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What is a carbon credit?

We often refer to green credits as carbon credits or environmental certificates. They represent a reduction or removal of greenhouse gas emissions. Mining companies can earn green credits by reducing carbon emissions. They can also earn them by sequestering carbon. Both actions contribute to sustainability.

Here¡¯s how carbon credits typically work:

1. Emission reduction projects: Mining companies can invest in projects that reduce or offset their carbon footprint. This could mean using energy-efficient technologies. It could mean supporting reforestation projects. And it could also mean capturing and storing methane emissions.
2. Verification and certification: Next, the project undergoes a verification process. This helps confirm that the claimed emission reductions are valid. Independent third parties often certify these projects; they provide credibility to the achieved reductions.
3. Issuance of credits: Once verified, the mining company receives carbon credits. The number of credits links to the amount of emission reductions. The credits are then recorded and can be traded on the carbon markets.
4. Trading and compliance: Other entities looking to offset their own emissions can purchase the credits. In some cases, it¡¯s required that companies offset a portion of their emissions so they can use credits for compliance. Because of this, carbon credits can be sold in either the voluntary or compliance carbon market.

For a mining company, embracing green credit programs contributes to environmental sustainability. But it can also generate revenue. So, the company can make money from its decarbonization efforts. Then, it can invest in more sustainable mining practices. This financial incentive aligns with broader trends in corporate responsibility and sustainable development.

What about financial green premiums and brown penalties?

Green premiums and brown penalties are financial terms tied to environmental stewardship. Green premiums are incentives for environmentally friendly practices. Brown penalties are costs or fines associated with harmful practices. Green premiums and brown penalties both exist in the mining industry.

Green premiums are a clear financial advantage. They benefit companies that adopt sustainable practices. This can include using cleaner technologies, reducing carbon emissions, or applying eco-friendly processes. For example, mining companies that adopt sustainable practices might receive higher prices for their products. They could gain preferential access to markets. And they could attract environmentally conscious investors. These premiums reflect a market willingness to reward responsible actions.

Brown penalties are the costs that companies face if they engage in environmentally harmful practices. Think pollution, deforestation, or poor tailings management. Mining companies facing brown penalties might experience increased regulatory scrutiny or legal challenges. It could also lead to fines or less access to certain markets. Investors and consumers may shy away from companies with poor environmental records. This leads to a financial disadvantage.

Green premiums and brown penalties are economic outcomes. And they are linked to the practices of mining companies. It is key for miners to put positive practices in place; it¡¯s also important to limit harmful ones. These financial incentives reflect a broader shift. A shift towards responsible resource extraction.

Cost savings through recruitment and retention

It¡¯s been said before, but it bears repeating. Employees want to work for companies that are responsible. This is especially true when it comes to the environment. According to Gallup, Gen Z and millennials now make up nearly half (46 percent) of the full-time workforce in the US. This new generation cares more about climate change and social equity than the workforce before them. Meaning? Companies that champion environmental and social efforts are more attractive to potential employees. They are more likely to get the top talent.

A culture of sustainability can also increase employee retention. This saves money and maintains a company¡¯s intellectual capital. An employer of choice must prove how they are improving lives today and for generations to come. ESG-focused values are appealing for many employees¡ªespecially millennials¡ªwho want their work connected to a higher purpose.

This is the ideal time for mining companies to tap into the new generation of workers. It¡¯s also a great time to further the ESG initiatives and achievements. This also means fostering a fresh view of the mining industry within society. Mining is changing its way of working. That is, being responsible and sustainable. It¡¯s an industry that is sourcing the critical minerals we need for green technologies. It¡¯s an industry that embraces workforce diversity. And it¡¯s an industry that engages with community. Mining is an industry that puts people first.

Making the cultural shift

One of the biggest obstacles to sustainability is a classic culprit. Money. Many people recognize the financial benefits of sustainability. But some still view it as an expensive undertaking. Or just a box-ticking exercise. Some may also think that these practices increase risk through downtime or less output.

But it is important to measure the long-term view of the business. And to consider the liabilities from not operating sustainably. One example: increased costs for mine closure. Or it could be something harder to measure, such as reputational damage or increased risks in the business.

Responsible miners have strong relationships with communities, their workforces, customers, suppliers, and governments. This yields a smoother business operation. Thus, it¡¯s a financial benefit as much as it is a social one.

An effective way to start a cultural shift? Helping both leaders and employees recognize the financial and social upsides to sustainability. When done right, sustainable designs drive operational costs down. They also improve recovery rates. For example, a copper mine in Arizona completed a debottlenecking study to review their operation. During this exercise, they realized they could save energy costs by modifying their grinding and crushing circuit. How? The modifications reduced energy use while also increasing their recovery. Sharing success stories like this can teach others that sustainable solutions bring cost benefits to the business.

Everyone has a role to play in decarbonizing mining

Engineers can lead the charge by using innovative and sustainable solutions in their projects. The result? Operations that deliver on environmental protection, decarbonization, safety, and the returns to stakeholders. The message is not hollow. The outcomes prove it.

Sustainability is not a target buried within an annual report. It is a moral obligation. It is a business imperative for corporations. It¡¯s the foundation of commitments, strategies, and metrics that are tracked and reported annually. And it¡¯s achievable. But only when supported with the funding and the people to make it happen.

This blog appeard in the May issue of the .