The 2015 Paris Agreement aims to limit global temperature rise, necessitating carbon pollution pricing and low-carbon technology investments. The mining industry, while contributing to carbon emissions, is crucial for the transition to a low-carbon future due to its role in supplying energy transition metals. While some mining companies support carbon pricing, others oppose it. This paper argues that the mining industry benefits economically from a harmonized international carbon added tax (CAT), despite past opposition. Existing literature primarily focuses on macroeconomic impacts of carbon pricing, neglecting micro-economic, industrial-level effects. This study addresses this gap by examining the impact of a hypothetical global carbon tax on the mining industry compared to other sectors.

Prior research on carbon taxation often uses macro-GDP models to assess economic impacts, overlooking the micro-economic effects on specific industries and commodities. While some studies examine the regressive impact of carbon pricing, few evaluate the industrial-level impact on various products. There is also a lack of exploration on the intersection between carbon pricing and the industry providing materials for the low-carbon transition. The existing literature reveals a fractured industry stance on carbon pricing, with some companies supporting it while others oppose it, primarily through lobbying efforts like those seen in Australia. This research aims to fill this gap by developing a financial model to directly assess the impact of a CAT on the mining industry relative to other sectors.

A financial model was developed to assess the impact of a hypothetical global carbon tax on the mining industry relative to other sectors. The model calculates the cost of carbon taxes for 23 commodities across three industries (energy, construction, and agriculture). The model incorporates commodity prices, carbon footprints (in a final consumer state, including refining and processing), and various carbon tax levels ($30, $70, and $150 per tonne). The selection of industries and commodities was based on US Environmental Protection Agency data on primary economic sectors contributing to greenhouse gas emissions. Transportation was excluded from the model as the focus was on raw materials rather than end-users. The model's limitations, such as the assumption of a globally harmonized CAT and the use of average carbon footprints, are discussed. The primary calculations involve determining the economic value per tonne of CO2 and the CAT as a percentage of product value. The data sources included research reports, market statistics databases (Statista), and a 2012 CSIRO report on energy use in metal production. Weighted averages were used for some metals to account for differing extraction methods. The model assumes the tax is collected at the point of carbon generation, excluding downstream carbon consumption in manufacturing processes. The model's simplicity, using simple ratios, is acknowledged, but its macro-scale analysis justifies the avoidance of fine optimization.

The analysis reveals that mining industry products generally exhibit a high economic value per tonne of CO2 emitted compared to energy, construction, and agricultural products. This implies that a global carbon tax would have a less significant financial impact on the mining sector than on other industries. Under a $70/tonne carbon tax, most non-ferrous, non-energy metals would face less than a 14% increase in product value. In contrast, industries with low-carbon substitutions could see price increases exceeding 55%. Aluminum and steel are outliers within the mining industry due to their high carbon footprints primarily from smelting processes. Vertically integrated aluminum producers using renewable energy sources have a significant CO2 emissions advantage. The steel industry's reliance on coking coal poses a challenge for carbon reduction. The model also examines the impact on recycled metals; the carbon tax affects raw metal mining and production more significantly than recycled metal due to issues like low-grade scrap metal losses. Even with 100% recycling, current metal supplies wouldn't meet future demand. A global carbon tax would disproportionately impact carbon-intensive industries like coal and natural gas, accelerating the transition to renewable energy sources. This transition increases the demand for energy transition metals, creating a positive feedback loop benefiting the mining industry. The decrease in the levelized cost of solar power further strengthens this trend.

The findings demonstrate that the mining industry's economic structure makes it a net beneficiary of a global carbon tax. The relatively low tax burden coupled with increased demand for metals from other sectors working to reduce their emissions create a favorable environment for the mining industry. Publicly supporting carbon taxation aligns with 2050 zero-emission goals while simultaneously benefiting the industry economically. The study also suggests that concerns about job losses in the mining sector due to carbon taxes are unlikely. However, the research notes the importance of holistic approaches to mining to avoid damaging environmental commons.

This research presents a novel perspective on the mining industry's role in climate change mitigation. The model shows that a global carbon tax would have a relatively minor impact on the mining industry while significantly affecting carbon-intensive sectors. This creates an economic incentive for the mining industry to support carbon taxation initiatives. The increased demand for metals in a low-carbon economy further reinforces this benefit. Future research could explore scenarios with varying carbon tax rates across regions and investigate the impact on resource allocation and investment decisions. Holistic environmental considerations must remain paramount in mining practices.

The study's reliance on a hypothetical, globally harmonized carbon tax regime is a limitation. The use of average carbon footprints for some commodities might not perfectly capture the variability within those industries. The model does not account for potential shifts in technology or resource efficiency that might alter carbon footprints over time. The assumption of equal and fair tax application globally may not reflect real-world scenarios.