Mining and deforestation

Felix Preston, Alison Hoare, Sian Bradley, Adelaide Glover

Energy, Environment and Resources

03 June 2015, Chatham House

The growth of emerging economies has generated new global dynamics over the past decade

Global resource trade dipped after the financial crisis but is now recovering. It was worth about $7 trillion in 2011, with metals about $1 trillion – before recent commodity price falls

Global resource trade (by value), 2000 to 2011

Metals & ores

In the past decade, the mining sector has been moving into operating terrains with complex technical, environmental and political risks in new producer states.

Of the fifty largest greenfield

mining projects, 21 are located in

developing countries, some with

unstable governments or limited

experience with extractive industries

Source: Citi (2011) Generation Next: A Look at Future Greenfield Growth Projects

Estimated likelihood of greenfield projects completion

Many of these projects also require larger up-front investments, including extensive infrastructure development

Source: Xstrata

Costs of next generation copper projects

Chatham House is working on ‘data and sustainability’, focusing on three key areas

• Analyse global resource trade through the lens of environmental sustainability – developing recommendations for national measures, international governance and bilateral cooperation to mitigate the impacts of resource trade on the environment.

• Bring global attention to environmental hotspots – where resource trends are increasing the risks of serious environmental, social or economic impacts, examine how these risks can be mitigated, and consider the implications for resource trade and politics.

• Develop national level social and environmental sustainability indicators – e.g. on emissions, reserves, water scarcity, deforestation, land use, air quality, governance etc. to highlight national environmental performance and encourage a race-to-the-top in resource producer countries.

An assessment of deforestation and forest degradation drivers in developing countries Noriko Hosonuma et al 2012 Environ. Res. Lett. 7 044009

Why mining and deforestation? Agriculture is clearly the major driver, but available data suggest mining and infrastructure are next on the list – and important in specific locations (+ ecosystems)

• Agriculture estimated the proximate driver for ~80% of deforestation worldwide

• Timber extraction and logging activities account for more than 70% of

degradation in Latin America and (sub)tropical Asia.

Mining and deforestation have made the news…

…but poor data appears to be hampering policy processes / discussions, at least in Europe

The impact on forests by illegal logging, mining, unsustainable forestry and agriculture practices, induced forest fires, could not be assessed due to uncertainties and limitations in the data available at global level. In this study, no deforestation was attributed to the mining sector, as deforestation caused by the mining sector is mainly limited to clearing for infrastructure, which is a small extent compared to land needed for agricultural expansion. However, the infrastructure development for mining has unlocked remote forest areas and incentivized further clearing of these forests for agricultural and forestry purposes. The EU27 sources considerable amounts of minerals from densely forested countries with high historic deforestation rates like Brazil and Indonesia. The unlocking of forest areas through road building for mining operations cannot be neglected as a driver of deforestation (Geist and Lambin, 2001).

The impact of EU consumption on deforestation: Identification of critical areas where Community policies and legislation could be reviewed (2013)

Getting the data right is no easy task… Challenge 1: highly site specific, many methodologies

Ecological, social and technical context

• Forest type, canopy cover, biodiversity/ecology

• Livelihoods, local health impacts, human security

• Type of commodity - Method of production (e.g. open pit vs underground)

• Project-linked infrastructure requirements

• Financial, technical and human capacity

Methodological challenges

• Difficulty of supply chain tracking across different commodities (e.g. diamonds vs gold conflict minerals tracking)

• Different data needs for ASM/large-scale formal mining

• Identifying and isolating drivers and responsibilities e.g. mining vs ag, shared infrastructure, different spatial scales

• How to connect different datasets e.g. international trade vs. national production vs. subnational ecological contexts

Challenge 2: Many objectives Different kinds of data are used by different stakeholders for different purposes

Stakeholder – Motivation / driver • Government - Regulatory enforcement

(environmental protection, investment promotion)

• Company – Legal, financial and reputational risk. Demonstrating best practice / leadership.

• Civil society – livelihoods, health impacts, rights/accountability

Policy tools dependent on data

Site/project • EIAs • Company reports • Stakeholder groups • ASM beyond these National • Legislative and regulatory frameworks • Land use planning/zoning etc. proposals • CSO/NGO groups Global • Tracking envt change (e.g. GFW) • Supply chain tracking mechanisms • Shareholder/consumer scrutiny

Direct forest loss Mine footprints - vary according to mining method e.g opencast - large for industrial scale mining (e.g. Carajas) - high cumulative impacts of small-scale/artisanal mining activities (e.g. artisanal mining in

Peru, Asner et al. 2013) Loss of biodiversity GHG emission from deforestation Impact on hydrology Pollution - mercury pollution from artisanal gold mining - water pollution - surface and groundwater Indirect impacts - mining roads open up forest to other activities - settlements - footprint of towns/villages - forests used for fuel - transient nature of production - downstream industries

Challenge 3: A mining project’s life cycle can have different potential impacts on forests, both direct and indirect – which are highly context specific

Carajas Mine, Para, Brazil Forest impacts vary at the national level Carajas – largest iron ore mine in the world, located in Pará, Northern Brazil. Region’s forests highly sensitive. Vast area of >75% canopy density (GFW).

Samarco Alegria - one of the largest iron ore mines, located in Minas Gerais, South-eastern Brazil. Region less sensitive in terms of forest impacts – majority of canopy density is 30% (GFW).

