Pathway to decarbonization – a panel discussion forum CIM 2023
Decarbonization is at the forefront of discussion in the mining industry as companies work to reduce their carbon emissions. Some companies have announced objectives to reduce emissions by up to 50% by 2030 and become carbon neutral by 2050, in line with the Paris Agreement. Other companies are currently establishing objectives while they research and plan. There are numerous decarbonization strategies across the industry, but building a flexible plan for future operations is a challenge unique to each company.
“Building trust to decarbonize the world” was the theme of the 2023 Canadian Institute of Mining, Metallurgy, and Petroleum (CIM) Convention and Expo in Montreal. At the convention, there was a panel discussion called “Pathway to decarbonization: navigating through risks and pitfalls,” moderated by Amanda Fitch, department manager for mining and metals at BBA. The panelists represented a diverse range of mining companies from across Canada: Chris Adachi, director of climate change at Teck Resources; Alexandre Belleau, chief operating officer at Champion Iron; Eric Desaulniers, president and CEO of Nouveau Monde Graphite; and Jean-François Gauthier, managing director at Rio Tinto Iron and Titanium. Each speaker shared strategies and challenges faced on the road to decarbonization, which made for engaging conversation and practical advice.
Decarbonization strategies
To begin the panel, the speakers described how their companies are currently undertaking decarbonization. As each company is unique, a variety of strategies was discussed.
a. Planning: Planning is crucial for decarbonization. Like any other project, the first step is to determine what you are trying to achieve and why. “If you are just doing it for the sake of doing it or because others are doing it, chances are you are going to miss the boat,” Belleau stated. Companies should define specific goals, examine the inventory of their emissions, identify opportunities to reduce their carbon footprint, and prioritize these opportunities using different factors (such as feasibility and accessibility of technology). Then, they can develop a realistic plan that includes a way to measure progress.
b. New business opportunities: Companies cannot only decarbonize their own assets, but also help their customers decarbonize. New mining technologies (e.g., cleaner smelting processes and products with superior mechanical properties) can potentially be used by other producers and across other industries. Investing in the development of these new solutions can be beneficial for the mining company itself, its customers, the industrial ecosystem, and the planet. Another approach is focusing on critical minerals that will contribute to the energy transition. There are opportunities available to partner with the federal and provincial governments to make this happen. To be successful, mining companies should bring decarbonization to the heart of their business strategy.
c. Carbon neutral versus net-zero: Companies typically begin their decarbonization journey by avoiding and reducing emissions with the end goal of achieving carbon neutrality or net-zero. But Desaulniers says that sequestration is an often-overlooked part of the equation: “Mining can play a very important role in the future by making sure we do compensation projects that focus on the sequestration of CO2. This is the real net-zero. If you do compensation projects with somebody else who is just reducing their emissions, that is not considered net-zero; that is carbon neutrality.” Developing sequestration projects to achieve a mathematical net-zero is not easy, and larger mines will need to scale up according to their output.
d. Context: Mining operations in Canada start with an advantage over international competitors because of access to low-carbon electricity. However, this also presents a challenge for Canadian operations looking to reach emission reduction targets, as operations in other countries can reach short-term targets easily by taking simpler actions (e.g., signing a good power purchase agreement). Mining companies should be aware of this context when discussing decarbonization and when marketing products. Additionally, companies should understand their scope 1, scope 2, and scope 3 emissions and find opportunities where decarbonization efforts can result in multiple wins.
Short-term versus long-term solutions
Decarbonization is not a straightforward switch to new technologies. Sometimes, those technologies are not yet de-risked or commercialized, or companies do not have the power supply in place to support them. To deal with these scenarios, companies use interim solutions, such as transitionary fuels (e.g., renewable diesel in B.C.) or trolley assist for haul trucks before switching to a full battery electric or hydrogen-powered fleet. Adachi explained how to prepare: “Part of our strategy is monitoring these [new] technologies, getting involved with them in early stages, and building out the infrastructure you are going to need.” Decarbonization can be viewed as a process with transitionary steps. “As [with] any other project, decarbonization is a journey,” Belleau said.
Although it is easier to discuss and achieve short-term targets (like 50% emission reduction by 2030), it is important to keep targets for 2050 in mind. Short-term solutions should still follow the trajectory to 2050 and ensure progress toward net-zero. Thinking toward the future will affect the decisions made now. As Gauthier stated, “2030 is almost tomorrow, and 2050 will come very fast.” It might be better to prepare a flexible plan for a larger, long-term objective rather than locking into a plan now that will fall short of net-zero, even if that long-term plan is scrutinized in the interim.
