The production of nine key economic and human commodities - grains (wheat, rice and maize), critical minerals (copper, cobalt, lithium) and vital metals (zinc, iron, aluminium) - is at risk from climate change, even in a scenario where carbon dioxide emissions fall, according to PwC's report "Climate Risks to Nine Key Commodities: Protecting People and Prosperity"*. Estimates show that 87% of global rice production, over 70% of cobalt and lithium production and around 60% of bauxite and iron production will be negatively affected by 2050.
The analysis identified two climate change hazards - drought and heat stress - as potentially damaging to mining and agricultural production if no action is taken. Even in the most optimistic scenario, in which the world manages to slow the rate of greenhouse gas emissions, extreme weather events will become much more frequent and severe. Heat waves can make life difficult or even life-threatening for workers in the workplace, while droughts can destroy crops and damage the water-dependent mining sector. For example, it takes more than two million litres of water to extract one tonne of lithium.
"Businesses need to prepare for a world in which climate change will cause significant disruptions to production and supply chains, including for critical commodities. For example, Romania is one of the top five producers of wheat and maize in the European Union, and as agriculture is climate-sensitive, both authorities and companies need to implement measures to mitigate the impact of these phenomena. Close cooperation between businesses, governments and communities is needed to create sustainable production and consumption patterns," said Dinu Bumbăcea, Country Managing Partner PwC Romania.
For each of the nine key commodities, the world is dependent on just a few countries. The concentration is most pronounced for lithium, cobalt, iron and bauxite, with more than 70% of global supply for each commodity coming from no more than three countries. For example, more than half of the world's cobalt production comes from just five mines in the Democratic Republic of Congo. This geographical concentration increases the risk of supply disruptions.
Some mines and farms have already taken steps to operate in hot and dry conditions. For example, as the drought in Chile worsens, some mining companies are using desalinated seawater.
Essential commodities face heightened exposure to drought and heat risk
Critical Minerals
By 2050, even if carbon emissions are drastically reduced, more than 70% of cobalt and lithium production could be at significant, high or very high risk of drought, compared to almost zero today. Less than 10% of copper production is affected by these risks today, but this would rise to more than half in a low emissions scenario by 2050 and to more than 70% in a high emissions scenario. Cobalt, copper and lithium are integral to electronics and clean energy technologies.
Key crops
All three crops (wheat, rice, maize) face increasing risks from both extreme temperatures and drought. These three crops provide 42% of the calories consumed by humans. The most widespread and serious risk is to rice. Currently, more than 75% of rice is grown under conditions of significant heat risk, demonstrating that it is not only the level of risk that matters, but also how producers are prepared to adapt. OECD estimates for 2023-32 suggest that global demand for these grains will increase by 11-12%.
Vital metals
The PwC study shows that more than 60% of global bauxite and iron production could be at significant risk of heat stress by 2050, even in a low emissions scenario (compared to 30-50% today). Aluminium (from bauxite), iron and zinc are widely used in manufacturing, transport and infrastructure.
*About the Report
PwC’s report – Climate risks to nine key commodities: Protecting people and prosperity – analysed nine commodities crucial to the global economy and their risk exposure to drought and heat stress. Risk was categorised as significant, high or extreme. Heat stress risk is categorised based on durations above Wet Bulb Globe Temperature [WBGT] limits. WBGT reflects the combined impact of temperature and humidity. Drought risk is categorised based on the percentage of time spent in severe drought over a 20 year period. Exposure of key mines and farms critical to the production of the nine commodities was assessed relative to climate-related drought and heat stress at a present day baseline and in two future years: 2035 and 2050. For 2050, we examined how risk exposures vary depending on how effectively the world reduces its carbon emissions by comparing low vs high emission scenarios.
While our approach provides a useful insight into how different commodities may become more exposed to different climate perils in the future, there are a number of limitations. These include that we do not estimate potential changes in production and we cannot predict future actions to adapt.
You can read the full report, and learn more about key takeaways for climate risk adaptation on www.pwc.com
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