IEA (2021), The Role of Critical Minerals in Clean Energy Transitions, IEA, Paris https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions, License: CC BY 4.0
The growth of minerals supply not only plays a vital role in enabling clean energy transitions, but also holds great promise to lift some of the world’s poorest people out of poverty. Mineral wealth can, if exploited responsibly, contribute to public revenue and provide economic livelihoods for many. However, if poorly managed, mineral development can lead to a myriad of negative consequences, including:
- Significant greenhouse gas (GHG) emissions arising from energy-intensive mining and processing activities.
- Environmental impacts, including biodiversity loss and social disruption due to land use change, water depletion and pollution, waste related contamination, and air pollution.
- Social impacts stemming from corruption and misuse of government resources, fatalities and injuries to workers and members of the public, human rights abuses including child labour and unequal impacts on women and girls.
In addition, these risks may lead to supply disruption, which could slow the pace of clean energy transitions. It is therefore imperative for both companies and governments to manage the environmental and social impacts of mineral production.
Companies have a clear business case to address these harms to reduce risk and maintain a social license to operate. Consumers and investors are increasingly demanding that companies take these issues seriously. Failure to respond to these social demands could not only undermine reputation, but also lead to difficulties in raising capital or even to legal liability.
Companies have increasingly implemented responsible practices over the years. The adoption of corporate responsibility policies and processes at company level and via industry-wide initiatives has led to improvements throughout mineral supply chains. However, performance varies significantly among industry actors, with some segments showing limited effort and more progress being needed across the board. Challenges are more substantial where regulatory safeguards are inadequate, and where systemic issues such as labour informality, weak fiscal capacity and high inequalities are persistent, such as in artisanal and small-scale mining (ASM).
Governments play an important role in promoting improvements in environmental and social performance. As supply chains become more global, international co-operation to apply appropriate standards will be critical to ensuring that the extraction and trade of minerals are carried out sustainably and responsibly, and that the supply of energy transition minerals remains uninterrupted.
Production of energy transition minerals can lead to significant GHG emissions. These minerals typically require much more energy to produce per unit of product than other commodities, which results in higher emissions intensity. Nonetheless, this contribution to emissions does not negate the climate advantages of clean energy technologies when considered alongside the full life-cycle emissions of other technologies. Total lifecycle greenhouse gas emissions of EVs are around half those of internal combustion engine cars on average, with the potential for a further 25% reduction with low-carbon electricity.
For the moment, emissions from energy transition mineral production are relatively small, due to their low production volumes. However, these emissions will grow alongside projected growth in demand. This will be compounded by the fact that future production is likely to gravitate towards more energy-intensive pathways, exerting upward pressure on emissions. For example, lithium production has been moving from brine-based recovery (mostly in Chile) to concentrate production from hardrock (mostly in Australia), of which emissions intensity is three times higher than that of brine-based production. Demand is also moving from lithium carbonate towards lithium hydroxide with higher emissions profiles, as the latter is more suitable for batteries with higher nickel cathode chemistries. Likewise, future growth of nickel is increasingly coming from laterite resources, which require more energy to produce.
Experience has shown that there are ways to minimise emissions as emissions intensity of production can vary considerably across companies and regions, depending on operational practices, power sources and production pathways. Fuel-switching, low-carbon electricity and investment in energy efficiency can significantly reduce the emissions footprint in the near term. Low-carbon electricity can be particularly crucial to reducing emissions from refining and smelting operations, which involve large electricity consumption. In the medium-term, reducing or displacing diesel use in trucks can also be an important element of many companies’ efforts. A simulation of an indicative copper project, from mine-site to refining and smelting, reveals that electrification and renewable-based electricity, when combined, have the potential to reduce emissions intensity by over 80%.
Announced emission reduction targets have proliferated in recent years among major mining companies, with over two-thirds of the top 20 mining companies having established emissions reduction targets for 2030. In addition, market-driven initiatives have pushed companies to undertake voluntary environmental impact disclosures, helping to bridge the gap between consumer and investor expectations. While these steps are encouraging, greater pressure from governments, investors and end-use customers is needed to expand emissions reductions initiatives beyond the limited group of companies that have made voluntary commitments.
Policy support is needed to standardise emissions accounting frameworks, which differ widely between companies and are often lacking. Government policies can also drive companies to adopt emissions reduction strategies across their operations, for instance through renewable portfolio standards, energy efficiency mandates, emissions regulations, and carbon pricing. Government support to R&D and innovation will also be important to support improvements in technology.
Mineral development affects the local and regional environment in different ways. Related interactions must be managed carefully to mitigate negative impacts and reduce associated risks, including measures to address:
- Land use change – This is the main source of direct and immediate impacts on people, biodiversity and ecosystems. It can result in the displacement of communities and the loss of habitats that are home to endangered species.
- Water use – Mining generally requires large volumes of water for its operations. It can also be a source of water contamination, be it through acid mine drainage, wastewater discharge or the disposal of tailings.
- Waste generation – Mineral development results in massive amounts of residues, both during extraction and after utilisation, some of which are hazardous to human health.
Mineral development also entails other environmental impacts, including air pollution from particulate matter (e.g. mine dust) and gaseous emissions, and noise pollution due to blasting and transporting activities.
Experience suggests that these impacts can be managed with a combination of policy measures, robust project management and technological solutions. In particular, integrating environmental concerns at the early stages of project planning can go a long way to ensuring sustainable practices do not come at a high cost.
