The Vision of Carbon Neutral Having Brought about Opportunities and Challenges to Metal Mining Industry

In September, 2020, President Xi Jinping proposed in General Debate of the 75th Session of the United Nations General Assembly that China will enhance the efforts of INDCs (Intended Nationally Determined Contributions) and adopt more powerful policies and measures to make carbon emission peak by the year of 2030 and achieve carbon neutral by the year of 2060. As the biggest developing country in the world and the country generating the most carbon emission in the world, China has made a commitment that is of great importance to itself and the whole globe. Driven by this vision, metal mining industry is sure to be exposed to huge challenges as well as new opportunities for development.

1. Carbon Neutral Has Been A Common Goal Globally

(1) Carbon neutral attracts more concerns than carbon emission peak

Carbon emission peak means total emission of carbon dioxide reaches peak and after that the emission maintains the same or declines. Carbon neutral is an original English word coming from Paris Agreement. “Carbon” here in general refers to greenhouse gas that causes global warming, while “neutral” reflects a concept in chemistry called neutral reaction, which indicates that carbon neutral does not simply refer to zero emission of greenhouse gas, instead, it means cancelling out greenhouse emission and absorption and achieving a balance, i.e. a concept of net zero emission. One side of the balance is emission of greenhouse gas, mainly greenhouse gas arising from production and life released to atmosphere. The other side of the balance is greenhouse gas absorbed from atmosphere through physical methods and chemical methods. Present primarily used methods are carbon sink of agriculture and forestry (afforestation) and Carbon Capture，Utilization and Storage (CCUS) for carbon reduction and carbon sequestration. That is to say, even if carbon neutral comes true one day, there still will be a certain amount of greenhouse gas emission but the amount should be small enough to be consumed and absorbed.

With respect to emphasis, carbon emission peak emphasizes carbon dioxide emission trend rather than emission load. The achieving of carbon emission peak marks the transformation of economic development pattern, and leads to decoupling of carbon emission and economic development. Carbon neutral not only raises requirements on the trend of emission control but also focuses on if net emission is zero. It stresses the necessity to match absorption ability with emission amount. To sum up, carbon neutral involves more fields than carbon emission peak, is exposed to bigger pressure and requires more efforts.

(2) The world sees carbon neutral as a goal in the cause of coping with climate change

In 2015, nearly 200 contracting parties unanimously agreed on Paris Agreement where each party undertakes to make more efforts, based on current goal of limiting temperature rise to no more than 2℃ on pre-industrial level brought up by the United Nations Framework Convention on Climate Change, to limit temperature rise to no more than 1.5℃ on pre-industrial level. Paris Agreement also puts forward that the world achieve carbon neutral (a balance between human greenhouse gas emission and absorption) by the second half of this century.

As a result, more countries (regions) around the world have been devoted to carbon neutral cause. EU, Britain, Japan and other major economies are committed to achieving carbon neutral by the year of 2050. USA backed out of Paris Agreement on November, 4, 2020 but just 39 days after that, on January, 20, 2021, President Biden announced on his inaugural ceremony that USA was going to reenter Paris Agreement. It took 30 days to complete reentry procedure. All these clarify an obvious trend that the whole world is actively on its way to carbon reduction.

In order to respond to the commitment of President Xi Jinping about “30?60” carbon emission peak and carbon neutral on General Debate of the 75th Session of the United Nations General Assembly in last September, Chinese government has made according efforts: The Central Economic Working Conference convened in last December incorporated “carbon emission peak and carbon neutral” into Eight Major Tasks of 2021; in this February, the State Council issued Guidelines for Accelerating the Construction of An Improved Green and Low-carbon Circular Economic Development System that clarifies the construction goal of green and low-carbon circular economic development system for the year of 2025 and 2035, and deploys major tasks involving 6 aspects;

The 14th Five-Year Plan for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 plans and deploys roadmap for carbon emission peak and carbon neutral in this March; the 9th Meeting of the Financial and Economic Commission of the CPC Central Committee clarifies basic ideas and primary measures for achieving carbon emission peak and carbon neutral.

