Monika Sarder Senior Policy & Research Coordinator, The AusIMM

1. Why the Mining Industry is Critical to Sustainable Development: Greenhouse Gas Emissions Policy,A Case Study Monika Sarder Senior Policy & Research Coordinator, The AusIMM New Leaders Conference, Kalgoorlie, April 2006

2. 1990s – Industry Image Takes a Beating • Growing up in 1990s (era of Captain Planet) prevailing message was that industry was opposed to wellbeing, existing solely for personal profit of unscrupulous fat cats indifferent to the fates of whatever stood in its way. • Did not arise in a vacuum –horrible incidents arising from lack of transparency, faulty chains of accountability and occasional dodgy director (eg Thalidomide babies, Bhopal disaster in Bangladesh) • Human globalisation experiment has no precedent in human history. • As industry increases in scale and rewards, regulations and systems of accountability continually evolve alongside it. • Ongoing challenge: balance material wellbeing and risks.

3. Sustainable Development: A Necessary By-Product of Globalisation • Theoretically, tension between advancement and risks resolved by principle of sustainable development. • Bruntland Report defined as “meeting the needs of the present without compromising the future generations to meet their own needs.” • Mining epitomizes challenge of sustainable development: few sectors have as direct impact on natural environment, yet are more important to economic and social health of every region on the globe.

4. Resolving Sustainable Development and Global Competitiveness • In a global industry need to resolve sustainable development international competitivess. • Federal and State Govt policies on key sustainable development issues will have fundamental impact on our competitiveness. • Dangerous fatalism about state of science led to dangerous “stop production” attitude. • It is not fully appreciated that for many of these issues technology drives the solution. • As technical institute, The AusIMM sees one of its roles as being to highlight the way in which industry innovation can and must be part of the solution to government.

5. Case Study: Greenhouse Gas Emissions Policy • The AusIMM advocacy initiatives: • policy settings which encourage R&D to raise our prospectivity • greater funding for minerals related tertiary courses • more rational policy around uranium related activities • Evolving position on GHG emissions policy. • Shows the way in which “limits to growth” policies can have a negative impact on sustainability of the sector. • Highlights the importance of technology based solution, and what minerals sector professionals can contribute.

6. World Community on Climate Change • Risk that hastily implemented GHG emissions policies will adversely impact industry: • Carbon trading between Kyoto ratified countries coming online in 2008 • States proposing national emissions trading scheme • World Govts accepted IPCC findings that human activities increased GHGs and If no abatement measures taken avg surface temperatures could increase by 1.4 to 5.8 degrees. • Possibly increased temperatures, more frequent droughts, sea level rise, more frequent extreme weather events and wider distribution of certain insect borne diseases. • IPCC estimates that reduction of at least 60% of 1990 levels of GHGs necessary to stabilise climate.

7. Australia and the Kyoto Protocol • Stabilising GHG emissions needs global solution. • Kyoto Protocol most famous multilateral measure. • Came into force February 2005 after Russia ratified. • Seeks to lower emissions by seeking commitment of some developed countries to reduce GHG emissions between 2008-2012. • We did not ratify it. Flawed measure that would deliver negligible GHG reductions (less than 1%). • Would have devastating consequences for an energy intensive, coal dependent economy such as ours. • We only account for 1.6% emissions worldwide – but high per capita emissions.

8. Coal: Our Achilles Heel Could be our Greatest Strength • Coal accounts for 75% of our stationary power generation = 35% of our GHG emissions. • Energy prices in Australia some of the cheapest in the developed world. • Major exporter of energy resources: $24.2 billion; coal $11.9 billion • Major exporter of energy intensive resources: largest exporter of alumina; 5th largest exporter of aluminium • Knee jerk measures such as emissions caps would drive up energy prices and hurt major exports. • Result: carbon leakage as major industries go to developing countries. • Net emissions increase if country is less energy efficient and lower capacity for technological innovation than us.

9. Coal: Our Achilles Heel Could be our Greatest Strength (cont’d) • Rather than putting rapid downward pressure on emissions, we should tap into our natural advantages to develop leading edge technologies that can deliver long term abatement for the future. • Total world energy consumption to increase by 140% in next 50 years, developing countries account for 80%. • Developing countries will note accept binding target. • Meaningful emissions reduction only if cost effective low emissions technologies deployed to these countries, and more efficient processes for producing key commodities for them brought on line. • As major producer and supplier with knowledge intensive industries and R&D links, Australia can be part of a long term technology based solution.

10. Low Emissions Energy Technologies • In the recent Energy White Paper, the Govt identified areas where we can be ‘market leaders’, ‘fast followers’ and build ‘reserve capacity’ • Electricity breakdown: 75% coal, 14.2% natural gas, 6.7% hydro, <1% wind, biomas, biogas. • Market leaders: advanced coal, geosequestration, photovoltaics, hot dry rocks • Fast followers: natural gas, wind, biomass

11. Carbon Geosequestration • Geosequestration of CO2 – capture and storage of CO2 in deep geological reservoirs – is most favourable. • Greatest opportunity for retrofit. • Already used in oil industry as a means of enhancing recovery from oil fields and disposing of CO2 (eg Sliepner Vest Gas Field) • Potential for Australia has shown 65 sites are environmentally sustainable for CO2 injection. • Otway Basin Trial commencing this year. • Need to bring down associated costs.

