
However, putting aside the political negotiations, what is clear is that the degree of public and media attention to this event shows that the weight of public opinion has shifted. There is now an increase in the intensity of pressure that is reaching political tipping points in many locations. It is perhaps public opinion that will impact mining, metals, and minerals organisations most significantly unless they too get on to the front foot with meaningful action.
We can’t predict how net-zero will be implemented in each jurisdiction, but broad trends and patterns can be synthesized. Decarbonisation of power grids and transport networks, reforestation, and phased reduction of fossil fuels all are an inevitability if net-zero is to be achieved. Whatever pathways are adopted, businesses need to look beyond the politics and look at the trends so that their plans, and corporate positions, can be determined.
We have asked ourselves what types of questions businesses in the mining sector should be asking themselves now. We have identified some of these questions below and segregated them into the broad categories of The Good, The Bad and The Reality.
COP26 sets up something of a paradox for the resources sector.
Acceleration of carbon reduction targets is likely to increase demand for the raw materials that will be essential for the decarbonisation of power grids and transport systems. It is estimated that more than 3 billion tons of minerals and metals will need to be extracted to implement solar, wind, and geothermal energy. This will substantially increase demand for certain commodities.
Demand increases present an opportunity for mining companies. At the same time, as the pandemic has shown us when there is an increase in demand companies need to be aware of the limitations in their supply chains, their production capability, and their workforce availability.
QUESTION 1: Is our production capability able to meet an increase in demand for needed commodities, but in a way that keeps costs of production in control?
QUESTION 2: What efficiencies could automation and digitisation yield to overcome potential blockages in supply chain or limitations on workforce availability?
QUESTION 3: Do we have plans in place to get us ahead of the curve and avail of the opportunity?
QUESTION 4: Are my engineers being proactive in anticipating the trends and giving me options to consider how I respond?
QUESTION 5: Are we able to increase production but can we do so whilst coincidentally reducing our carbon and water footprint?
QUESTION 6: Do all my proposed projects positively impact the communities in which they are undertaken through more jobs, reduced environmental impact, improved diversity, and inclusion (in my stakeholder engagement)? Are my development and growth plans a vehicle for positive social impact?
Decarbonisation targets are not likely to be achieved without significant decarbonisation of power grids and transport systems. The time needed to shift a grid from fossil fuel generation sources to clean renewable sources will take time. Commitments to accelerated carbon reduction targets, will most likely require energy users and emitters to reduce their demand on grids and/or decarbonise their operations. How this is done in each jurisdiction is likely to be bespoke to each region. However, this shift from current fossil fuel-based sources to renewable sources will involve significant time as well as technical challenges for grid stabilisation.
Achieving early carbon reductions by placing requirements on businesses to decarbonise their operations, whilst putting in place the longer-term grid decarbonisation, is a possibility in many jurisdictions and one that businesses need to consider.
If that is the case, then owners and operators of energy-intensive assets need to be asking additional questions, such as:
QUESTION 7: What is my pathway to net-zero operations or, at the very least, significant reductions by 2030?
QUESTION 8: Do I have a plan, and do I understand the cost implication of decarbonisation? Can I do this in a staged way where the capital cost outlay is known, planned, and budgeted?
QUESTION 9: Have my engineers looked at the options and prepared a staged approach where my operations remain at or close to full production, but my sources of energy are replaced by renewables and new technologies?
QUESTION 10: Do I know what the options are, how reliable they are and what opportunities new technology might provide me?
A review of COP26 would also not be complete without considering the likely impact of public opinion.
As we head toward 2030 and 2050, with the first milestone being just over eight years away, a range of additional questions need to be asked.
Question 11: If the new assets that I am considering now are only likely to be brought online in the next 4 – 6 years (only 2 – 3 years ahead of 2030) are they suitable for prevailing public opinion when they come online?
Question 12: Do I know, and does my business know, what being “Future Ready” means for the assets I have planned now?
The focus on organisational environmental credentials and social license to operate is only likely to increase post COP26.
Organisations will increasingly need to “walk the talk” to maintain their social license. “Greenwash” and platitudes won’t cut it and momentum is now on for real action. This means that mining organisations have even more intense challenges to face, possibly even more complicated than the technical and financial challenges. Developing well-considered values and purposes, that the organisation lives and breathes, and having the leadership capability to lead these changes, will be, perhaps, the hardest challenge of all. Taking purely financial considerations into any project is unlikely to be sufficient in the years ahead. This will require rewiring how many businesses, and their leaders, have thought for their entire career. Balancing cost, carbon, water, energy, leadership, values, and the future will be the new challenge to leaders.
Question 13: Am I building the leadership capabilities in my business that will be necessary for us to navigate the complexity of change as a result of public opinion on climate action?
Question 14: Do I have an organisational culture that leans in to change, innovation, and challenges the status quo? Is my business, and my leadership teams, up for the challenge of being challenged? How do I develop this skill in my management teams?
Question 15: Am I confident that we have the plans in place to “walk the talk” in a transparent and open way?
As the ripples of COP26 start to emerge, we believe it is imperative that mining organisations start asking the right questions now and, where they are unable to obtain answers, they pull into their ecosystems partners who can help them build the organisational and technical abilities to thrive in a post COP26 world. Perhaps the most important question of all will be:
Question 16: Who can help me meet the challenges my business is going to face in the next 5 – 8 years?