According to Gustavo Pimenta, the Chief Financial Officer of Vale, one of the world’s largest mining companies, the cost of transforming the global mining and steelmaking industries into zero-carbon sectors is expected to surpass $1 trillion, . Speaking at the Fronteiras da Mineração conference, Pimenta provided a detailed overview of the financial challenges and opportunities ahead as these industries strive to achieve net-zero emissions.
Pimenta revealed that when the entire production chain is modeled for a zero-carbon transition, the estimated cost is staggering. “We’re talking about more than a trillion dollars,” he said, emphasizing the enormous financial commitment required. He further noted that the combined market value of all the steelmakers in the world does not even reach this trillion-dollar mark, highlighting the scale of investment needed.
Despite the financial challenges, Pimenta pointed out that there are no significant technological barriers to generating zero-carbon energy today. Technologies like natural gas and hydrogen are already available, though scaling them up and reducing costs remains a significant hurdle. Hydrogen, in particular, is currently about twice as expensive as it needs to be for it to be a viable option in the steelmaking process.
The CFO stressed that adopting zero-carbon technologies will likely be uneven and gradual across different regions. For instance, countries like the United States, which offer substantial support and subsidies for green technologies, are expected to transition more rapidly. In contrast, China, which has a relatively new industrial fleet and infrastructure, may take longer to make the switch to carbon-free production methods.
Intermediate solutions, such as carbon capture, will also play a crucial role in the transition period. Pimenta highlighted the importance of these technologies as essential steps toward full decarbonization, particularly in regions where immediate adoption of zero-carbon technologies may not be feasible.
Another key factor in the transition to zero-carbon industries is how countries will tax carbon emissions. Pimenta underscored the critical role of carbon taxes in guiding capital allocation and incentivizing producers to adopt greener practices. He noted that carbon taxes could eventually make it more expensive to sell carbon-intensive products, such as certain types of steel pellets, in markets like Europe. This could, in turn, push companies to develop and market products with a smaller carbon footprint, such as briquettes.
The transition to a carbon-free mining and steelmaking industry is not just a financial challenge but also a complex process that will unfold differently across the globe. Some countries, particularly those with robust support systems for green technologies, may lead the way, while others might lag due to existing infrastructure and economic conditions.
