APEC commodities critical to supply chains and global clean energy transition face rising climate-disruption risk without adaptation: PwC

• Six essential commodities (lithium, cobalt, copper, iron, zinc, bauxite) face rising climate-disruption risk, even under an optimistic low emissions scenario 
• APEC economies (US, Canada, China, Australia, Peru, Chile, Mexico) are among the world’s top three producers of all six commodities analysed
• Business leaders must take action to mitigate the impact to production and supply chain risk 

Lima, Peru, 15 November 2024 – Six essential commodities critical to supply chains and the global clean energy transition face rising climate-disruption risk, even under an optimistic low emissions scenario, according to a special report produced by PwC and launched at APEC, today.

The report, which analysed six commodities including lithium, cobalt, copper, iron, zinc and bauxite, finds that their production may be increasingly disrupted by accelerating heat stress and drought risk, with even modest declines in commodity production cascading through supply chains.

The report finds that APEC economies are among the world’s top producers of all six commodities analysed, with the critical minerals and vital metals integral to the global production and supply of everything from electronics, technology, manufacturing, energy, consumer products, and more.

The special report is the latest instalment in PwC’s special series: Climate Risks to Nine Key Commodities: Protecting People and Prosperity and provides insight on how business leaders can adapt to climate-driven disruption and take steps to protect their operations.

Ivy Kuo, Asia Pacific Sustainability Leader, PwC China, said: “APEC economies producing vital commodities critical to global supply chains and the clean energy transition face rising climate-disruption risk. Even in an optimistic, low emissions scenario studied by PwC, many essential commodities will see rising levels of climate-disruption from heat stress and drought risk. In some cases, these risks are rising sharply. Businesses, regardless of whether they are producers or consumers of such commodities, must build the resilience of their operations and capitalise on adaptation opportunities, if they are to mitigate the impact of a changing climate, protect future prosperity and facilitate the clean energy transition. Collaboration with policy makers, communities and across supply chains and industries is crucial to accelerating effective adaptation actions that contribute to a just transition.”

APEC-produced commodities critical to the global economy face heightened climate-disruption risk

Looking at critical minerals, copper mines in Chile and Peru, the world’s #1 and #2 copper producers, face steeply rising drought risks, even in an optimistic scenario in which the world sharply reduces carbon emissions. Even in this optimistic scenario, 41% of Peru’s copper production will be exposed to significant drought risk by 2050, up from 0% today. Similarly, drought risk to Chilean copper production more than triples by 2050. Elsewhere, lithium mines in Australia and China, the world’s #1 and #3 lithium producers, face huge increases in drought risks: 68% of Australia’s lithium production and 70% of China’s will be exposed to significant drought risk by 2050, up from 0% in both countries today.

Looking at vital metals, Australia is the world’s #1 producer of iron and bauxite, and #2 producer of zinc and cobalt. Australian production of all these commodities faces steep rises in drought, heat stress, or both. For example, by 2050 in a high emissions scenario, 46% of Australian bauxite production faces levels of heat and humidity that are dangerous to outdoor workers (up from 0% today).

The sustainability imperative

The report suggests three steps business leaders can take to prepare for the growing risks of disruption. First, enhance resilience by identifying and managing climate risks throughout the supply chain. Next, capitalise on the opportunities to deliver products or services that help companies and communities become more resilient and adapt to the changing climate. Finally, join forces with stakeholders from governments to communities to shape collaborative outcomes and enhance adaptation at a policy and systemic level.

Companies and CEOs are increasingly recognising the impact of climate disruption and taking action. Already, 47% of CEOs have taken proactive measures to safeguard their workforces and physical assets from climate change, according to PwC’s 2024 Annual Global CEO Survey. However, more needs to be done if the global economy is to adapt to climate risk.

Notes

About the report series

PwC’s special report – Climate Risks to Essential Commodities – explores the impact of heat and drought risk to six essential commodities produced in APEC economies. The special report has been produced for the Asia-Pacific Economic Cooperation (APEC) conference in Lima, Peru, between 10-16 November 2024. The report is part of PwC’s series, Climate Risks to Nine Key Commodities: Protecting People and Prosperity. You can read the full report, and learn more about key takeaways for climate risk adaptation on www.pwc.com.