Images: mining-atlas.com

Challenge 4: Increasingly complex supply chains and new actors

Top metals trade flows to/from China

2000 2010

Source: Chatham House Resource Trade Database (2013), BACI, COMTRADE.

These bilateral trade flows mask the specific impacts of project and commodity impacts

Some initial mapping, based on production and

trade data

work in progress!

Large-scale mineral extraction/production remains concentrated in a handful of countries…

Source: Chatham House (2012) based on analysis of data from FAO, EIA, IFA and the USGS

…some of which have experienced significant deforestation

Share of global production (%) in 2010

deforestation has also been linked to mining in smaller producers

Cameroon 0.0%

DRC 0.1%

Guyana 0.4%

Literature review* suggests a ‘working list’ of countries currently experiencing deforestation/degradation…

* (literature is focused on tropical countries, often with focus on ASM)

Country Commodity Forest % GDP, 2011 Tree cover loss 2001-2013 (mil ha)

Indonesia Tin, nickel, gold, copper, bauxite 1.7% 17 (10%)

Brazil Iron ore, copper 1.1% 36 (7%)

DRC Copper, gold, tin, tantalum, tungsten

0.6% 7 (3%)

Cameroon Gold 2.8% 0.5 (2%)

Ghana Gold 3.5% 0.5 (7%)

Guyana Gold 4.1% 0.1 (0.5%)

Liberia Gold 15.2% 0.6 (7%)

Peru Gold, tin, copper 0.8% 2 (2%)

Many of these countries have much larger mining sectors

**Exports of metallic minerals, metals and coal (UNCTADstat data) as share of total merchandise exports.

Country Key mineral export commodities Total export contribution**

Mining % GDP 2012*

Indonesia Copper, Nickel, Tin, Gold, Aluminium (Bauxite)

20% 1.7%

Brazil Iron ore 17% 2.9%

DRC Copper, cobalt 82% 18%

Cameroon Aluminium (Bauxite) 2% 0.2%

Ghana Gold, Manganese 18% 13%

Guyana Gold, Aluminium (Bauxite)

59% 22%

Liberia Iron ore 41% 29%

Peru Copper, Gold, Zinc, Lead, Silver 60% 13%

Are any of these commodities also a cause of concern re. forests?

This is only a snapshot so could miss important trends – it’s not just mining today but mining tomorrow…

Brazil, metal and mineral exports, 2000 – 2012, Chatham House Resource Trade Database (2015)

Where is it going? Example 1: Europe is key for gold

Source: Chatham House (2015), source data from COMTRADE

Example 2: China, the world’s largest import market for most commodities, is a key destination

Policy context

Producer country governments face many challenges, although there are points of policy influence / support

Political and capacity challenges – Development imperatives/drivers

– Lack of capacity (availability of technical assistance from donors)

– Difficulty of building joined up institutions (in some countries)

– Relative power of different ministries

– Civil society accountability mechanisms/access to dispute resolution

Interesting initiatives underway… – REDD Readiness documents acknowledge the role of mining in

deforestation: Ghana, Indonesia, Cameroon, Colombia, DRC, Rep. of Congo, PNG

– Guyana: Low Carbon Development Strategy (LCDS) proposes reforms of mining sector

– Forest codes (but no specific requirements in mining codes)

Could existing policy levers along the supply chain be adapted to tackle mining and deforestation?

• Industry/operating standards:

– ICMM Sustainable Development Framework identifies need for ‘material stewardship’ including 10 principles. No direct guidance on forests, but does promote biodiversity and integrated approaches to land use planning.

• Sustainability reporting

– GRI

– UN Global Compact/PRI

– EU 2013 non-financial reporting directive

• Investment / reporting standards:

– IFC Performance Standards – routinely applied in mining, and in forestry sector strong commitment to avoiding tropical deforestation

– Equator Principles - apply IFC PS, widely adopted across the financial sector

– CCCMMC Guidelines (commitment to ‘Respect nature and protect the environment’)

• Consumer country policy measures:

- Extra-territorial legislation – Dodd-Frank, EU Directive on Conflict Minerals

Where to focus attention given falling commodity prices?

• How do lower commodity prices and risk-averse investment decisions in the mining sector affect short- and long-term risks of deforestation/degradation?

– In the short-term - are there still individual projects that present risks? Does it invite in less scrupulous operators?

– In the long-term – demand projections suggest long-term pressure to develop resources in ecologically sensitive locations

• How do different commodities affect this analysis e.g. gold and other precious metals with explicit links to financial markets/derivatives?

Some questions

What data are most urgently needed?

• Policy makers, businesses, regulators, communities, NGOs, consumers?

• What are the key objectives at these different levels?

• How to differentiate between mining and other drivers?

What are the key opportunities for enhanced data collection and analytics?

• Is it useful/ possible to enhance integration of existing data collection?

• How to bring different data, methodologies and approaches together?

• What kind of metrics / standards could be explored?

How to leverage existing policy processes / institutions?

• Which existing policy tools offer good lessons, or could be expanded?

• Who should be responsible for collecting and ensuring data quality?

• How to engage emerging economies?

What data may be needed to link with existing international processes?

• UNFCCC/REDD+ role of forests for climate change mitigation and adaptation

• SDGs – e.g. proposed goals on inclusive+sustainable industrialisation, terrestrial ecosystems

• UN Declaration on Forests?

Thank you

Chatham House | The Royal Institute of International Affairs