What Mining Firms Should Know About Decarbonization, Climate Risk

Over the last decade, the impact of climate change and how the mining industry can respond to it has become a popular discussion topic. Most mining operations operate in harsh conditions. However, predictions of hazards such as heat, drought and heavy precipitation show that the effects of harsh climates may get more intense and frequent, which only grows the challenges mining operations will have to endure.

Under the Paris Agreement, which was signed in 2015, 195 nations entered into an agreement that would require them to restrict global warming to under 2 degrees Celsius. For this to be achieved, most, if not all industries would need to decarbonize. This would create significant shifts in the demand for commodities for the natural resource sector and probably cause a decline in international mining revenue pools.

At the moment, the global mining sector is responsible for about 7% of greenhouse gas emissions. Theoretically, mines can decarbonize fully by employing the use of renewable energies, electrification and boosting operational efficiency.

However, the industry may be impacted by the decarbonization shift as well as the risks from climate change, which may shift the demand for some minerals.

So, what do mining firms need to know about this?

Climate science has shown that climate change will cause recurrent floods and droughts, which will alter the supply of water to mining operations, in turn disrupting operations. A water-stress and flooding scenario that was recently carried out and evaluated on zinc, iron ore, gold and copper, revealed that 30% to 50% of production of the aforementioned minerals was concentrated in regions that had high levels of water stress.

The main hot spots for mining include western North America, western Australia, southern Africa, the Middle East, eastern Australia, the Chilean coast and Central Asia. Climate research shows that these hot spots will worsen in the coming years.

Additionally, mining areas that aren’t accustomed to water stress are forecast to become more vulnerable. Flooding, which also causes operational disruptions, is forecast to get worse in the following wet spots: southeast Asia and India, western and central Africa, southern Africa during the summer, south America, northern Australia and Indonesia during the winter. These areas may experience a more than 50% increase in extreme precipitation.

Furthermore, if industries commit to reducing emissions in accordance with the targets set in the Paris Agreement, there will be considerable growth of low-carbon technologies. These technologies include hydrogen fuel cells, solar photovoltaics and wind turbines.

Decarbonization of the power sector would also prompt a decrease in coal combustion, which would weaken the demand for metallurgical coal. These are just a few of the things that mining companies need to keep in mind as more entities adopt decarbonization policies in a bid to reduce emissions.

Fortunately, leading mining firms such as First Energy Metals Ltd. (CSE: FE) (OTCQB: FEMFF) clearly appreciate the impact decarbonization can have on their bottom lines, so the sector is likely to see major shifts in the way mining operations are conducted.

NOTE TO INVESTORS: The latest news and updates relating to First Energy Metals Ltd. (CSE: FE) (OTCQB: FEMFF) are available in the company’s newsroom at https://ibn.fm/FEMFF

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