The world’s biggest mining companies are failing to meet the goals of the Paris climate accord and need to consider more aggressive action to reduce greenhouse gas emissions.
In a report published on Wednesday, consultant McKinsey said the mining industry was taking insufficient action and putting underwhelming plans in place to tackle global warming, risking a backlash from investors and society.
“Action on climate change is growing in the mining industry, as companies review commodity portfolios, set targets and engage stakeholders,” McKinsey said. “Yet these actions are too modest to reach the 1.5-2 degrees Celsius scenario and may not be keeping up with society’s expectations.”
The biggest mining groups say that they are committed to aligning their business models with the Paris climate agreement. BHP, Anglo American and Rio Tinto all signed the Paris Pledge for Action, a commitment to implement the accord, while Glencore said that it would adopt a strategy “consistent” with Paris.
However, McKinsey said that their specific targets suggested otherwise. Mining groups have only just begun to set targets that range between a zero and 30 per cent reduction in greenhouse gas emissions by 2030, falling well short of the level required under the Paris accord, the report said.
To limit a rise in global temperatures to 2°C, greenhouse gas emissions need to be reduced from 2010 levels by between 41 and 72 per cent by 2050 and more than 78 per cent to cap the rise at 1.5°C, according to the UN Intergovernmental Panel on Climate Change.
The report comes a week before the industry gathers for the annual Mining Indaba conference in South Africa, where climate change is likely to be the major topic of discussion.
The range of targets set by mining companies are yet to include “Scope 3” emissions — those released even after their products have been sold. BHP, the world’s largest mining group, and Vale, the world’s biggest iron ore producer, have made public commitments to set targets to reduce their customers’ carbon emissions but are yet to release concrete figures.
“Any serious effort to implement Paris Agreement goals would require a major contribution from the entire value chain,” the report said.
“Mining companies’ published emission targets tend to be more modest than that, setting low targets, not setting targets beyond the early 2020s, or focusing on emission intensity rather than absolute numbers.”
The majority of the mining industry’s on-site emissions, which are as much as 5.1 gigatonnes of CO2 equivalent a year, largely come from methane released during coal mining, while power consumption is the second-biggest contributor.
As other sectors reduce their carbon emissions and introduce low-carbon technologies such as wind turbines and electric vehicles, mining companies should diversify their portfolios to meet the demand for metals underpinning those technologies, despite being unable to replace revenue from coal and iron ore, the report added.
Rio is the only major mining group without exposure to oil, gas or coal, after selling the last of its thermal coal assets in 2018.
The consultancy’s report also highlighted the growing vulnerability of mining operations to extreme weather events and water stress that are becoming more frequent due to climate change and can have a negative impact on output, costs and the asset’s value.