Flexibility
Mine life extensions, future expansions, technological developments, and changing commodity prices can affect decarbonization plans. The panel discussed the flexibility built into their plans that allows them to adapt to potential changes.
Gauthier explained that Rio Tinto is developing several decarbonization technologies simultaneously, as the extent to which each technology will reduce emissions is unknown. These potential solutions are tested and demonstrated at a significant scale to determine their effectiveness. Then, a combination of solutions will be implemented to achieve emission reduction objectives. Rio Tinto also builds flexibility into its decarbonization plan by working with customers to develop critical minerals.
Some companies prefer a plan that does not rely on new technology. Belleau explained that the obvious solution for Champion Iron is to convert fixed emission points to electricity. Technology already exists. The only constraint is the availability of power, and the company is working with authorities and governments to get it. Companies can also build flexibility into their decarbonization plans by addressing how they consume energy. The mining industry consumes substantial amounts of energy, and historically, energy efficiency has not been optimized. After fixed emission points, the remaining bulk of emissions are from haulage, so future mines should be designed to avoid haulage as much as possible.
Feasibility and operations
When identifying the feasibility of decarbonization solutions, it is important to collaborate with technology providers and original equipment manufacturers (OEMs). Simply asking for zero-emission solutions may not work; you need the right partners to get you there. When working with OEMs on decarbonization, mining companies should first explain their specific situation, as every mine is different. Then, they can agree on a business solution that works long-term for both parties. Building a close relationship with the OEM is essential. According to Desaulniers, Nouveau Monde does this by having early learners of new equipment share feedback with the providers. This ensures that everyone is on the same page and opens further discussion. Each mining company will have specific solutions that work for them, but some OEMs focus on developing holistic solutions that will translate to other mines too.
The acceptance of decarbonization solutions may prove difficult when handed over to operations. Planning early in the process can help mitigate these issues. Adachi explained that the decarbonization team at Teck is specifically designed to include employees from operating roles: people who currently work or previously worked at the mines and have experience operationalizing projects. Early-stage evaluations are done centrally, as it makes more sense in terms of resource efficiency and capacity, but then the operations teams are brought in to guide decisions. For decarbonization projects, mining executives should be mindful about operationalization, consider the impacts on productivity and safety, involve the right people in project advancement and execution, and adopt a thorough transition plan. Integrating operations teams early and allowing them to own the procurement and operationalization processes can make for a smoother transition.
Financing decarbonization
Junior and mid-tier mining companies often have limited financial capacity to undertake decarbonization. Despite support from Canadian federal and provincial governments, it can be difficult to get significant financial backing in the mining industry. But decarbonization may present new opportunities.
In some industries, customers are willing to pay more for a product branded as “low-carbon” or “carbon neutral.” The panel discussed charging premiums for low-carbon mining products to finance decarbonization projects. The automotive industry is currently the most vocal when it comes to low-carbon products, but mining products go through a succession of customers, so the branding of “low-carbon minerals” does not yet move the dial for most end customers. Although buyers are happy to receive products from low-carbon mines, they are not paying more or increasing the price of their end products to compensate investments in decarbonization. Applying those costs to the product may not have much impact on prices downstream but would allow mining companies to be rewarded for their efforts. It may be possible to negotiate a five to 10% premium with customers; however, charging a premium is not always feasible.
The panel also discussed the opposing view that decarbonization is a responsibility and that companies should not expect a financial reward. “We need to rise to the occasion to find financially interesting solutions,” Gauthier said. “We cannot just forward the bill to our customers. How can we find solutions to differentiate ourselves?” Developing innovative technologies for decarbonization can give a mining company a competitive advantage and open new financial opportunities. New technologies may even improve productivity and allow for a discount on products.
Investors and senior managers may be hesitant about decarbonization because of the risks involved. Currently, the onus for reaching net-zero is being placed on mining companies, but capital providers also need to think about their investment decisions and risk tolerance. “What investors are giving you the direction to actually invest in these technologies to take on that risk?” Adachi said. Desaulniers is “dreaming of a world where industrials and miners will become carbon credit providers.” When carbon credit becomes a real business, managers who focus on financials will come on board.
Key takeaways
To conclude the panel, the speakers shared the following key takeaways:
> Mining companies have a responsibility to decarbonize and make a difference.
> Governments need transparent measures to incentive decarbonization for everyone from mines to customers.
> Companies should adopt a more holistic view of decarbonization and determine what role they can play in decarbonizing the industrial ecosystem.
> The mining industry has moved beyond hypothetical questions about decarbonization and is now navigating the deployment of new technologies. Many people are eager and passionate about decarbonization; it will only ramp up from here.
Kesiah Stoker is a multi-skilled freelance writer.
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