Lubin, 15 July 2020
ZPPM / 66 / VII / 2020
Directorate-General for Financial Stability, Financial Services and Capital Markets Union
Unit B2 – Sustainable finance
Employers Organization of Polish Copper position on the renewed sustainable finance strategy
Employers’ Organization of Polish Copper welcomes a European Green Deal to put Europe on the right track to a sustainable future and is prepared to take the necessary measures to make it the world’s first climate neutral continent.
As the representative of the Polish metals mining, processing and smelting industry, we welcome the Commission’s renewed sustainable finance strategy as a part of actions for a greener and cleaner economy and agree that a socio – economically efficient, sustainable and flexible financial system is essential for long-term value creation.
The European mining industry plays a critical role in underpinning economic growth. The development of mineral resources is a pillar for many national economies, in terms of contribution to gross domestic product, foreign direct investment, tax & royalty revenues as well as other governmental revenues. Even more, the mining industry produces more than 42 different metals and minerals and employs 350.000 people directly and about 4 times as many indirectly. Modern extraction and processing of minerals and metals has brought huge benefits to society while reducing pressures on the environment, addressing green-house gas emissions, tackling pollution, minimizing waste and improving efficiency in the use of natural resources. Even more, the mineral industry will continue to enable downstream sectors to realize all these improvements.
All European strategic value chains are related to the two main drivers of industrial transformation – the transition to a climate-neutral economy and to a data-driven economy. They are directly linked to improving competitiveness, fighting climate change, and enhancing technological development. And all of them will inevitably require raw materials: not only those that are currently being tagged as “critical”, but also huge amount of base metals such as copper, aluminium, silver, lead and others.
Europe’s metal producers are switching to clean electricity more than any other energy-intensive industry as one of the world’s leading environmental champions. Compared to 1990 levels, the European non-ferrous metal industry already reduced its greenhouse gas emissions by 61% in 2015.
Without the products of the European non-ferrous metals industry, the ongoing technological revolution around us would be much slower and much smaller than what we are all used to in recent years.
For example, about 15-20 tonnes of copper are needed to produce one 2 MW wind turbine, while the construction of a 1 MW solar power plant requires between 3.1 and 4.5 tonnes of copper. Another opportunity for copper is electro-mobility – up to four times more copper is needed to manufacture an electric vehicle than a combustion car, and another area of application is vehicle charging infrastructure.
As early as 2017 the World Bank predicted that by 2050, the growing production of wind turbines will require 300% more metals, 200% more metals for solar panels and 1000% more metals for battery production.
Other future metals are molybdenum and rhenium. The first is widely used in the aerospace, defence, oil, nuclear and electronics industries – more than two-thirds of production is used as an additive in alloys, mainly in high-strength and high-temperature steels. On the other hand, rhenium, of which KGHM is the only European producer, is used, due to its very high melting point, for the production of jet engine turbines, gas turbines and covers for space vehicles. Silver and palladium are also used in the electronics industry and in medicine.
European Green Deal will require more copper, here are the reasons:
Copper plays an important role in renewable energy solutions – such as solar, wind, todal, hydro, biomass and geothermal – by improving their overall performance. For example a 3 MW wind turbine contains up to 4,7 tons of copper. In case of solar energy due to its intrinsic characteristics copper has always been the material of choice for the efficient extraction of electricity from solar cells. Relatively thick but soft copper is preferred for use in silicon cells to reduce fragility, and because soft copper offers faster throughput and better low yield strength.
Copper has the highest electrical conductivity of any metal, after silver. Products containing copper (e.g. engines) tend to operate more efficiently, with typical cost-effective reductions in energy use in the range 20-30%.
Beyond the energy sector copper is also key component in new, low-carbon modes of transportation, such as electric vehicles, playing an important role in their batteries and control systems as well as charging infrastructure. An electric car contains on average almost four times more copper than its counterpart with a combustion engine (83 kg to 23 kg).
Compared to 1990 levels the European copper industry has managed to reduce its per-unit energy consumption by 60%. Emissions from copper production in Europe are now very modest at 0.4% of total EU greenhouse gases emissions.
In addition copper is 100% recyclable and can be used over and over without losing its engineering properties. Copper is also a carrier of valuable metals present in electronics, batteries (cobalt for instance, is as a key by-product of copper metallurgy – 60% of cobalt production; other metals accompanying copper are, inter alia, nickel, silver and gold).
Greening by European mineral products also trigger emission reductions in other sectors of the economy.