2. It Is An Arduous Task for China to Realize Carbon Neutral

From the perspective of energy structure, carbon emission load and carbon emission intensity, or the perspective of development phase and implementation time limit, China, the biggest developing country in the world, is confronted with huge challenges on its way making carbon emission peak and carbon neutral come true.

(1) Huge pressure on energy structure adjustment

China is featured by the energy structure of “abundance in coal, shortage of oil and lack of gas”, from which we can tell that coal is the predominant one. The data of 2019 showed that our primary coal consumption accounted for 57.7% (falling from the record of 76.2%), the lowest since 16 years ago. But it still accounted for 51.7% of total global coal consumption. The most important approach to carbon emission peak and carbon neutral is the cleaning in energy structure, which means replacing coal with clean energy in a rather short period of time. This will give rise to difficulties and challenges that China has to address in multiple aspects including infrastructure construction, technologies and people’s livelihood safeguarding.

(2) Having difficulties in declining from the highest emission in the world

In 2005, China surpassed USA and became the country emitting the most carbon on the globe. With respect to total emission load, China has maintained its carbon emission at about 28% of global total for 10 years. In 2019, China accounted for 28.8% in global carbon emission, twice as much as that of USA the threefold as much as that of EU. With respect to the growth in carbon emission, China still surpasses the whole world. As the saying goes, it is hard for big ships to make a swift turn. China, the biggest developing country and the country emitting the most carbon, is inevitably facing huge challenges in realizing carbon neutral.

(3) Having been subjected to restrictions resulting from underdeveloped economic development

With respect to carbon emission intensity, China far surpasses USA. In 2019, intensity of China was 6.9 tons/USD 10000, while that of USA and EU was respectively 2.3 tons/USD 10000 and 2.5 tons/USD 10000, which indicates that China still falls behind developed countries in industrialization process. China needs to make efforts to achieve carbon dioxide emission peak as soon as possible on a relatively low economic development level, and this will expose China to bigger restrictions in economy and technologies.

(4) Shorter time limit for achieving carbon emission peak and carbon neutral

Western developed countries have been going through industrialization process for over 200 years since Industrial Revolution. Therefore, they have realized the decoupling of economic development and carbon emission if viewed from technology and law of economic development, and most of them have achieved the goal of carbon emission peak. While on the other hand, China has been going through industrialization process for less than 100 years so China has to adopt more robust policies and measures to achieve carbon emission peak. The time for China to go from carbon emission peak to carbon neutral is several decades shorter than that for developed countries. This may require fundamental reforms of economic development models and industrial structure so China needs to make profound technical innovations and industrial reforms.

3. Metal Mining Industry Enterprises Have Set Sails

(1) Metal mining industry is the important liability subject in carbon emission peak and carbon neutral

As an important fundamental industry in national economy, metal mining industry has been playing an irreplaceable role in our process of industrial modernization and is an important field for carbon emission reduction cause. In addition, metal mining industry is also an important liability subject in realizing carbon emission peak and carbon neutral.

According to incomplete statistics, metal mining industry accounts for over 20% of total domestic carbon emission. Especially, steel industry is the biggest carbon emission industry in manufacturing sector, with annual total carbon emission of 1.8 billion tons, approximately accounting for 15% of total domestic carbon emission. Preliminary statistics of China Nonferrous Metals Industry Association showed that emission of carbon dioxide in nonferrous industry in 2020 was 660 million tons, accounting for about 5% of total domestic carbon dioxide emission.

(2) Carbon control policies are issued intensively

Ministry of Ecological Environment intensively issued a series of carbon emission controlling policies including Measures for the Administration of Carbon Emission Trading (pilot), Guidelines on Coordinating and Strengthening Work Related to Climate Change and Ecological and Environmental Protection, and Notice on Strengthening the Management on Reporting Enterprises' Greenhouse Gas Emission on a short notice. MIIT and NDRC (National Development and Reform Commission) are formulating guidelines for new capacity replacement and project filing, in the hope of gradually establishing stock constraint mechanism based on carbon emission, pollution emission and total energy consumption and implementing industrial low-carbon initiatives and green manufacturing engineering.

