While global carbon dioxide emissions fell by 5.8% in 2020 owing to Covid-19 lockdowns globally and the resultant lower energy demand, Dutch multinational banking corporation ING says it is only a matter of time before they hit record highs again.
The International Energy Agency (IEA) estimates that energy-related carbon emissions will rise by 4.8%, or 1.5-billion tonnes, in 2021, which will be the largest increase in emissions since the Global Financing Crisis.
This puts increasing urgency on energy transition movements globally, which ING believes bodes well for the metals industry.
For example, the European Union plans to cut emissions by 55% by 2030 from 1990 levels, while the longer-term target is to reach net zero by 2050. The US is also targeting a greenhouse gas emission reduction of 50% by 2030, relative to 2005 levels.
Asian countries have also announced long-term targets on carbon neutrality.
ING says renewable energy and transport will be the key sectors for metals demand growth.
Copper, aluminium, nickel, cobalt and lithium are particularly used in the electrification of transportation and industry, as well as in renewables and stationary energy storage.
In ING’s most optimistic scenario, copper demand from road transportation and the power sector can grow from 4-million tonnes currently to 16-million tonnes by 2040, while the most pessimistic scenario envisions copper demand growth to 8.7-million tonnes by 2040.
In turn, aluminium demand will likely grow from 20-million tonnes currently to 38-million tonnes by 2040.
Nickel, cobalt and lithium could see average demand growth from the transport and power sectors of 16.8%, 14% and 13.6%, respectively, between now and 2040.
However, while metals could play a crucial role in the energy transition, the metals idnsutry is still energy intensive and a large emitter of carbon emissions.
Greenhouse gas emissions from the aluminium industry, for example, are estimated at over 1-billion tonnes, which works out to 11.5 t per tonne of aluminium produced.
Naturally, smelters that use coal to generate electricity have significantly higher emissions than smelters which use natural gas or renewables.
ING deems it crucial that the industry tackles the issue of its own emissions. Some have taken action, by growing “green” aluminium output, or using more recycled metals, or engaging in emissions trading systems, for example.
Aluminium has one of the highest recycling rates, currently at around 76%, nickel is around 68%, and copper comes in at around 60%.
Cobalt and lithium see much lower rates, with end-of-life recycling rates for cobalt standing at around 32% and less than 5% for lithium. These rates will undoubtedly increase as these two markets grow.
Increased recycling not only helps when it comes to lowering emissions, but will also help to meet the robust demand growth that is expected in the years to come.
Decarbonisation will require a huge amount of investment into new technologies, such as green hydrogen production, carbon capture and storage, and transportation.
According to IEA, energy intensity needs to decline by 1.2% annually in steel production and by 1.5% annually in aluminium production up to 2030 to be on track with the Sustainable Development Goals.
ING states carbon emissions disclosures and the setting and reaching of targets will be crucial for large public players in the sector. Investors and banks will look more closely at companies' decarbonisation track record and their achievements in increasing energy efficiency, and lowering overall carbon emissions and carbon intensity.
However, the corporation adds that the absence of unified reporting and the large and varied set of disclosed data means it is difficult to get good and credible cross-region and cross-sector analysis.
Tracing carbon emissions and other environmental data is therefore quite problematic.
To help with this, various nonprofits have emerged to help society, corporates and regulators with carbon tracing, carbon reporting, carbon emissions reductions, the setting and verifying of carbon targets, and empowering corporates to follow best market practices in carbon emissions disclosure.
In summary, ING says the metals sector is entering into a number of deals to advance carbon emission reduction projects, which is crucial if the industry is going to supply transport and power infrastructure of the future.