5 minute read
John Mulligan (World
from RGN Vol 7 Iss 7
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To mitigate the potentially catastrophic impacts from climate change, the global economy needs to reduce its CO2 emissions to net zero by 2050, in line with the Paris Agreement. This requires all industries to rapidly reduce their dependency on energy derived from fossil fuels. Climate-conscious investment groups have been particularly vocal in calling for more clarity from all sectors regarding their detailed plans to contribute to emissions reduction and climate stability. The World Gold Council has previously identified that 99% of the greenhouse gas (GHG) emissions from the gold sector are related to gold mining operations. We estimate around 75% of those emissions are associated with the generation and consumption of electricity. The gold mining sector’s ability to reduce its emissions in line with Paris targets will therefore largely depend on its capacity to change how it sources and uses power and fuels.
In our previous research, we outlined a potentially accessible and cost-effective pathway for gold mining to meet climate targets. To achieve a climate target limiting global warming to ‘well below 2ºC’ will require the industry to reduce GHG emissions by 80% by 2050. If a ‘1.5ºC’ target is adopted, it will likely require a GHG reduction of 92% by (or shortly after) 2040.
In our new analysis, produced in collaboration with energy and mining specialists at Wood Mackenzie1, we have sought to examine in more detail a key part of that pathway, the decarbonisation of power, and how that might allow the gold mining sector to reduce its emissions at a sufficient scale and speed. Recognising that action is needed over the next decade if net zero carbon targets are to be feasible, the report evaluates the impacts of reducing gold mining’s power emissions against 27% and 46% emissions reduction targets by 2030, which would put the sector roughly on schedule to meet targets consistent with less than 2 ºC and 1.5 ºC, respectively, by 2050.
The greening of the grid
Our analysis shows the significant impact local electricity grids have on gold
mining’s overall emissions. Of the 158 gold mines we examined, grid-sourced electricity represented 57% of their annual energy consumption. The substantive role of coal-fired power in the grids in some mining regions results in a high level of emissions intensity passed on to connected mines. But many grids are rapidly transitioning to greener power sources and the mines connected to them will benefit. The average carbon-intensity of grid-
John Mulligan
John is director of market relations and climate change lead at the World Gold Council, leading its climate change research programme and its associated engagement activity with stakeholder organisations. Additionally, he contributes to the organisation’s wider insight and communication outputs to improve understanding of the whole gold supply chain. John has written extensively and comments regularly on gold market dynamics, investment strategy and sustainability issues. John joined the World Gold Council in early 2005, working initially on investment research and investor outreach. He has worked in or around the financial markets for over 25 years, including senior roles in business development, product management, trading systems and market analysis. Additionally, John has previously consulted on research, business analysis and knowledge management projects for a range of clients, from SMEs to supranational organisations. John has degrees from the University of Sussex and Birkbeck College, University of London.
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sourced power for the mines we examined is expected to fall 20% over the next decade.
The changing ‘asset mix’
Several high-emission mines in our sample are expected to close or experience a substantial reduction in production levels over the next decade. The consequent emissions impacts are significant, resulting in a 19% reduction in emissions intensity across our sample. Of course, the active life of some of these mines may be extended if reserves allow and the gold price outlook renders them potentially economical. However, we expect the longer-term preference to be for the development of lower emissions intensity mines, supporting the ongoing reduction in sectoral emissions.
Recent announcements
Our analysis of recent gold mining company announcements to move to lower carbon power sources indicates that they are increasingly planning to utilise renewables in a substantive way (often as part of a hybrid power-sourcing arrangement), with solar photovoltaics as the currently preferred renewable energy source. These initiatives will likely reduce mine site power emissions by an average of 20% and, in some cases, by over 50%. Their overall impact on the sector’s power emissions is a reduction of around 6%. If, however,
these early stage actions by those at the forefront of the energy transition are adopted more widely, we estimate it would result in an at least an additional average fall in power emissions of 9%, allowing gold mining emissions to approach the 1.5ºC climate target.
Renewables and climate targets
Our analysis of the initial steps by gold mining companies to decarbonise power, and the implications if these actions are duplicated, alongside current trends in the energy landscape, suggest industry alignment with the ‘well below 2ºC’ climate target is very feasible. Achieving alignment with the 1.5ºC target will likely require further actions, including additional improvements in energy and operational efficiency, but there is considerable flexibility in how different gold mines
might seek to reduce carbonintensive power sources. For example, our analysis suggests that the increased use of renewables to replace the following:
55% or more of direct fossil fuel generated power, or 30% or more of grid supply, or
20% of both grid and direct fossil fuel-based supply should enable the gold industry to align itself to the 1.5ºC climate target and a net zero carbon future.
1. Wood Mackenzie’s analysis is based on an examination of the power consumption of 158 mines located in 31 countries and owned by 31 major gold mining companies, representing around 55% of global annual LSM gold production.
2020 World Gold Council. All rights reserved. For informational purposes only. Sources: all charts and data – Wood Mackenzie
