Carbon credits and mining: Paving the way for net-zero goals and sustainable strategies

As miners grapple with how they’ll meet their future net-zero commitments, carbon credits are likely to be part of the answer.

The dual benefits of embracing carbon credits are compelling for miners says Alex Pernin, CEO of Star Royalties (TSXV: STRR; US-OTCQX), a company specializing in royalty financing within the mining industry. He highlights that carbon credits align with environmental responsibility and enhances the financial viability of projects.

According to Pernin, whose company wrote the first royalty deal on a carbon credit in 2020, carbon credits provide a mechanism to incentivize emission reductions, achieve net-zero goals, fulfill regulatory obligations, demonstrate environmental responsibility, and unlock financial opportunities, making them an essential tool in the fight against climate change.

“Carbon credits are a tool in your green toolbox to achieve net-zero status,” Pernin tells The Northern Miner in an interview.

While the mining industry faces scrutiny and challenges in the carbon credit market, Pernin says miners increasingly recognize the importance of incorporating carbon projects into their operations and building partnerships to originate credits.

Getting involved with offsetting your carbon emissions is essential for cost competitiveness and capital access, Pernin suggests.

In a volatile market, mining companies must navigate pricing, regulations, and public perception uncertainties. They need to implement robust measurement and verification systems and address concerns regarding environmental impacts.

The mining industry is in the early stages of developing net-zero strategies, driven by environmental and financial considerations.

“Mining companies are recognizing the importance of incorporating carbon projects into their operations and building partnerships to originate credits,” he says.

While identifying and developing viable carbon offset projects can be complex and time-consuming, mining companies must find projects that align with their operations, have measurable carbon reduction benefits, and meet the eligibility criteria for generating credits.

“If you can originate credits in your backyard, you are an order of magnitude ahead of everybody else,” the carbon market expert says.

Pernin highlights the importance of mining companies creating carbon credits within their operational areas, emphasizing local projects and supply advantages.

He points out that accurately quantifying and verifying the carbon reduction achieved by a project is essential for the credibility and integrity of carbon credits. It requires robust measurement methodologies and reliable monitoring systems to ensure the accuracy of emission calculations and credit generation.

Financial sense

Implementing emission reduction initiatives and carbon offset projects often can be costly. Companies may need to invest in new technologies, equipment, or infrastructure to reduce their carbon footprint effectively. However, balancing the costs associated with emissions reductions against the potential financial benefits of carbon credits can be challenging yet financially rewarding in the long run.

Pernin says not carbon credits are created equal. The carbon credit market can be volatile, with fluctuating prices and evolving regulations. “The value of carbon credits can vary based on factors such as supply and demand dynamics, policy changes, and market sentiment. Mining companies must navigate these uncertainties and plan their carbon credit strategies accordingly,” Pernin says.

The mining industry often faces public scrutiny and criticism regarding environmental impacts. Engaging in carbon credits and offset projects requires effective communication and transparency to address concerns and build stakeholder trust. Companies must demonstrate their commitment to emission reductions and ensure the integrity of the carbon credits they purchase or generate.

Meanwhile, the policy and regulatory landscape surrounding carbon credits and emissions reduction initiatives vary across jurisdictions. Companies operating in multiple regions may need to comply with different compliance markets, regulations and reporting requirements, adding complexity to their carbon credit strategies.

“The mining industry is forward-thinking and in its early stages of thinking about its net-zero strategies,” Pernin says.

He acknowledges the mining industry’s increasing focus on net-zero emissions and the ongoing discussions and initiatives within the sector. “It’s the right environmental thing to do and the logical financial thing to do.”