The True Cost of Decarbonisation

Jul 18, 2022

A proper decarbonisation strategy will attract talent, manage risk, innovate for growth and save money for your organisation….. So what are the big drivers to pursuing net zero emissions?


Regulatory Pressure

Many countries are setting targets for renewables and net zero economies in an effort to meet the emissions reduction goals set out in the Paris Agreement. For example, the mining industry with the ever evolving regulatory landscape, (carbon and air quality regulatory framework, GHG Reporting Regulations, etc) and as a result the Mining sector is becoming increasingly complex from a compliance level. Market forces alone are insufficient to help this transition since CO2 emitters do not bear the full costs of their emissions. So we now anticipate and hope that Government Policy will step up in the short and long term to put financial pressure on those who are not transitioning via a carbon tax. The World Bank has mentioned that a carbon tax between $40 to $80 per tonne is needed to effectively reduce emissions. For example, if we look at Rio Tinto’s emissions from 2020 (31.5 Mt CO2-e), that equates to $1.26-$2.52 Billion in taxes or upto ~26% of net earnings.


Cost Reduction and Improvements in Operational Efficiency

Many mining companies are already taking steps to integrate decarbonisation into their company policy and strategies. These strategies not only reduce GHG emissions but also will reduce operating costs. Traditionally in mining operations, energy is the most significant spend, accounting for up to 40 percent of operating costs. The full decarbonisation of energy from nonrenewable resources to renewable resources should be regarded as a precondition towards decarbonisation, which we are now starting to see. Corporate decarbonisation roadmaps need to focus on improving energy efficiency and implementing low-carbon energy products. Investor pressure is forcing Corporate leadership on climate change to deliver a zero-carbon transition by 2050.


 Strengthening Brand and Reputation

Brand and reputation are very important, as consumers are making choices towards a sustainable future and would change buying habits to support a good cause. Investors too are moving towards “green” investing as they begin to align themselves with companies committed to setting decarbonisation targets.


Access to Tax Allowances or other Fiscal Incentives

Companies using the science-based targets approach have the added benefit of qualifying for tax allowances (carbon tax reduction due to reduction in scope one emissions) or other fiscal incentives (contracts that require a net zero strategy to be implemented within their business). Stakeholders are applying serious pressure on company directors, ie voting against directors that fail to act or auditors that fail to challenge management on shareholders’ behalf or publicly speaking out to demand changes to strategy. In the last couple of years, shareholders have pressed companies to take account of climate risks through shareholder resolutions. As a result, we are starting to see investors require companies to plan for their future in a net-zero carbon economy.

The stage is now set…… We wait to see who emerges as a smart company implementing a plan and a rollout of decarbonisation solutions that will not only decarbonise their operations, but also, position their company for future success 🚀!



Societal pressure

Local communities are often directly affected by the environmental impacts of mining operations and are increasingly demanding corporate adherence to higher standards of social responsibility. Measures such as skills development and environmental rehabilitation have long formed a central theme in mining regulatory frameworks. mining companies need to explore innovative strategies for decarbonisation to ensure their ongoing economic sustainability, maintain their social licence to operate, and create value beyond compliance. To move beyond compliance, there is a need redefine the concept of “value terms. Local Communities care about income earning opportunities, access to basic infrastructure and services, and impacts on health. In addition, many communities are heavily reliant on the environment and access to natural resources, which are more and more affected by the impacts of climate change. When companies align their purpose with doing good, they can build deeper connections with their community stakeholders and, in turn, amplify the company’s relevance in their stakeholders’ lives.


Attracting and protecting human capital

Making a company’s efforts visible to the public not only improves community and investor relations, but will also helps companies attract and retain a new generation of talent. In-demand employees want to work for companies that are creating a better future, not those perceived as “dirty” or dangerous. A recent study indicated that 75% of millennials expect employers to take a stand on addressing the climate crisis, and that Generation Z is demanding an equally strong stance on climate issues. Failing to commit to these issues will influence a company’s ability to the best attract talent, manage risk, and innovate for growth. Electrification of mines, including the transition to electric vehicles can help create a safer and cleaner environment for front-line workers, including higher air quality for those working underground. Decarbonisation is required and will demand dramatic changes in the use of energy and the use of land to reduce to zero the GHG emissions. A range of other effects will accompany these reductions in GHG emissions. The ‘co-benefits’ of GHG emission abatement extend to the impact on labour and communities and it is important that they are taken into account in considering the overall costs and benefits of abatement strategies. Bold action on climate change can deliver significant economic benefits, while also creating jobs and reducing premature deaths linked to air pollution.


Companies are increasingly being required to take a proactive approach to their supply chain in order to improve customer loyalty. This includes decarbonising, depolluting, creating a circular economy for products, sustainably and responsibly sourcing materials, becoming water and energy efficient, protecting biodiversity and the natural environment, and managing human rights and workers’ rights issues. 


To find out how Super Smart Energy can help your business, contact us today