Although opinions on the impact of COP26 varied, there is widespread agreement on one point: a lack of immediate, decisive action on carbon emissions will inexorably exacerbate the problem in the future.
Most analysts believe that the amount and speed of metals and mining investment required to decarbonize the global economy quickly enough to pursue a 1.5-degree route are insufficient and that actual action has yet to be taken.
What has changed since the meeting in terms of metals and mining!
What does it mean to “phase down coal”?
At COP26, forceful declarations regarding a “rapid phase-out” of coal were replaced by wording referring to a “step down.”
Some would argue that the final statements were more of a play on words than actual commitments. The phrase “phase down coal” necessitates some consideration. What exactly does that imply? Indeed, the finance and production of unabated coal-fired electricity generation and accompanying thermal coal mining will face significant challenges. At COP26, 34 nations and five public finance institutions agreed to stop providing direct public support to the worldwide fossil fuel energy sector by the end of 2022.
By the same date, all major coal-financing countries have committed to stopping international coal finance. What about domestic coal finance, particularly China and India, the two coal behemoths?
Will the COP26 declarations be translated into concrete policy?
Participating countries decided at COP26 to adopt more ambitious 2030 emissions reduction objectives by the end of the year. If passed, this will result in a significant increase in demand for metals important to the energy transition.
Only time will tell if these aspirations will be implemented or inscribed in legislation.
The adoption of zero-emission vehicles was linked to reaching rapid decarbonization targets, but the statements lacked teeth. “We pledge to accelerate the transition to zero-emission vehicles in order to meet the Paris Agreement’s targets,” says the report. “Rapidly accelerate” isn’t a well-defined goal. At the very least, “Together, we will aim to make all-new car, and van sales 0-emission globally by 2040, and no after than 2035 in major markets” gives a timescale.
The commitment is open to interpretation because “working toward” a goal is not the same as “reaching” it. For the time being, we must trust that these remarks will be converted into actionable policy at some point.
The EV supply chain has a challenge regarding the rate at which change must occur to achieve an expedited decarbonization path.
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By 2025, EV/hybrid production and sales must reach over 45 million vehicles, with more than 80 million by 2028.
While vehicle assembly factories may be built or changed over time, the 4600 GWh of additional battery manufacturing capacity required is a considerably more difficult task. Battery factories are modular, take time to scale up, and pass stringent auto manufacturer qualifications. They’re pricey; the extra capacity will set you back roughly US$350 billion.
The inelasticity of metal supply is arguably the biggest hurdle, with timetables from discovery to production spanning more than ten years. Ironically, a once-in-a-lifetime opportunity for metals is also a nightmare because the supply chain will not scale quickly enough to fulfill demand.
Even if it can, it will have difficulty reducing its emissions quickly enough to counteract the increase in output.
What it means for mining to halt and reverse deforestation
A vow by 137 countries to eliminate deforestation by 2030 was made during COP26, covering 91 percent of the world’s forests.
This poses a significant issue for the mining industry, as many commodities required for the energy transition are found in places with high biodiversity.
The exploitation of nickel ores in Indonesia is one example of this, where there is a 100 percent link between resource location and extreme biodiversity.
Mining businesses face a huge task and obligation in ensuring that their impact is limited.
“We’re excavating our own graves by burning, drilling, and mining deeper,” UN Secretary-General António Guterres said in his opening address at COP26.
It is undeniable that irresponsible, unsustainable, and non-ESG compliant mining is a big problem that must be addressed.
Will the mining sector benefit from Paris-aligned financing?
Perhaps the most significant potential victory of COP26 for metals and mining came on Finance Day when UN Special Envoy for Climate Action and Finance Mark Carney convened the Glasgow Financial Alliance for Net-Zero.
This consortium of bankers, insurers, and investors pledged to align US$130 trillion in assets with the Paris Agreement’s climate targets.
This might help secure the approximately $2 trillion in finance needed to deliver the metals required for an expedited energy transition.
Even here, there’s some ambiguity: what does it mean to “Align US$130 trillion in Assets”? COP26 was a bit of a conundrum, with some grand declarations of intent but no actual policy to support the supply of the metals required for a fast energy transition so far.
Policymakers have yet to recognize the difficulty of developing metals supply and the lengthy timeframes that it requires.
Good intentions will remain just that until the requisite policies – and a mind-boggling volume of funding – to enable accelerated mining expansion are forthcoming.