In February of this year, China Iron and Steel Association issued Big Responsibility of Steel Industry to Embark on New Journey of Low Carbon – Promoting Low-Carbon Initiative in Steel Industry for the purpose of putting forward 6 initiatives for steel industry to promote industrial carbon emission reduction. Relevant departments formulated Implementation Plans on Carbon Emission Peak in Nonferrous Industry and are now soliciting opinions from industrial associations and enterprises. Preliminary goals have been made for nonferrous industry that carbon emission peak be realized by the year of 2025.

(3) Leading enterprises of industry accelerate

1. International metal mining giants are committed to realizing carbon neutral by the middle of this century

Vale of Brazil is committed to investing at least USD 2 billion in the coming 10 years in efforts to reduce, by 2030, absolute emission by at least 33% on that of 2017. It aims to realize net zero emission by 2050.

Rio Tinto has formulated in detail five-year decarbonization plans and is committed to investing USD 1 billion in climate-related projects during 2020-2024. Rio Tinto has also set a goal for carbon emission, i.e. to reduce steelmaking carbon intensity by at least 30% by 2030 and realize net zero emission in business operation by 2050.

2. One after another, domestic mining enterprises have identified their schedules

China Baowu put forward for the first time goals and schedules for carbon emission reduction in early 2021, i.e. releasing low-carbon metallurgy roadmap in 2021, aiming to realize carbon emission peak in 2023, grasping technical abilities to reduce carbon emission by 30% in 2025, aiming to reduce carbon emission by 30% in 2035 and aiming to realize carbon neutral in 2050.

Following Baowu, HBIS Group presented its overall goal of carbon emission peak and carbon neutral: releasing low-carbon metallurgy roadmap in 2021, realizing carbon emission peak in 2022, reducing by over 10% compared to carbon emission peak in 2025, reducing by over 10% compared to carbon emission peak in 2030 and realizing carbon neutral in 2050.

As a leading enterprise in nonferrous industry in China, CHINALCO established working group on carbon emission peak and carbon neutral and convened meetings to deploy relevant work. Working group also constructed relevant mechanisms to push forward carbon emission peak and carbon neutral.

Beside state-owned enterprises, some private enterprises also clarified their determinations in the cause of low-carbon achievements. Delong Steel and NTS Group brought up the ideas of “l(fā)ow-carbon development, energy efficiency, growing into low-carbon smelting model enterprises”. They will release low-carbon metallurgy roadmap this year and aim to gradually reduce carbon emission load per ton steel from 2022, which means 1 year earlier than the industry to achieve carbon emission peak.

4. Opportunities and Challenges Metal Mining Industry Meets With In Carbon Emission

(1) Challenges and difficulties

As one of the key industries concerning carbon emission as well as one of the important industries to practice carbon neutral in China, metal mining industry is faced with huge pressure in the cause of emission reduction. It is predicted that MIIT will control the yield of crude steel this year from the two aspects of capacity and yield. In the meantime, to continue to deepen supply-side structural reform in aluminum industry and strictly control the additional capacity of aluminum. Overall speaking, the task of carbon emission reduction has generated huge pressure. Some local governments have responded to the call, among which, Tangshan of Hebei Province, a major steel province, has become the first one to release production curtailment notice in March, which requires that 7 steel enterprises carry out emission reduction measures of production curtailment by 50% in the first half of this year, and carry out emission reduction measures of production curtailment by 30% in the second half of this year. The Notice also additionally requires that 16 steel enterprises carry out emission reduction measures of production curtailment by 30% the whole year. Inner Mongolia, a major aluminum province, will further its curtailment on thermal aluminum capacity after the circulated notice criticizing its failure to meet energy “dual control” goal.

In the coming future, more relevant policies will be issued more actively, therefore, metal mining enterprises are sure to be given more pressure on carbon emission reduction.

2. Carbon emission control directly leads to increase in cost

Following power sector, metal mining industries like steel industry and nonferrous industry are to be gradually incorporated into national carbon market, especially aluminum industry, for it already made good performance in carbon emission. Experiences from international carbon market and domestic pilot carbon market tell us that monitoring & enforcement cost or emission reduction cost resulting from entering carbon market will elevate production cost of carbon market enterprises, thus influencing their operations to some extent. The price of metallic mineral products go up, which will impair international competitiveness of metallic mining enterprises to some extent.