Furthermore, in November 2018 the European Commission underlined the importance of continuing exploration and extraction in its document, A Clean Planet for all, a strategic long-term vision for a prosperous, modern, competitive and climate-neutral economy by 2050. “Raw materials are indispensable enablers for carbon-neutral solutions in all sectors of the economy. Given the scale of fast growing material demand, primary raw materials will continue to provide a large part of the demand.”
In this context, we believe that the renewed sustainable finance strategy should ensure an integrated approach, providing consistency, stability and predictability along the whole value chain by:
- Continuing to fulfil our current needs without compromising the ability of future generations to meet theirs;
- Keeping finance and investment available to all, both to those that are trailblazers and to those that are in need of finance to modernise and upgrade toward achieving these targets, including SMEs;
- Markets, industries and companies in transition need assistance if we are to achieve our shared goals;
- Integrating the research, development and innovation potential in sustainability reporting;
- Maintaining the system’s flexibility and dynamism according to the social, economic and environmental evolution;
- Fostering transparency and providing clarity to the markets through a common understanding of sustainable investments and their environmental impacts;
- Keeping reporting duties to an efficient and functional minimum;
- Encouraging investments into generic new business developments such as sustainable exploration, which would secure the supply of resources for the future.
- Enabling further decarbonisation through funding for investments to switch from fossil fuels to electricity in technological processes. Electrifying the mining sector – that is, replacing machines and upgrading processes to use electricity as an energy source instead of fossil fuels – is essential to reducing carbon emissions. The electrification of mining equipment will cost up to billions of euro for company as big as KGHM because it will require not only purchases of completely new, electric machines but also large investments in infrastructure (electric grid, recharging points). New investments in zero-carbon energy sources and industrial installations in KGHM may require billions of euro by 2050. Large part of these investments will need to be funded by EU’s dedicated mechanisms as it exceeds company’s ability to generate free cash or debt money.
- Including the raw materials sector as an energy-intensive industry in the possibility of obtaining EU funding for investments in self-owned RES, smart grids, energy storage facilities, industrial applications in the area of energy efficiency and others (e.g. through the Modernisation Fund, Innovation Fund, European Investment Bank). A considerable decrease in specific energy consumption will only be achieved through major retrofits, which often have high investment costs that can be financially unviable, particularly for smaller operators. This is why raw material sector need the access to funding. The financing instruments at EU and Member States level should be present and accessible to facilitate investments. Investment costs can be significant and it would not be in the interest of the EU to have European companies relocating their headquarters and their stock exchange listing in order to access adequate finances and investments. Those cost can reach levels as high as tens billions of euro in CAPEX and OPEX combined.
- Significant increase in co-financing of investments in energy and raw material efficient recycling of non-ferrous metals. A key driver for this is that the increase in total demand for materials can only be easily met through increasing both primary and secondary materials production and use. The relatively high labor costs for secondary production methods also hampers further penetration of secondary non-ferrous metals in the central baseline projection. This is why we need funding programme, which will help us to increase our energy efficiency and recycling process and thus keep the costs low enough for this part of the business to constantly develop and progress.
- Preferences for raw materials extracted and produced in Europe under public procurement contracts. The preferential coverage of extracted raw materials and manufactured products will contribute to the fact that European companies would be used in the first place for investments related to public procurement. Such action will significantly contribute to securing the supply chain, stabilizing the development of European enterprises and strengthening the European mining and manufacturing sector. In addition, such activities will contribute to the use of raw materials in public procurement that have a low carbon footprint and come from a trusted and safe source.
We would like to underline another important aspect .The renewed Sustainable Finance strategy has been announced in support of the efforts to finance the Green Deal ambitions. It is now being developed while Europe is progressively exiting from the unprecedented crisis caused by the COVID-19 outbreak. The strategy will therefore need to respond to the dual objective of mobilising more investments towards EU’s sustainability goals and of enabling the short-/medium-term recovery of the whole European economy.
The COVID-19 outbreak, which is first and foremost a sanitary crisis, has put the EU economy in a very critical situation. This makes a comprehensive recovery strategy absolutely necessary, one that considers environmental, social and economic aspects in a mutually reinforcing way. It also increases the investment demand for a more sustainable and resilient economy, and reminds the central role of companies in ensuring the resilience and dynamism of Europeaneconomies and their role in society.
Beata Staszków, President of the Board/ Chief Executive Officer
Position based on documents by: KGHM, Euromines, BusinessEurope