The mining industry as a net beneficiary of a global tax on carbon emissions

The study examines how a globally harmonized carbon added tax (CAT) would affect the mining sector relative to other carbon-intensive industries. In the context of the Paris Agreement and the need to price carbon pollution to meet climate goals, the authors note that demand for energy transition metals (e.g., copper, nickel, aluminum) is expected to rise significantly, while fossil fuel extraction should decline. The research question is whether, and to what extent, a CAT would economically burden or benefit mining compared to sectors like power generation and agriculture. The purpose is to quantify CAT impacts at a commodity level and assess whether mining has an economic incentive to support international carbon taxation. This is important because mining supplies critical materials for decarbonization, and policy design could influence both emissions and material supply dynamics.

The paper situates its work within existing policy instruments for carbon pricing—emissions trading schemes (e.g., EU ETS) and carbon taxes—and notes mixed outcomes in emission reductions despite pricing mechanisms. Prior literature often emphasizes the distributional and regressive economic impacts of carbon pricing and uses macro-level GDP models, with limited attention to microeconomic, commodity-level effects across industries. Industry positions on carbon pricing have historically been fragmented, with some mining associations opposing taxation while certain firms (e.g., BHP, Rio Tinto) express support. The review highlights the global spread of carbon pricing instruments and revenue generated, as well as increasing demand forecasts for transition metals, underscoring the need to analyze sector-specific impacts of CAT at the commodity level.

The authors built a carbon added tax (CAT) model applied to 23 commodities across energy, construction, agriculture, and metals/mining. They used 2020 average commodity prices and compiled carbon footprint data for each commodity, including refining/smelting to finished metals (e.g., blast furnaces for steel, smelting for aluminum). For copper, nickel, lead, and zinc, weighted averages of carbon footprints were computed across extraction methods based on global distributions. Three hypothetical global carbon price levels were tested: USD 30, 70, and 150 per tonne CO2, selected from current policy levels and literature. Key outputs were: (1) Economic value per tonne of CO2 (market price per unit divided by CO2 emitted per unit); and (2) CAT as a percentage of present product value (CO2 intensity times carbon price divided by product price). Core formulas: Economic value per tCO2 = (market price per MWh or per tonne) / (tCO2 per MWh or per tonne); CAT per unit = (tCO2 per unit) × (CO2 price). A central assumption is a globally harmonized CAT collected at the point of carbon generation (scope 1/2 for production and smelting) and excluding downstream post-smelting manufacturing emissions and transportation end-use. Transportation sector was excluded as the tax is applied to raw materials rather than end-users. Data sources include Statista, industry and research reports, notably CSIRO (2012) for energy use and emissions in metal production, IEA, EPA, and others. The analysis focuses on variable energy sources (coal, natural gas, solar) and a representative subset of construction and agricultural commodities due to data availability. The model uses simple ratio calculations, emphasizing comparability across commodities rather than optimization.

- Mining products generally have high economic value per tonne of CO2 compared to energy, construction, and agriculture commodities, implying lower relative financial impact from a CAT. - Under the tested CAT levels (USD 30, 70, 150/tCO2), most non-ferrous, non-energy mining commodities would not add more than 30% of their present product value in tax; lead and zinc are among the more affected within mining, reaching up to about 14% at USD 70/tCO2. - Fossil energy commodities experience much higher CAT burdens: coal for power could face taxes exceeding 150% of current product value at higher CAT levels, with natural gas also materially affected. Construction materials and certain foods can see CAT burdens up to roughly 55% of present product value at USD 70/tCO2. - Lifecycle emissions differ sharply between raw ore mining and metal production: example intensities (tCO2 per tonne product) include bauxite ≈ 0.02, aluminum (integrated) ≈ 5.43, aluminum (average) ≈ 14.37, iron ore ≈ 0.01, steel ≈ 2.19. Emissions for iron and steel are dominated (>99%) by refining and smelting stages, not ore extraction. - Aluminum and steel are outliers within mining due to energy-intensive smelting. However, vertically integrated aluminum operations (e.g., Rio Tinto, Alcoa) using hydro/renewables have around 8.9 tCO2/t Al advantage versus average non-integrated producers. - Recycling faces lower CAT burdens than primary production; CAT affects primary metals more than twice as much as recycled metals (illustrated for copper and steel), but even high recycling rates cannot meet future demand due to limited above-ground stocks. - CAT would accelerate substitution away from carbon-intensive energy (coal, then gas) toward low-carbon sources (e.g., solar), further boosting demand for transition metals; solar LCOE is already competitive and trending lower than coal and gas, with CAT reinforcing the shift.

The results indicate that a global CAT would impose relatively small cost increases on most mined metals while significantly raising costs for carbon-intensive energy and some construction and agricultural commodities. This asymmetry addresses the research question by showing mining as a net beneficiary: the sector faces modest direct tax burdens and benefits from rising demand as other sectors decarbonize to avoid higher taxes. Limited substitutability for key metals (e.g., copper, nickel) and supply constraints enable mining to capture economic rents relative to their CO2 emissions. Outliers (aluminum, steel) face higher CAT impacts due to smelting energy intensity, but integration with low-carbon power can mitigate taxes and encourage innovation. Policy-wise, a harmonized CAT is unlikely to trigger relocation of mining to low-tax jurisdictions given small relative impacts; instead, it can support climate goals and job growth in mineral-endowed regions. Overall, CAT functions as a progressive, value-added style tax that incentivizes decarbonization in high-emitting, substitution-available sectors while minimally burdening critical mineral supply for the energy transition.

The paper contributes a commodity-level, cross-sector analysis showing that the mining industry would be a net economic beneficiary of a harmonized global carbon added tax. Most mined metals incur relatively low CAT burdens (generally under 30% of product value at tested levels), whereas coal and other carbon-intensive commodities face very high burdens, accelerating the energy transition and increasing demand for transition metals. The study recommends that mining companies and policymakers support harmonized CAT implementation, leveraging low-carbon power and process innovations, particularly in aluminum and steel, and expanding responsible supply to meet growing demand. Future research should analyze non-uniform CAT regimes across regions, refine emissions intensity ranges by technology and geography, expand commodity coverage as data improve, and integrate downstream manufacturing emissions where appropriate.

- Assumes a globally harmonized CAT with uniform rates across countries; real-world heterogeneity is not modeled. - CAT applied at the point of carbon generation for production/smelting; excludes downstream post-smelting manufacturing emissions and end-use/transportation. - Uses industry-average carbon intensities and simple ratio calculations; does not model full distributions or process-specific variability. - Relies on 2020 average prices and several secondary data sources; excludes 2021 spot price volatility. - Carbon footprint data availability constrained commodity selection; some sectors/commodities underreported. - Emissions data for metals draw on older sources (e.g., CSIRO 2012); while processes likely improved, exact current intensities may differ. - Transportation sector excluded since the tax is modeled on raw materials, potentially understating broader economy-wide CAT effects.