Development of a model to stress-test the impact of climate risks on primary copper production up to 2050

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Insinööritieteiden korkeakoulu | Master's thesis
European Mining Course
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European Mining, Minerals and Environmental Programme (EMMEP)
The widespread concerns about climate change, as well as the major enabling factors for the transition that are required to guarantee its control, necessitate research and a tool that can provide insight into the future of copper mining. The world's copper supply is primarily concentrated in a few producing locations: Chile, Peru, Democratic Republic of the Congo, China, and Zambia. More than 50\% of the supply of this metal is produced in locations with high water stress. This is a concerning issue as the process to produce copper is particularly water-intensive. Existing physical risks such as landslides, floods, fires, and dangerous amounts of heat stress are also common and so are researched in this thesis. Policy makers, governments, society, banks, and investors are monitoring the impact of climate risks on this industry. Therefore a tool to evaluate the risks on copper mining to allow the stakeholders to assess exposure to climate change has been developed in this thesis. To accurately analyse the future supply of copper, this tool specifically stress tests different standardized NGFS climate scenarios for years 2030 and 2050 for copper mines throughout the globe. The simulation revealed that climate risks are a systematic risk for copper mining companies, with roughly a 50\% of the supply being at high risk. Moreover, the findings suggest that this commodity is rather more vulnerable to transition risks than to physical risks, mainly due to the price of carbon. Furthermore, major producers in Chile and Peru must turn to seawater desalination and this will significantly raise operational costs. In addition, there are concerns over a possible labour migration to regions with food security issues which could jeopardize the skilled mining workforce, more research into this is required. The findings also indicate that countries previously regarded as unattractive locations for investment, such as Zambia and the DRC, may soon rank among the major producing nations with the lowest climatic risk exposure and the lowest industry costs. However, these ratings may be offset by these countries' higher political risks. Climate change will also affect demand. Copper is a key component of the carbon-neutral transition as numerous significant renewable technologies depend on this raw material. Furthermore, conventional copper-intensive applications such as electrical networks will also expand over the next few decades. Although investments have been pledged, it is anticipated that these will fall short of what is required to satisfy the increasing demand. The developed model is static and reflects the issue that mines would face if they kept business as usual. This provides insights on the size of effort required by miners to overcome climate risks as well as to expose how vulnerable this commodity currently is. The model has the potential to be scaled and adapted to other commodities and to other industries. Due to its modular structure assumptions and parameters can be easily updated providing versatility and robustness.
Rinne, Mikael
Thesis advisor
Buxton, Mike
copper, mining, stress-test, climate risk, climate change, sustainability
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