Higher Carbon Prices Needed to Comfort Renewable-Mineral-Project Investors (3)

–Rich nations need to respect China, which has strong influence over the existing mineral supply chain
–Copper is crucial to energy transition (electrification) and its price is surging

OPINION by Mathew Carr

May 5, 2021 — LONDON: Much stronger climate policy is needed immediately, otherwise the world may not quickly invest enough in mineral projects needed for rapid emission cuts required through 2030.

There needs to be a fast and massive jump in spending on the production of minerals such as copper, lithium, cobalt, nickel and rare-earths or the world’s target to keep temperatures from rising 1.5C was at risk, according to International Energy Agency officials, speaking today in an online web event.

The IEA didn’t pick carbon pricing out, but one way to show renewables really are the path of choice for the world would be to put CO2 prices in place across the globe.

Here’s what’s needed in minerals. These supply uplifts seem unlikely, underpinning the need for aggressive climate policy action to spur them on:

“Early and clear signals from policy makers are critical. Security of supply also lies in diversity of supply,” said Tim Gould, IEA executive (see above).

Reinforcing geological surveys, streamlining permitting processes, providing financing support to de-risk projects and raising public consciousness of the projects’ importance for the climate transition are all needed, the IEA said.

China, Chile and Australia are among countries with strong influence over existing mineral supply chains. The U.S., Qatar and Australia have strong influence over existing energy systems.

Higher carbon prices would underpin demand for clean energy by making traditional dirty energy more expensive and so less attractive. Higher carbon prices may also be offputting if they increase the cost of mineral projects, said Aime Emmanuel Yoka, managing partner of Marys Capital Investments Pte Ltd., answering a CarrZee question on LinkedIn.

The higher carbon prices may boost the cost of a project if it requires a carbon-capture and utility element or the purchase of green electricity, he said, citing a “backlash and difficulties” in raising finance for mining projects.

Carbon pricing can provide new sources of government revenue that can be used to help derisk projects using development banks, for instance. That revenue can also make up for lower tax revenue from fossil fuels.

Copper, needed as economies electrify, has been surging. See these short-term and longer-term charts from the London Metals Exchange.

LME: https://www.lme.com/en-GB/Metals/Non-ferrous/Copper#tabIndex=5

(Updates with Yoka, supply chain data, price charts.)



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