Lower emissions require more metals investment: BHP

Market: Emissions, Metals
06/04/22

Limiting global warming in line with the 2015 Paris climate agreement will require a significant lift in investments in new metals production capacity, although minerals mining can be emissions intensive, according to Australian resources firm BHP.

The 2015 Paris climate agreement aims to limit the rise in global average temperatures to below 2°C, and preferably to 1.5°C. Action to reduce greenhouse gas (GHG) emissions must be taken as soon as possible, as delayed action will be significantly more costly in monetary and socio-environmental terms, BHP vice-president for market analysis and economics Huw McKay said.

Policies on emissions reduction must address all fundamental elements of the energy transition to allow the demand and supply sides of the system to adjust as required, he added. Carbon pricing is a core ingredient of any effective policy framework to reduce emissions, McKay said.

"None of the [actions required] will be feasible if the supply of metals does not keep pace with the spectacular demands expected to be created by the needs of the energy transition," said McKay.

The dilemma for investors is that metals are essential inputs for the hardware of decarbonisation, and there will be no energy transition without a significant increase in the production of critical minerals, but the production of minerals can itself be a GHG emission-intensive process, according to McKay.

The energy transition will require a vast capital reallocation and will generate material risks and opportunities, placing investors and global capital markets at the very centre of the challenge, he added. Under the International Energy Agency's (IEA) net zero 2050 scenario, annual average energy capital investments would rise from around $2 trillion at present, or 2.5pc of gross domestic product (GDP), to around $5 trillion for the period from 2021-50, or 4.5pc of GDP in 2030 and falling to 2.5pc of GDP by 2050, McKay said.

All low emissions energy technologies require metals, from the nickel used in electric batteries, steel used in wind turbines, silver and silicon used in solar panels, to the copper that will enable further electrification, he added.

Challenges also remain for the development of many metal deposits. The discovery, appraisal and development of new metal deposits is a time and capital-intensive process, where a decade from start to first production would be regarded as "incredibly swift", according to McKay.

"Exploration success has been only modest over the last decade, and in the case of copper, the bellwether for both the base metal complex and the electrification mega-trend, grade decline is expected to become a material headwind for primary supply over the course of this decade," said McKay.

The industry does not currently have an abundance of high-quality development opportunities ready to go, and scrap supply is insufficient to fill the gap, according to BHP.

By Kevin Morrison

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21/11/24

Brazil congress approves carbon market legislation

Sao Paulo, 21 November (Argus) — Brazil's lower house approved the creation of a regulated carbon market, which is seen as an essential tool for the country to meet its emissions reduction targets. The senate approved the bill earlier this month . It now awaits the president's signature to become law. The legislation, which has been the subject of legislative debates for more than three years, creates the Brazilian emissions trading system (SBCE) and stipulates that companies with emissions greater than 25,000 metric tons of CO2 equivalent (tCO2e)/yr will be subject to the cap-and-trade system. Companies with emissions from 10,000-25,000 tCO2e/yr will need to report their emissions but will not be required to offset them. The market will help Brazil reach its new nationally determined contribution (NDC), according to vice president Geraldo Alckmin. The new NDC , released earlier this month, stipulates that Brazil will reduce greenhouse gas emissions by up to 67pc from 2005 levels by 2035. Roughly 5,000 companies will be subject to the cap-and-trade system, covering about 15pc of Brazil's emissions, according to finance ministry estimates. The new market will go into effect over a six-year period in five phases. The first phase involves defining the rules that will govern the market, which can take up to two years. In the second phase, companies will be required to measure their emissions, and in the third phase report emissions and present a plan to monitor and reduce them. In the fourth phase, the trading market will begin operating and the first carbon allocation plan will go into effect. In the fifth and final phase, the market will be fully operational. As expected, the agriculture sector was excluded from the regulated market and will not have emissions-reductions targets. The law also exempts waste treatment companies, including sewage treatment and landfill operators if they can demonstrate the use of technologies that neutralize greenhouse gas emissions. The legislation also addresses regulations for the voluntary market, helping finance decarbonization projects in the agriculture and forestry sectors. Brazil has the potential to generate up to $100bn in revenues from the carbon market by 2030, according to a study by think tank ICC Brasil. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Cost of government support for fossil fuels still high

21/11/24

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21/11/24

Cost of government support for fossil fuels still high

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Cop: Talks in Baku torn between mitigation and finance

21/11/24

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21/11/24

Cop: Talks in Baku torn between mitigation and finance

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Brazil's Bndes approves $1.2bn in Climate Fund spending

21/11/24

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21/11/24

Brazil's Bndes approves $1.2bn in Climate Fund spending

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Cop: Developing countries reject new finance draft

21/11/24

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21/11/24

Cop: Developing countries reject new finance draft

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