161. Five Years After the Adoption of the Paris Agreement, Are Climate Change Considerations Reflected in Mining Contracts?
- Author:
- Tehtena Mebratu-Tsegaye, Perrine Toledano, Martin Dietrich Brauch, and Mara Greenberg
- Publication Date:
- 07-2021
- Content Type:
- Special Report
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- At the 2015 Paris Climate Change Conference, the world’s governments set an ambitious goal of limiting global temperature rise to 1.5 °C over pre-industrial levels. To meet this goal, global anthropogenic CO2 emissions must decline steadily and reach net zero by about 2050.2 The pathway to a low-carbon future requires a fundamental shift away from fossil fuels and toward clean energy technologies. This transition will be mineral-intensive: the World Bank estimates that the production of minerals could increase by more than 450% by 2050 to meet the growing demand for clean energy technologies.3 How these minerals are produced will have a lasting effect on the clean energy transition. The mining and metal sector contributes 4–7% of greenhouse gas (GHG) emissions globally.4 Without adequate regulation to incentivize climate- friendly sustainable operations, increases in mineral extraction risk increasing the sector’s carbon footprint.5 In addition, climate change acts as a risk multiplier by increasing the risk of flooding, drought, and landslides and, as such, exacerbates the negative externalities caused by poor mining practices. First and foremost, climate change considerations should be incorporated into the climate, environmental, water, forestry, energy, or mining laws of mineral-rich countries. For example, in 2016, Kenya passed a climate law that requires climate mainstreaming in all sectors.6 Guinea’s 2019 Environmental Code encourages the use of renewable energy wherever possible and mandates the environment minister to implement the National Strategy for Climate Change Adaptation.7 But the pace of legislative processes is often slow—and in countries where the legislation does not include climate change mitigation and adaptation requirements,8 countries may turn to contractual provi- sions to compel the mining sector to shift to climate- sensitive practices. This paper assesses the extent to which this is being done through an analysis of all publicly available mining contracts signed by fragile states in Africa9 after the adoption of the Paris Agreement in December 2015 that appear on ResourceContracts.org (21 contracts).10 Though the magnitude of African fragile states’ contri- bution to global GHG emissions is minimal, these states have a comparatively high degree of vulnerability to the impacts of climate change.11 In this context, governments can and should mobilize the mining sector to play a meaningful role in meeting their climate mitigation and adaptation needs and those of project-affected communities. In addition, the increased demand for critical minerals to produce renewable energy and battery solutions tends to increase investment flows into the mining sector of several of those fragile states,12 making it all the more crucial for their governments to ensure that new mining investments support each country’s sustainable development goals. Doing so, with respect to climate action, furthers both a country’s competitiveness in international markets13 and minimize the mining sector’s footprint on the country’s environment and communities. Though our analysis focuses on contracts concluded by fragile states in Africa, the policy recommendations that we draw from their analysis apply to all host governments that do not already have robust laws that operationalize mitigation and adaptation goals and are eager to leverage and strengthen the role of their mining sectors in achieving sustainable development. Our recommendations envision generating long-term savings over the life of the mines, even if some of those recommendations may in practice represent higher upfront costs for mining companies. For example, adopting renewable energy sources, though possibly more expensive at the outset, is more cost-effective than fossil fuels considering the life of a mine.14 Avoiding deforestation early on also generates savings for mining companies when the time comes to fulfill their mine closure and rehabilitation obligations. Furthermore, by supporting community efforts to build resilience to climate change, mining companies have the opportunity to meaningfully contribute to project-affected communities. Attention to climate change considerations that entail higher expenditures by mining investors at the initial stages of the operation of a mine also tend to reduce the tax revenues from mining for host governments in the short term. However, for governments, too, the long-term benefits outweigh the initial revenue reductions. As long as governments put strong progressive fiscal regimes in place,15 they will be able to reap the upside from a climate- aware, low-carbon mining sector that will be more profitable than a business-as-usual, carbon-intensive mining sector in the medium to long term.
- Topic:
- Climate Change, Environment, International Cooperation, and Carbon Emissions
- Political Geography:
- Global Focus