The implications of climate change for the extractive industries.

Position:Research brief

Climate change is one of the most complex and urgent of global issues due to its potential impacts and the policies and measures needed to address those impacts. Both are potential game changers for the Earth's biosphere, ways of life, and economic development into the twenty-first century and beyond. Climate change will impact the extractives sectors in a number of ways, generating both threats and opportunities.

Bio-physical impacts are expected on capital investment and operations

The industry faces a wide range of environmental challenges to its operations as the result of rapidly changing climate. Extractives industries operate at the 'front lines' of the natural world, often in comparatively extreme and isolated environments that are more likely to suffer the effects of climate change. The industry also relies on global supply chains for material inputs and product exports; these chains are vulnerable to unexpected climatic events and sea level rises. This poses risks for operations and supply chains.

Impact evaluation models are being developed in the industry to examine occurrence probabilities, who will be affected, the expected duration of impacts, and whether impacts will directly or indirectly affect extractives-based activities. The industry's proficiency in risk management and planning should be a relevant factor when developing appropriate climate resilient/adaptation policies in mining areas.

A shift to clean energy has implications for core fossil fuel commodities

Recent research has suggested that an immediate and radical reduction in the use of fossil fuels--such as coal, oil, and gas--will be necessary for governments to meet commitments made in the Paris Agreement, leaving large multinationals with considerable stranded capital assets. However, the implementation possibilities of different low-carbon pathways as well as the will needed to meet commitments are still unclear. Initially the change is likely to be gradual, with the potential for significant impacts by the end of the century.

Improved energy efficiency and the use of Carbon Capture and Storage (CCS) represent two possibilities for a more gradual shift away from fossil fuels. These could help abate the costs and challenges associated with the transition to a renewable future.

Increased costs for energy efficiency, and water and ecosystems regulation in daily operations

Even outside of fossil fuels, there will be considerable regulatory and pricing pressure to...

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