12. Nuclear Energy and Renewables • Australia is the worlds second largest uranium exporter and has 40% of known low cost uranium reserves. • Nuclear power stations produce less than 40kg/MWh cf. 760/kWh from coal fired power stations. • Dearth of discussion around nuclear options in Australia. • Renewables - two major projects underway – hot dry rocks and ‘Solar Cities Trial’. • So far, used to supplement fossil fuels during peak generation times, too intermittment for base load.

13. Improving Energy Efficiency • Manufacturing and mining largest energy users (49% and 11% end use fuel consumption). • Iron and steel, cement and aluminium production particularly energy intensive. • With ramp up in production, estimated that iron and steel production will account for 50% of new emissions. • Tapping into industry’s desire to reduce cost of this input is an important challenge for policymakers.

14. Current and Future Directions for Emissions Reductions in Minerals Sector • Coke consumption in blast furnace ironmaking a third of what it was 80 years ago. • Next generation of ironmaking furnaces likely to be operated without coke, using 100% directly injected non coking coals (eg HIsmelt process at Kwinana). • Projected energy efficiency improvements through: • continuous smelting technologies for treatment of nickel and copper • direct smelting for primary lead production • commercialisation of inert anodes and wetted cathodes for aluminium production, by eliminating the need for carbon based anodes. • Also, underground coal mines capture fugitive methane and use it to generate electricity, while others capture and flare (87% reduction)

15. Current GHG Emissions Policy:A Mish Mash of Push and Pull • A technology based solution will require both ‘push’ policies for low emissions technology R&D and ‘pull’ policies to encourage technology uptake. • Currently polices ad hoc and not complimentary • ‘Push’ Policies • Usual channels such as university funding, ARC grants, R&D tax concessions, CRC’s, CSIRO. • Low Emission Technology Development Fund; $100 million per year Competitive Grants for Renewables • ‘Pull’ policies (hard) • Mandatory Renewable Energy Target (9500 GWh by 2010) • Qld 13% Natural Gas • NSW GGAS: retailers to meet mandatory emissions intensity benchmarks • Pull’ policies (soft) • Australian Greenhouse Challenge –eg Normandy Mining Ltd Pajingo Gold Mine achieved a 27% reduction in CO2 per tonne of ore processed as a result of efficiency upgrades. • Mandatory Energy Efficiency Opportunity Assessment

16. Room for Improvement • Push measures starting to be more focused. • Measures aimed at leveraging business investment in R&D need to be more strategic across industries, not just aimed at the stationary energy sector. • Eg. Mandate in California that, by 2030, 10% of the cars sold by the 7 largest automobile manufactures must be zero emission or near zero emission vehicles • Pull measures are entirely scattered and are not linked in with push initiatives. • Need an overarching vision of where we are going.

17. A States Based National Emissions Trading Scheme – A Flawed Proposal • September 2005 States released background paper for consultation. • Covers stationary energy sector only, ‘cap and trade’ as opposed to a ‘baseline and credit’ system. • ‘Cap and trade’ there is an absolute emissions cap cf. ‘baseline and credit’ businesses are ascribed a baseline of emissions per unit of output (emissions intensity) • Baseline and credit more appropriate for Australia given anticipated ramp up in production. • Focusing on stationary energy sector only does not take into account how product contributes to emissions mitigation across its entire life cycle: • Aluminium • LNG

18. The Pitfalls of a Hastily Implemented Scheme • In Australia, getting the settings around emissions trading wrong could be disastrous. • Economic models show that 10% increase in electricity costs would result in –ve profitability of steel, nickel, copper, gold, uranium, paper and cement. • Creating shallow illiquid market only likely to create abatement at the margins and increase energy costs. • Learn from overseas experience: • EU Emissions Trading: windfall for power generation • Kyoto Protocol: Russia signing on = net emissions increase

19. AP6 and Technology Based Solutions • If we are to reduce GHG emissions whilst maintaining standards of living in developed countries, and without compromising developing countries right to improve theirs, a technology based solution is required. • Necessary technologies will not be developed by us alone, but in collaboration with other countries. • We are already involved in a number of international research groupings • Asia Pacific Partnership on Clean Development and Climate Change (AP6) is the major framework for collaboration • Major emitter countries and industry: BHP Billiton, Rio Tinto, Exxon Mobil attended first meeting in Sydney. • Will create multi million fund to encourage mining and power industries to develop and use cleaner energy: $445 million pledged. • International policy frameworks for development and diffusion.

20. We Need an Overarching Vision • At the domestic level, need to target ‘push’ policies towards R&D that will make the difference, and which are reasonable given geography, resources and industries • Improving energy efficiency indispensable. Research that encourages whole of life cycle approach (3 Rs). • ‘Pull’ polices to stimulate technology uptake – necessary to overcome conservative culture and perceived risks. • Only justifiable if they can encourage adoption of commercially viable low emissions technologies or assist in averting high emission technological lock in. • Policies must be coherent and informed by long term strategic vision. • Needs to be developed at the Federal level.

21. What role for The AusIMM? • Challenge of reducing GHG does not need to be a “limit to growth” • Policy paper from The AusIMM will form basis of press releases and submissions. • On sustainable development issues, crucial that govt work with industry, not against it. • Need to continually highlight how science and technology can contribute to solving political problems. • The AusIMM will make best efforts to channel knowledge of our members across geology, minerals processing and mining engineering in research and industry into policy positions on key issues. • We look forward to your contribution in the coming years!

22. Contacts • Discussion paper of GHG emissions policy in next Bulletin. • Advocacy around uranium, R&D for sustainable sector etc. • Contact through WIR, The Bulletin, Task Forces. • Email msarder@ausimm.com.au • Policy web page http://www.ausimm.com/policy/policy.asp