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Creating the zero-carbon mine

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Despite a daunting timeline, zero-carbon mines are within reach if the right solutions are implemented

The mining industry is at a tipping point where sustainability and de-carbonization are top items on CEOs’ agendas. To achieve a 1.5°C climate-change target by 2050, the mining industry will need to reduce direct CO2 emissions to zero. Encouragingly, our analysis shows that solutions to de-carbonize the majority of emissions will become economic within this decade, addressing both Scope 1 and Scope 2 emissions.

The mining industry contributes 2 to 3 percent of global CO2 emissions and has a large role to play in emissions reduction. Within the industry, much of the focus to date has been on portfolio shifts (that is, divestment of coal assets); however, the industry is facing increasing pressure from regulators, investors, and customers to de-carbonize operations. The sustainability of miners is increasingly a focus for the capital markets, with access to capital now more frequently dependent on sustainability. The cost of capital can be 20 to 25 percent higher for those miners with the lowest ESG scores.2 Simultaneously, customers are exerting increasing pressure. For example, most of the largest automotive OEMs have set ambitions for material de-carbonization. This has led to substantial initiatives, such as the launch of H2 Green Steel in Sweden—the world’s first zero-carbon steel producer. It will demand zero- or low-carbon iron ore to feed into production.

De-carbonization presents a significant opportunity for ambitious players to differentiate themselves and lead the way toward zero-carbon mining. For this to happen at scale across the industry, multiple stakeholders (including mining houses, OEMs, suppliers, oil and gas players, commodity customers, and others) need to work together to develop the potentially cost-positive abatement approaches that are currently unavailable.

This article was originally published on the McKinsey & Company’s website.

Date: June 29, 2021

Author: Henry Legge; Clemens Müller-Falcke; Tomas Nauclér; Erik Östgren

Tags: Transformation, McKinsey

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