Report sees the industry as a key lever for a faster global transition to climate-friendly energy.
The energy transition is picking up speed and is currently progressing faster than expected – this is the conclusion of a new report by management consultancy EY. The authors predict that green energy will dominate by 2038 and account for 62 percent of the global electricity mix by 2050. This momentum should be harnessed and accelerated, as it is currently not enough to limit global warming to the target of 1.5 degrees Celsius. This requires a rethink, EY continues. Energy and mining companies should play a leading role here, for which there are not only risks but, above all, great opportunities.
The report shows that the global path to a new energy future is not linear. The management consultancy believes that economies such as the UK, Europe, and the USA have sufficient opportunities for a faster transformation, as they have the necessary political measures, capital, and infrastructure, among other things. On the other hand, oil still plays a central role in the Middle East, a significant challenge on the path to climate neutrality, although some countries, such as Saudi Arabia, are also looking for new ways. Even within a country, developments can vary, such as in China, the world leader in wind energy who simultaneously burns the most coal globally.
The authors see the decarbonization of industry as an enormous challenge to a more sustainable future. An ambitious expansion of renewable energies is not enough; there must also be a decisive move away from fossil fuels, which, depending on the market, will take longer and be more expensive than expected. In addition to targeted political measures such as subsidies, technological innovations are also needed. Here, the report recommends that oil and gas companies lead the way and develop solutions, for example, for capturing, using, and storing carbon or alternatives like hydrogen and ammonia.
Mining as a Decisive and Underestimated Factor for Clean Energy
EY also sees mining as a decisive – and underestimated – lever. Without this sector, the energy transition would be impossible, as it supplies the necessary raw materials such as copper, lithium, and nickel to construct new energy plants and infrastructure. However, national protectionism regarding resources and geopolitical tensions are jeopardizing supply, with the threat of rising costs and increased market volatility.
Another challenge is the lack of capital: investment in the exploration and development of mining areas is expected to reach around 200 billion dollars by 2030 – but according to EY, twice that amount is needed. To attract capital, skilled workers, and the appreciation of governments and communities, mining companies should focus on targeted environmental, social, and governance (ESG) initiatives to demonstrate their value to investors and society. According to the report, more sustainable supply chains are increasingly in demand – this is already paying off for mining companies that have invested in this area. To reduce the investment risk, partnerships could be entered into, for example, with car manufacturers and battery producers to stabilize supply chains or universities to develop environmentally friendly extraction methods for raw materials.
More on the role of mining in the energy transition: The investment company BlackRock also recently highlighted why the sector is currently unattractive to investors but indispensable in the fight against climate change. Our background report sheds light on other challenges facing the mining industry in its new role within the energy transition.
Photo: iStock/jasonbennee
