Forget COP26. The world needs COPPER 26

GLASGOW, Nov 5 (Reuters Breakingviews) - COP26 has a blind spot. The prime ministers and corporate bigwigs gathered in Glasgow want to cut demand for the fossil fuels that constitute most of the world’s greenhouse gas emissions. To make that happen without crashing the economy, there has to be lots more of the metals underpinning a greener society.

Along with phasing out coal and reducing deforestation, COP26 needs to champion electric vehicles and spur investment in renewable energy. That means more wind turbines, solar panels, energy storage and charge points. That in turn means more aluminium, cobalt, copper, lithium and nickel.

Consultant Wood Mackenzie has run the numbers. Limiting global warming to 2 degrees Celsius above preindustrial levels implies 19 million tonnes of additional annual copper production by 2030, a 60% increase. Aluminium supply needs to jump 30%, nickel 50%, and lithium and cobalt 140% and 150% respectively. Limiting warming to 1.5 degrees Celsius implies an even greater supply hike.

Normally this would be an epic green light for miners to get digging. After an iron ore boom, giants like BHP (BHP.AX), (BHPB.L) and Rio Tinto (RIO.L), (RIO.AX) are awash with cash. But the gap between the investment that’s needed over the next 15 years and what’s signed off is almost $2 trillion, Wood Mackenzie says.

As big a problem is red tape. On average, it takes over 16 years to go from discovering reserves to producing metal, according to the International Energy Agency. Meeting the elevated demand will also mean venturing into trickier jurisdictions like Democratic Republic of Congo, where most western investors have feared to tread. That said, labour disputes and environmental or social rows can erupt anywhere, as Rio’s Juukan Gorge debacle in Australia proved.

That’s where politicians can help. Western governments have lists of critical materials. If they are so important, European nations and the United States can use their heft to strike agreements with mining jurisdictions like DRC. These could lay down rules of engagement to stop companies being hit with sudden taxes or expropriation, while also committing them to strict social and environmental principles.

This wouldn’t change the geopolitical headache created by China’s control of 60% of rare-earth production and its hefty sway over cobalt. But at the very least, Western powers need to start talking about the issue. Step forward, COPPER 26.

(This is a Breakingviews prediction for 2022. To see more of our predictions, click .)

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CONTEXT NEWS

- Keeping global warming to 1.5 degrees Celsius requires a transformation of the energy system that would substantially raise the demand for metals, the International Monetary Fund said in its October World Economic Outlook.

- “If metal demand ramps up and supply is slow to react, a multiyear price rally may follow—possibly derailing or delaying the energy transition”, the IMF warned.

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