3. Elimination of outdated capacity accelerates

Since the 13th “Five-year” Plan, as policies on supply-side structural reform and ecological environmental protection continue to deepen and advance, metal mining enterprises have achieved tremendous progress in energy consumption and environmental protection by adopting conventional energy saving and emission reduction technologies. On this basis, further progress in carbon emission reduction requires more upgraded and revolutionary technologies. As a result, small and medium-sized enterprises that do not meet carbon neutral requirements will be eliminated by government. Elimination of outdated capacity may proceed more rapidly.

4. Great difficulties due to complicated carbon emission mechanisms

Unlike power sector, metal mining industry has numerous challenges in multiple aspects: a wide range of product types, raw material and accessories; different associated states in one type of metal mine especially nonferrous ore; different mining methods and smelting methods for one type of metal; various combining production for different types of metals; different single process has different carbon emission mechanism. That is to say, it is extremely challenging for metal mining industry to realize carbon emission peak and carbon neutral, no matter from perspective of raw material, product, process or from perspective of emission mechanism.

5. Underdeveloped green technologies

Relevant technologies that support low-carbon development of metal mining industry are rather underdeveloped. Technologies like blast furnace rich hydrogen metallurgy and direct reduction of pure hydrogen in shaft furnace are still at early stage of development and we still need to make plenty of efforts before developed technologies and devices can be widely applied. On the other hand, it puts higher requirements on technologies and economic threshold to replace coke with hydrogen energy as reductant, so currently fossil energy still is deemed as the primary raw material for hydrogen production, which gives rise to high price of hydrogen. What’s more, this preparation process will generate big loads of carbon emission, so even though hydrogen-replacing-coke process is widely promoted, it is still of no use in actual carbon emission reduction.

(2) Opportunities

1. New energy and new infrastructure boost increase in demands

Energy structure adjustment is China’s priority if China plans to realize carbon neutral. The ever-increasing proportion of clean energy will actively boost demands for metal. According to the report by the World Bank Act of Minerals Influencing Climate: Consumption Intensity of Minerals Transforming From Clean Energy, by 2050, minerals closely related to clean energy (graphite, lithium and cobalt) are likely to increase by 500% in yield. As the new infrastructure constructions spread, i.e. intercity high-speed railway, urban railway system, UHV grid, charging piles of NEV and 5G base station, demands for metal minerals will significantly increase, including specially-made steel, copper, aluminum and nickel. Demands for metal minerals will maintain an increasing trend in the coming future.

2. Increases in both demands and cost drive the price to go up

Two elements will make tension between supply and demand last longer: a. growing demands; b. government strengthens its control on capacity and yield of steel and nonferrous metal because of the goal of realizing carbon emission peak and carbon neutral. Experiences from central ecological and environmental protection inspection tell us that stricter environmental protection policies will drive environmental protection cost of high-emission enterprises to go up. Similarly, metal mining enterprises will have to raise production cost because they take stricter measures for carbon emission reduction under the pressure of carbon emission peak and carbon neutral. The price of metal minerals is likely to set a new high stimulated by high demands, high cost and global inflation.

3. More enhanced industrial concentration

Carbon emission peak and carbon neutral require a tremendous investment of manpower and material resources, so small and medium-sized enterprises do not have a thorough understanding of them, nor do they have enough self-motivation in technical transformation. More enhanced industrial concentration will enable leading industrial enterprises to give full play to their strengths in human resources, technologies, equipment and management, and to their role of pioneers in carbon emission reduction, thus helping the industry to achieve dynamic supply-demand balance of higher level and facilitating carbon-emission-peak-related and carbon-neutral-related initiatives all across the whole industry. On December, 31, 2020, MIIT released Guidelines on Promoting High Quality Development of Steel Industry (exposure draft) that brings up further deepening mixed-ownership reform and enhancing industrial concentration, thus improving industrial structure and deployment rationalization. “Matthew Effect” of leading enterprises in metal mining industry may soon present itself.