Environmental and social impact assessments (ESIAs), which evaluate the impacts of a proposed project and alternatives, can support decision making by providing an understanding of present environmental conditions and future consequences of proposed actions. ESIAs can support the development of mitigation measures and compensation schemes. These can be consolidated in environmental management plans (EMPs), which integrate regulatory requirements and company mitigation efforts, such as pollution control, environmental monitoring, compensation projects and risk management.
Employing a holistic approach enables an integrated assessment of the drawbacks and benefits of different project alternatives. Often there are trade-offs between different environmental objectives. Open pit mining, for example, has lower energy requirements than underground mining, generally leading to lower emissions, but it results in more land use change. However, there are also cases where an alternative presents synergistic outcomes. For example, increasing recovery of minerals from waste streams can potentially reduce waste, emissions, and impacts on water quality.
In most countries, mineral deposits are public resources, and the government is charged with managing them in a manner that brings a public benefit. As demand grows for energy transition minerals, so does the potential for these public resources to contribute to economic growth and deliver just outcomes for national governments, companies and communities. Unfortunately, there are myriad examples where development of resources has not led to sustainable economic growth or has caused corresponding social harm.
A high reliance on export revenue from minerals has often led to underinvestment in economic transformation, making the economy more vulnerable to changes in global commodities prices. These problems may be particularly problematic in countries where mineral extraction contributes a large share of fiscal revenue. This underscores that effective institutional and legal governance are required to ensure that mining revenues are used to ensure benefits for the local community and to support diversification of the economy.
Energy transition minerals are often produced in countries that score below average in measures of corruption risk. Companies operating in these areas are subject to significant risks to the extent their employees and business partners engage in bribery. The potential liability can be enormous, with fines reaching hundreds of millions of dollars. Most major mining companies prohibit bribery among their employees, but in order to be effective, such policies must be backed up with additional measures, including employee training, investigation mechanisms, and risk-based due diligence processes.
At the societal level, corruption and bribery can lead to numerous negative effects, including decreased fiscal revenue, reduced economic growth and erosion of the rule of law. Policy makers in both producing and consuming countries are increasingly recognising that these impacts must be addressed through expanded support for legal institutions, transparency and the rule of law. International cooperation may be particularly impactful in expanding transparency practices. Mechanisms such as the Extractive Industries Transparency Initiative (EITI) have been successful in calling attention to vulnerabilities that increase the risk of corruption and increasing the availability of public data, but effort is still needed to further develop local institutions.
At artisanal and small-scale mine (ASM) sites, workers often face difficult or dangerous working conditions. At ASM cobalt sites in the Democratic Republic of Congo (DRC), child labour remains prominent, despite efforts to improve the situation. Due to these risks, there could be a temptation for companies to disengage from the ASM supply chain entirely. However, this approach may paradoxically worsen the situation as it fails to address the root cause of child labour: poverty.
As an alternative to disengagement, companies can seek to work together with multi-stakeholder groups to promote “formalisation” of ASM activities. There is some evidence that formalisation can be successful at reducing child labour concerns and improving working conditions. However, successes have so far been limited in scale, despite broad recognition that support for formalisation needs to be expanded.
The DRC government has initiated some promising reform efforts in recent years, including the formation of a new government-owned corporation charged with supporting the development of new formalised ASM sites. While encouraging, the impact of these reforms remains to be seen, and these efforts may stumble without adequate policy support to provide alternative sources of income for poor children and families.
While child labour concerns tend to grab a lot of attention, other impacts may ultimately prove to be more widespread. Given this, governments and companies increasingly cannot afford to ignore other pernicious impacts, including risks to public safety, unsafe working conditions and unequal impacts on women.
Given the complexity of mineral supply chains, no individual country will be able to drive the necessary changes on its own. Instead, different actors will need to work together to identify and address risks while navigating a patchwork of legal frameworks and local contexts. Encouragingly, many international initiatives have emerged in recent years to address various supply chain challenges. However, there is still no overarching international framework for critical minerals and coordinated policy action is lacking, suggesting scope for enhanced alignment and co-ordination.
Across all environmental and social impacts, supply chain due diligence is a critical tool to identify, assess and mitigate risks while increasing traceability and transparency. International frameworks for due diligence, facilitated by organisations like the Organisation for Economic Co-operation and Development (OECD), have been critical in setting authoritative standards for responsible and sustainable sourcing of minerals. Many companies already have due diligence policies, but further coordination is needed to ensure consistency and to increase uptake.
Multilateral efforts to enhance capacity building and knowledge sharing can address key resource gaps between countries. On a government-to-government level, countries work together through institutions like the World Bank and the OECD to support sustainable mining and supply chain practices. Separately, governments have set up extractives-specific initiatives like the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) and the Energy Resource Governance Initiative (ERGI) to provide technical assistance. Public-private collaboration has also generated successful initiatives covering many aspects of critical mineral supply chains.
Despite many success stories, the proliferation of international initiatives increases the risk of duplication and inconsistency. Even where a harmonised approach emerges, to the extent that efforts are voluntary, some key players may opt out. A high-level forum for co-ordination could thus play a key role in standardising environmental and social standards. In addition, a governance framework for minerals modelled on the IEA’s energy security framework could provide countries with the tools they need to mitigate environmental and social impacts alongside co-ordination on security of supply.