Consider climate change in formulating mining contracts, NRGI advocates
Senior Legal Analyst with the Natural Resource Governance Institute (NRGI), Nicola Woodroffe, has advised the Government of Ghana to incorporate into mining contracts, the impact of mining operations on climate change.
Making the call on government during an NRGI training workshop on government mining contracts for journalists on Thursday, May 12, 2022, Ms Woodroffe averred government should factor into its mining contracts with mining firms, the country’s policies regarding climate change and management of climate impacts.
In further enforcing policies on climate change, Ms Woodroffe asserts energy requirements of mining companies should also be factored into mining contracts by the government.
“Governments need to think about things like the energy intensity of mining projects and whether mining firms require to use renewable energy which is something that the government can require without making the project too expensive.
“Also, what is the energy requirements on companies with respect to their mining operations, what is the country’s policy towards managing energy transition and climate impacts, and then what kinds of rules we need to apply to different sectors to achieve our goals and objectives. So, yes, climate change needs to be considered more by the government and all other governments in mining projects in terms of what kinds of energy is used and how it is used,” she stated.
The mining sector faces pressure from governments, investors, and society to reduce emissions. Mining is currently responsible for 4 to 7 percent of greenhouse-gas (GHG) emissions globally. Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption, respectively) amount to 1 percent, and fugitive-methane emissions from coal mining are estimated at 3 to 6 percent.
The mining industry has only just begun to set emission-reduction goals. Current targets published by mining companies range from 0 to 30 percent by 2030, far below the Paris Agreement goals.
Mines theoretically can fully decarbonize (excluding fugitive methane) through operational efficiency, electrification, and renewable-energy use.
Capital investments are required to achieve most of the decarbonization potential, but certain measures, such as the adoption of renewables, electrification, and operational efficiency, are economical today for many mines.
To address climate risks, mining companies can focus on three areas: which assets are most at risk from physical climate change; how decarbonization could shift demand for key minerals; and how miners can decarbonize their own operations.
The governance of Ghana’s mining sector according to the NRGI, has improved since the 2017 RGI, driven by a 22-point increase in the index’s value realization component, and a 17-point increase in revenue management, further asserting Ghana’s enabling environment has continued to provide a good foundation for resource governance.
The NRGI however, states that the country governs its oil and gas sector better than its mining sector, noting Ghana’s oil and gas sector features a more robust legal framework than the mining sector, especially in terms of licensing, where mandatory contract disclosures are required by law, and in taxation, where the Petroleum Revenue Management Act requires the full public disclosure on all payments and receipts from oil and gas producers to the government.
The mining sector legislations, it says lacks such good governance stipulations.
Performance of Ghana’s mining sector “satisfactory”
The Natural Resource Governance Institute (NRGI) in its 2021 Resource Governance Index assessment of Ghana’s mining sector, has described the performance of the sector as “satisfactory”.
The mining sector per the NRGI’s resource governance index, attained a composite score of 69 out of 100 points.
The score marks 13 points increase in the 56 points score recorded by the index in 2017.
The increase in score was due to improvements across both the index’s value realization and revenue management components, with notable increases in governance of local impacts and national budgeting.
- Key areas within the licensing and subnational resource revenue sharing subcomponents were still classified as “failing,” reinforcing the need for legislation and further disclosures.
- Within value realization, the taxation subcomponent increased by 10 points to score 82 out of 100 points, moving it into the “good” performance band, while local impact improved by 29 points, scoring 100.
- Ghana’s national budgeting governance improved due to the adoption of, and adherence to, fiscal rules.
- While both law and practice scores improved since the 2017 RGI, the gap between them grew from -8 to -15 points. Enacted laws and rules must be adhered to by relevant state authorities to prevent the implementation gap from growing wider.
- Weak adherence to open data standards, as well as the absence of online data portals related to the extractive sector, has held the mining sector back.
- Ghana’s oil and gas sector outperformed the older gold mining sector owing to enhanced transparency and accountability in the oil and gas sector legislative framework.
Review the Mining Act 2006 and ensure compliance of the laws – NRGI tells gov’t
The Natural Resource Governance Institute (NRGI) has tabled for the country’s mining sector, five (5) resource governance related recommendations.
The recommendations, the NRGI asserts in its 2021 Resource Governance Index report, will help Ghana continue on the positive resource governance trajectory it is currently on.
The NRGI says it has made the following recommendations to aid improve on the country’s resource governance framework in the mining sector;
1. The Ministry of Lands and Natural Resources and the Mineral Commission should accelerate and leverage the on-going review of the Minerals and Mining Act 2006 to strengthen the legal framework governing the mining sector. Legislation must be improved to enhance disclosures in licensing, beneficial ownership information as well as asset declaration by public officials.
2. Relevant government agencies and ministries should adhere to open data principles in line with commitments made through Ghana’s Open Government Partnership National Action Plan.
3. The Ministry of Lands and Natural Resources, the Finance Ministry and the Minerals Commission should ensure compliance and enforcement of existing laws in the mining sector. If the implementation gap widens, companies and citizens could lose faith in the legal framework. Newly passed laws, such as the local content law, may therefore not translate to improved local impacts in the mining sector.
4. Prestea Sankofa Gold Limited should study GNPC’s transparency practices and adopt best practice approaches to state enterprise governance before resuming operations.
5. The Ministry of Finance and the Ministry of Energy, along with other key governmental actors, should collaborate with civil society organizations, and the Ghana EITI to ensure that Ghana meets the standard requirements of the EITI.