In its move to renewable energy and a lower-carbon future, the world faces a climate conundrum around extractive industries.
IPCC calculations indicate that from a start date of 2017 the world can absorb only 420 more gigatons (Gt) of carbon dioxide if it is to stay below the 1.5°C climate target. The time clock operated by the German Mercator Research Institute suggests that this gives us less than seven years.
Time is ticking, and this year’s COP26 will bring leaders together with a renewed sense of urgency. At the recent Austrian World Summit, climate campaigner Greta Thunberg delivered another call to world leaders to act now. So what’s stopping them?
In the past eight months, all five regional commissions of the United Nations have held substantial meetings to discuss the future of the extractive industries – especially this future's implications given the global climate change agenda and the alarming prognosis outlined above. The attendees included some ten heads of state and a large number of ministers of energy and/or mining. The process culminated at the end of May with a Global Roundtable led by UN Secretary-General António Guterres, and was followed by the publication of a UN Policy Brief. We ourselves have participated in all these meetings.
The most ardent proponents of an aggressive policy approach would see clear, unambiguous conclusions to these discussions: surely, we just need to rapidly phase out coal, adjust quickly to a world using far less oil and gas, and phase out environmentally harmful mining? However, as over 20 hours of debate revealed, there are numerous dilemmas and pitfalls along this apparently simple path to climate "salvation", none of which are easy to resolve. We highlight six of these below.
Demand for more metals
Recent World Bank research has shown that the metals industries, far from facing decline, will enjoy a dramatic boost to demand given the ambitious targets for the technologies required in energy, transport etc for the Net Zero world.  That research identified a minimum of 17 main metals needed in significant quantities to meet the needs of that revolution, its six scenarios indicating increasing demand for those metals through to 2050.
More financial and technical support is required
The good news is that many of these metals are found in abundance in some lower-income economies - some 18 such countries, on one assessment. So; the increased metal demands can provide a 20-30 year window of potential opportunity to boost national income, reduce poverty and generally advance the objectives of the Sustainable Development Goals (SDGs). But the question then arises as to where the financial and technical support will come from to help such countries benefit from this potential: failures in the past have been all too common, and the appetite of possible donors to help the sector is increasingly questionable.
Cutting coal has huge consequences
Furthermore, set against this potential advantage there are several lower-income countries that have a continuing high dependence on coal mining – especially in Asia – and participants in the UN Roundtables from that region pointed to the massive social and economic adjustments that these counties face if they are required to strand their coal resources.
Environmental and human rights implications
A further problem arises from the reality that the sources of supply of the critical metals are far from ideal. For example, cobalt is a critical input for the batteries used in, for example, electric vehicles (EVs). The DRC (Democratic Republic of Congo) has around 65% of the world’s cobalt reserves but the environmental and human rights characteristics of mining in the country are known to be sub-standard. Similar concerns apply to rare-earth elements, and China’s dominance as a producer and processor of these.
The realities of energy transition
Detailed research on the energy transition in Asia’s two largest economies, India and China, shows that this will likely reduce the intensity of coal use in relative terms but will involve a significant increase in absolute terms. One alarming consequence is that the bulk of the global carbon budget identified by IPCC could be pre-empted by Asia.
Where do the funds come from? Oil
As was reported in the Western Asia Regional Roundtable, the dominant oil and gas producers of the Middle East are making impressive strides both in diversifying their economies, and also in adopting lower carbon technologies (including their significant potential in hydrogen). However, it is also clear that the budgetary financing needed to support these changes will continue to come for some considerable time from their major, and low-cost oil resources! Paradoxically, that same region sees 60% of its population living in areas facing severe water stress (including 12 of the world’s driest countries), making it especially vulnerable to a warming world.
Conclusions: looking ahead to COP26
If pushed to provide one succinct takeaway from the Roundtable process it is that the climate crisis – combined now of course with Covid pressures – creates a combination of significant difficulties for many extractive-dependent economies (notably the stranding of coal and other valuable minerals), but also exciting new opportunities for others (notably, large endowments especially in lower-income countries of the metallic resources that the net-zero world will require in abundance). The demanding challenge for both national and international policies is to craft responses that can mitigate the dangers while at the same time enhancing the prospects of successfully grasping the new opportunities.
How to continue progress with the SDGs, provide the energy and resources needed for their achievement and that of the Net Zero world, and how to manage this while reducing the emissions of the extractives sector itself, will define the policy agenda for decades ahead. The UN itself has done this in part through the publication of the Secretary General’s Policy Brief that emerged from the round table. Those ideas and those of other organisations will be under intense scrutiny at the COP26 meeting to be held in Glasgow, UK, in November 2021.
This blog was originally published for the summer 2021 Edition of the 1818 Society Quarterly, a newsletter for retirees of the World Bank.
About the authors:
Alan Roe holds Associate appointments at Oxford Policy Management, at the University of Warwick, and is a Non-Resident Senior Research Fellow at the UN World Institute for Development Economics Research (WIDER). The book, Extractive Industries, The Management of Resources as a Driver of Sustainable Development, co-edited with Prof. Tony Addison, was used as a main source for the Regional and Global Roundtables.
Tony Addison is a Professor for the Development Economics Research Group (DERG) at the University of Copenhagen. He has worked with African governments and aid donors, including the World Bank and UN agencies; extensive field experience, particularly in sub-Saharan Africa and Asia. He co-edited Extractive Industries, The Management of Resources as a Driver of Sustainable Development with Alan Roe. They both attended all five regional Roundtables and were invited to speak at the final Global Roundtable in May 2021.