The cost of carbon pricing: competitiveness implications for the mining and metals industry

The report examines how carbon pricing mechanisms—such as carbon taxes and emissions trading systems—affect the competitiveness of the mining and metals sector. It focuses on aluminium, copper, iron ore, and coal across the EU, South Africa, Australia, Canada, and the US. The analysis highlights that electricity-intensive processes, like aluminium smelting, are most vulnerable to indirect costs passed through from power grids. The report advocates for a principles-based approach to policy design to prevent carbon leakage and maintain international competitiveness, recommending a transition toward a harmonized global emissions system.

• Carbon pricing impacts are most acute for electricity-intensive industries, such as aluminium and copper, particularly when power generation is included in the pricing scope and the grid relies on high-emission fossil fuels.
• For aluminium producers, if all carbon costs from electricity are passed through, these costs can represent as much as 70 per cent of EBITDA.
• Iron ore mining generally faces lower cost impacts due to its relatively low emissions intensity, with potential impacts often remaining below 1 per cent for most financial indicators across jurisdictions, excluding total costs in British Columbia and annual capex.
• Coal production costs are highly variable based on the type of mine; specifically, 'gassy' mines with high fugitive methane emissions face significantly higher liabilities when such emissions are included in the pricing system.
• The inclusion or exclusion of a specific sector from compensation measures, such as free allowances, strongly determines the final cost impact on a company's bottom line.
• Metals production, particularly aluminium, iron, and steel, is widely classified as an emissions-intensive and trade-exposed (EITE) industry across reviewed systems, whereas mining activities are less commonly given this classification.
• The report argues that a global emissions system would be the most effective way to maintain trade competitiveness by ensuring all jurisdictions face the same carbon price and operational regime.
• Policy uncertainty and the lack of long-term price signals can lead to delayed investments, which is particularly critical for the mining and metals industry given its investment cycles often exceed 50 years.
• Benchmarking as a method for allocating free allowances is effective for standardized processes like aluminium smelting but is less effective for mining due to uncontrollable geological factors such as ore grade and mine depth.
• The financial impact of carbon pricing is most significant when measured against annual capital expenditure, followed by EBITDA, cash costs, and finally sales.

APA

International Institute for Sustainable Development (2013). The cost of carbon pricing: competitiveness implications for the mining and metals industry. https://www.iisd.org/system/files/publications/icmm_the_cost_of_carbon_pricing.pdf

Chicago

International Institute for Sustainable Development. The cost of carbon pricing: competitiveness implications for the mining and metals industry. 2013. https://www.iisd.org/system/files/publications/icmm_the_cost_of_carbon_pricing.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=The cost of carbon pricing: competitiveness implications for the mining and metals industry |date=April 2013 |url=https://www.iisd.org/system/files/publications/icmm_the_cost_of_carbon_pricing.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2013cost, author = {{International Institute for Sustainable Development}}, title = {{The cost of carbon pricing: competitiveness implications for the mining and metals industry}}, institution = {International Institute for Sustainable Development}, year = {2013}, month = apr, url = {https://www.iisd.org/system/files/publications/icmm_the_cost_of_carbon_pricing.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }