Incorporate climate change, decarbonization and just transition considerations into extractive industry contracts

Incorporate climate change, decarbonization and just transition considerations into extractive industry contracts

photographer Tom Fisk on Pexels

The relevance of climate change to the mining, oil and gas industries goes well beyond the physical risks and impacts of climate change on business operations and the corresponding planning needs that result. Extractive industries, including their value chains, Significant contribution to global anthropogenic emissions Carbon dioxide and other greenhouse gases (GHGs) that cause global warming.The science-based policy imperative to significantly reduce greenhouse gas emissions by 2030 and achieve net-zero emissions by 2050 under the Paris Agreement targets is placing heavy pressure on the extractive industries: they must transform their operations Way From fossil energy to renewable energy.

For oil, gas and coal extraction, the implications are even more profound: because the fossil fuels they produce contribute to a global climate emergency, they need Rapid transition to a zero-carbon business model, and they may need to retire assets earlier than originally planned.For mining other than coal – especially for mining key minerals There is an increasing need to build Renewable energy generation systems, grids, storageand other green technologies for a zero-carbon world—decarbonization efforts may represent not only challenges, but also opportunities from growing demand.

Successful governance of extractive industries in the context of a just zero-carbon energy transition can benefit all stakeholders.Communities can reap the co-benefits of sustainable development from the transition, including access to affordable renewable energy and sustainable, climate-resilient infrastructure to help them adapt to climate impacts; reduce poverty and inequality; and human rights realized. Workers can benefit from upskilling and retraining opportunities, enabling them to secure decent jobs and incomes to support their families in a zero-carbon economy. Resource-rich countries can benefit from continued revenue streams that will allow them to finance investments in public goods.While fossil fuel companies believe they will lose from decarbonization, those that are reinventing themselves and embarking on a zero-carbon energy transition can thrive.

Achieving this vision of extractive industries governance depends on implementing legal framework. National law is an ideal legal tool to regulate the contribution of extractive industries to climate action in terms of mitigation and adaptation.In the absence of relevant laws to advance climate goals, governments could consider using Climate related regulations in the investor country Oil, Gas and Mining Contracts or model and Community Development Agreement Advancing climate goals for extractive industries.

Proposed climate-related clauses for new or revised extractive contracts

1. Adapt to regulations

• Requires climate risk assessments and community vulnerability assessments.
• Companies are required to support and comply with national adaptation plans and climate adaptation guidelines developed by host countries.
• Integrate the company’s climate change adaptation strategy into Community Development Agreement.
• Standardize water use and provide for granting water rights to companies Strict Obligations Regarding Water Efficiencyincluding penalties for excessive water use or discharge of untreated wastewater, and a grievance mechanism for downstream communities whose water rights are affected.
• require companies to create shared use opportunities to increase community access to waterespecially those under increasing water stress.
• Retains the ability for governments to vary water allocations to extractive operations based on fluctuations in water availability and the number of users that depend on the source.
• By requiring companies to set aside resources in advance and provide for the closure of extractive projects, climate resilience restoration of project sites, retraining of workforce and economic diversification of project-affected communities, as well as other associated socioeconomic and environmental risks and impacts.

2. mitigation clause

3. Cross-cutting regulations

• avoid Stability Clauses, Force Majeure and Arbitration Clauses That constraint The ability of governments to adopt policies to reduce greenhouse gas emissions and climate-related risks from extractive projects.
• Companies are required to purchase insurance policies from brokers with specific tools to analyze local and global risks related to climate change, and to purchase additional coverage for risks in any specific location.
• Provides parties to renegotiate contracts every three to five years, including based on scientific findings about potential climate impacts.

4. Mining specific adaptation regulations

• Require companies to justify their tailings dam designs, prohibit dams upstream from communities, avoid wet tailings dams, and demonstrate in mining plans that tailings dams meet the latest global safety standards and will undertake ongoing maintenance and restoration activities .
• Companies are required to model the risk of collapse of tailings dams due to climate-related risks in environmental and social impact assessments, and to incorporate tailings monitoring into environmental management plans to achieve the goal of zero collapse.

5. Oil and Coal-Specific Mitigation Provisions

• Ask companies to eliminate routines Emissions, Fugitives and Combustion Emissions and Coal Mine Gas Emissionsdeter penalties for non-compliance.
• Negotiate early closure or decommissioning, where appropriate Coal, oil and gas exploration and development projects and associated infrastructure, with provisions addressing associated socioeconomic and environmental risks and impacts.

Martin Dietrich Brauch is a Senior Law and Economics Fellow at the Columbia Center for Sustainable Investing (CCSI). Perrine Toledano is Head of Mines and Energy at CCSI.

the story is originally published Columbia Center for Sustainable Investment.

read more:

Five years after the Paris Agreement, are climate change considerations reflected in mining contracts?

Allocation of climate-related risks in investor-state mining contracts