4. To make carbon assets of enterprises valuable

Ministry of Ecological Environment lately will conduct allocation of carbon emission quotas among power sector, the first batch of players. The first exercise cycle of domestic carbon market commences and it is also planned that online trading will be launched at the end of June. The curtain of domestic carbon market is thus lifted. Carbon emission quota is allocated according to emission intensity before or industrial base line. Therefore, enterprises with higher energy utilization and better energy saving and technical reform effects will enjoy extra carbon emission quota. They can circulate and transfer extra quotas as an extra source of incoming. Since the commencing of carbon trading pilot in Hubei Province, several enterprises including Ezhou Power Plant have made emission-reduction profit of over RMB 20 million. With the spreading of carbon market, quota is gradually becoming a novel type of assets among metal mining industries.

5. To broaden funds acquiring channels for enterprises

In last October, Ministry of Ecological Environment, jointly with NDRC (National Development and Reform Commission), People’s Bank of China, China Banking Regulatory Commission and CSRC (China Securities Regulatory Commission), released Guidelines on Promoting Investment and Financing in Addressing Climate Change, which points out that the government will guide more capital to investment and financing initiatives in fields of climate change addressing. Based on the experiences from 7 pilot carbon trading provinces and cities in China, carbon trading provides multiple financing approaches for enterprises such as carbon foundation, carbon bonds, quota pledge and buy-back financing. In the future, carbon emission reduction projects and climate-friendly enterprises will get more preferred by investors and capital markets home and abroad, so their financing abilities will get strengthened and financing cost will get declined.

6. To strengthen carbon sink through tree planting in mining area

Carbon absorption ability is as important as carbon emission reduction in the cause of carbon neutral. Metal mining enterprises are usually located in vast regions far from urban areas. Therefore, the vast mining land resources can be well utilized for tree planting for carbon sink. That is how we actively find solutions through afforestation instead of just handling supervision requirements on ecological restoration from superior departments. Researches show that active ecological restoration in deforested land in mining areas helps to improve carbon sequestration ability of ecosystem by about 20%, which makes huge contributions to the goal of carbon neutral.

5. Suggestions for Metal Mining Enterprises

(1) To adopt control and management on carbon emission in informationalized way

Carbon emission data is the basis for all management measures in the cause of low-carbon transformation. It is suggested that informationalized measures be adopted such as big data, Cloud Computing and AI, to promote digitalization and intelligentization transformation of metal mining enterprises, to comprehensively collect energy data in each production process and carefully investigate carbon emission of each enterprise. We need to rely on current monitoring system of enterprises to construct a smart management platform that comprehensively monitors carbon emission of all processes so as to realize smart controlling on core energy using equipment, thus greatly improving fine management and utility efficiency of energy.

(2) To advance the development and application of key technologies

Technology innovations are a key element to realizing both economic development and carbon emission peak and carbon neutral. It is suggested that we strengthen the promotion of green low-carbon new technologies, new form of industry and new model; carry out researches on forward-looking and breakthrough technologies; develop and promote low-carbon, zero-carbon and negative-carbon technologies that are featured by low cost, high efficiency, carbon emission reduction and safety and controllability. We should comprehensively advance industrialization and innovations of low-carbon technologies, implement critical science demonstration engineering in green low-carbon fields and give full play to strengths in coordinated management and industry-college-institute cooperation.

(3) To construct circular economy industrial chain

It is difficult for an enterprise or an industry to realize carbon neutral independently. It is suggested that we strengthen circulation within chain and improve utilization efficiency of steel scrap and recycled aluminum; give support to power battery metal recycling to prolong lifecycle of metal products and realize carbon emission reduction of chain in full lifecycle; implement green fusion of different industries and build horizontal connections among industries of metallurgy, chemical engineering, petrifaction and building materials. Relying on intercommunity of technologies and complementarity of products, industries should learn from each other, make according transformation and connect with each other. Carbon reduction effect made by single industry is rather limited, and only by cross-border fusion and novel process can we create a win-win situation that complements each other's advantages.