Greenhouse gas (GHG) emissions, particulate matter and acidification from the extractive industry costs £2.5trillion every year, according to a new research from the Journal for Cleaner Production.
These GHG emissions make up a huge chunk of the total environmental costs in the industry, amounting to as much as £4 trillion ($5 trillion) every year.
UN Secretary-General António Guterres has called mineral resources one of Earth’s “great endowments”, which plays a “dominant role” in the economies of dozens of countries. Indeed, the study demonstrates that, for most countries, the mining sector delivers larger economic gains than losses.
The study, however, concluded that for some vulnerable countries– such as Gabon, Madagascar and Afghanistan– the environmental costs could exceed the economic gains.
This resonates with what is often described as the “resource curse”, referring to links between mineral extraction and negative outcomes, such as inequality and environmental destruction.
With fossil fuel extraction representing nearly half of the environmental costs– without including the combustion of the resulting fuels– the authors say the findings highlight the benefits of moving towards cleaner energy sources.
Counting the Costs
While natural resources can bring wealth and jobs to countries, extracting them can also cause harm to human health, biodiversity and the environment. With this in mind, the research team estimates the ratio between these costs and the economic gains that these industries bring.
To do this, the authors analysed the global production of 38 raw materials– such as coal, iron and natural gas– using databases from the US and British geological surveys.
The study focused on the health impacts of these activities, such as the respiratory diseases and skin disorders suffered by miners, as well as the loss of biodiversity due to habitat loss and degradation.
To highlight the uncertainty associated with monetisation, the researchers used a “high” and “low” monetisation factor for each respective endpoint. Rosalie Valeska Arendt from the Technical University of Berlin, who led the study, said:
“For the high estimate we included future effort costs. These are costs that occur because the concentration of ores and material deposits decline, so that more energy and work needs to be invested to extract them. For the low estimate, these costs are excluded, because the costs of mining have historically decreased despite decreasing ore grades. If future effort costs are included, they dominate all other costs and the impact of fossil energy carriers becomes even more pronounced.”
Rosalie Valeska Arendt
One of the main novelties of the study is that the research team compared the calculated environmental costs of countries with their GDP and level of employment. For most countries, the damages exceeded £420 ($500) per employed person, apart from some African countries where the costs were lower.
The scientists wanted to show the difference between local and global costs of mining. For this they assumed “all impacts to be local impacts apart from global warming”, the paper says, meaning that the study does not consider the “transboundary effects of air, soil and water pollution”.
Resource Curse Scenarios
The authors concluded that overall environmental costs generated by extraction industries globally are £0.3 trillion ($0.4 trillion) per year in the low estimate, representing 0.5% of the world’s £71 trillion ($85 trillion) annual GDP.
Taking into account future effort costs, this amount rises to £4 trillion ($5 trillion) annually, representing 6.4% of global GDP. The study notes that 64% of all these costs result from climate change, meaning between £0.3 trillion and £3 trillion caused by extraction-related greenhouse gases alone.
For climate change, the mining of materials “contributing most to environmental damage are iron (23%), coal (18%), magnesium (13%), crude oil (10%), aluminium (8%) and manganese (7%)”, the study noted. Overall, 43% of the costs arise from harm that has been caused to ecosystems, while 21% are related to human health impacts.
As a group of materials, fossil fuels contribute disproportionately to the environmental damages, representing 43% of the total costs. Oil was associated with the highest costs, followed by natural gas and coal.
Analysing Losses and Gains
When countries’ domestic costs are assessed without including global climate damages, the study concludes that, overall, mining is more beneficial from an economic point of view for the majority of countries.
The nations with the largest environmental costs – China, Brazil, India and Russia – all have higher benefits than costs associated with their mining activities.
However, for the high “global” estimate, when the damages linked to climate change are included, 20 countries’ GDP losses are higher than the benefits they gain from mining activities. These countries are clustered in Africa, Central and South America and south-east Asia and are “severely impacted by climate change”, according to the study.
For the low estimate, environmental costs exceed economic gains only for a handful of countries: Rwanda, Gabon, Madagascar and Afghanistan.
The lead author of the study, Valeska Arendt said:
“If climate change costs are added to the domestic costs, more countries have a negative cost-to-benefit ratio (their total environmental costs exceed their GDP contribution for mining and processing), but these costs of climate change are not carried by the extracting countries themselves.”
Valeska Arendt
The study finds that countries involved in processing materials – such as steelmaking in Germany and Japan – and oil-producing countries – such as Algeria, Azerbaijan and Nigeria– gain the most economic benefits.
This is because they “largely externalise environmental costs of upstream and downstream processes”, the study noted, meaning that their environmental costs are carried by society as a whole.
