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Blog • 07 Feb 2022

Embarking on the 2050 carbon neutrality through decarbonisation of the mining sector

Embarking on the 2050 carbon neutrality through decarbonisation of the mining sector

There is a common misconception that the mining sector cannot conduct environmental stewardship, but Exxaro has proven otherwise, argues ABEL SAKHAU, Environment and Climate Change Manager

Climate change is undoubtedly one of the defining global challenges of our generation. It is disrupting national economies, weather patterns are becoming extreme and livelihoods, especially of the most vulnerable, are threatened. We are experiencing a growing trend where investment community and banking institutions are reviewing their financial support for fossil fuel assets. Through their Nationally Determined Contribution (NDCs), governments are committing to reducing global greenhouse gas emissions to limit the temperature increase to well below 2°C, preferably to 1.5°C by 2030.

The Covid-19 pandemic may have stalled national plans to tackle climate change and reduce emissions. As such, the COP26 summit in Glasgow 2021 brought parties together to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.

To deliver on the Paris Agreement, the global economy needs to shift to low carbon technologies in the mining, energy, transportation and agricultural sectors. Companies, banks, insurers, and investors must adjust their investment strategies and business models to develop and implement credible plans to transition to a net-zero carbon economy.

The mining sector has been facing pressure from governments, investors, and society to reduce carbon emissions as the world moves towards a low carbon future. Renewable energy is becoming an inexpensive source of electricity; many of the world's carmakers are shifting to make only electric and hybrid models; countries around the world are starting important work to protect and restore biodiversity; cities, states and regions around the globe are also committing to the net-zero emissions target by 2050.

According to data from McKinsey, mining is cited as being responsible for 4% to 7% of scope 1 and 2 greenhouse gas (GHG) emissions globally. The mining industry is energy-intensive, using diesel and fossil fuel-generated electricity to drive scope 1 and 2 emissions. Decarbonisation of the power sector and diesel mobile mining vehicles presents the mining sector with an opportunity to meet the net-zero target by 2050. In 2017 South Africa had one of the most emissions-intensive power sectors, ranked 25 globally, and is therefore particularly vulnerable to the transitional risks of climate change.

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Exxaro has embraced the need to transition its business model and decarbonise and build resilience to the impact of climate change. We believe a "Just Energy Transition" for South Africa must address present and historical inequality, creates jobs, reduce poverty, restore our biodiversity and to build resilience against physical risks of climate change, and most importantly, ensure that no one is left behind.

Our Climate Change Response Strategy is integral to our Sustainable Growth and Impact Strategy aligned to the relevant UN Sustainable Development Goals twi and designed to ensure we can manage the direct and indirect climate change impacts on our current portfolio while ensuring we can contribute to the low-carbon environment of the future.

Our business has been in transition from as early as 2012 with the formation of Cennergi. Cennergi is a wholly-owned renewable energy subsidiary that operates two wind farms in Eastern Cape that contribute 239 megawatts into the national grid. Cennergi is also developing the 70MW Lephalale Solar Project to supply renewable energy to the Grootegeluk Complex in Limpopo.

Our transition is intentional and anchored on the "Just Transition" principle, which seeks to balance our business financial performance, South Africa's economic development needs, environmental stewardship and societal adaptive capacity in the face of changing climate.

We recognise the numerous benefits associated with diversifying and adopting a value chain approach to climate change adaptation and resilience building, especially given that the negative impacts of climate change are not only limited to our business's operating space. The foundational elements of our decarbonisation plan are geared towards empowering all our employees, including contractors. The organisation does not drive decarbonisation; employees are at the centre of decarbonisation activities.

In the process, we have mobilised practical ideas for job creation linked to the areas where they are located and provided collective support to small and medium-sized businesses, especially those operating in rural and township areas. Sixty-six entities – of which 44% are 100% black-owned and 26% women-owned – are supported by Exxaro, and we have started engagements regarding SMME opportunities and development in relation to decarbonisation.

We also remain focused on ensuring an optimal portfolio to deliver on our purpose — powering better lives in Africa and beyond. This focus required tough calls on our assets to extract the maximum value from these investments efficiently. Our portfolio must be resilient against physical and transitional climate change risks while leveraging opportunities presented by the transition.

There is a common misconception that the mining sector cannot coexist with environmental stewardship, but we have proven otherwise. Guided by environmental sustainability practices and our vision of "Resources Powering a Clean World', we have strengthened our organisational resilience while protecting the future of our environment. This stewardship will translate into future mining opportunities for sustainable growth.