The move away from fossil fuels toward clean energy sources was described by the International Energy Agency as “unstoppable” in its latest edition of the World Energy Outlook. At COP28 in December 2023, governments from across the world called for the tripling of renewable energy capacity globally, as well as a transition away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade to achieve net zero by 2050 in keeping with the science. These statements send a clear message regarding the world’s energy trajectory.

Regulators, policymakers and investors are ramping up measures to achieve net zero by 2050. For instance, regulators in the European Union and the United Kingdom have indicated their intention in future to require companies to develop and publish credible climate transition plans that align with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the International Sustainability Standards Board‘s Sustainability Standards. In Q4 of 2023, the UK Transition Plan Taskforce published a best practice, “Disclosure Framework” for climate transition plans, which aims to assist listed companies across several sectors – including mining, asset owners and others – prepare transition plans.

South Africa is in the process of charting the course for its own energy transition. Dominated by coal, South Africa’s entire energy value chain – including mining, infrastructure, transport, products and livelihoods – is at risk. Understandably, there is a call by some developing countries, including South Africa, for the energy transition to be underpinned by considerations of justice (procedural, distributive and restorative justice), hence the emergence of the term Just Energy Transition (JET)Lessons from previous experiences where commodities were abandoned for environmental, social and health reasons should be learnt. For example, when asbestos was declared an undesirable commodity that was banned in many parts of the world, host countries whose economies depended on asbestos mining were the ones that carried the costs. We must ensure history does not repeat itself concerning coal, particularly because of the scale of the transition required in the current circumstances.

The context and commercial realities of the mining industry in South Africa cannot be ignored. The mining industry has faced significant challenges over the past 20 years, including regulatory inconsistencies and an increasingly complex social landscape. This is exacerbated by failing energy, infrastructure, logistics and weakened local government. The result has seen limited investment into the industry and large-scale divestment by the majors of operations to mid-tier and smaller miners. Junior miners do not necessarily have the depth of skills nor the balance sheet to pursue JET initiatives, which could make the development of circular and/or post-mining economies difficult to get off the ground. Absent the introduction of a competitive and reformed mining and tax regime, this cycle will likely continue, and any form of meaningful JET will continue to elude the country, particularly the most vulnerable – the host communities. The net result will likely play out as superficially rehabilitated mines (if at all) no post-mine economy to speak of and the lumbering of taxpayers with the increased burden of resolving both issues.

There is currently misalignment and mistrust regarding the JET among some of the key stakeholders, namely mining companies, government (across all levels and departments), labour unions, host communities and Eskom. The lack of precedent also exacerbates the misalignment. A November 2023 report by the Presidential Climate Commission regarding Komati Power Station’s decommissioning and repurposing project provides some important lessons and recommendations for the JET, especially concerning procedural justice and community engagement. Komati was closed for economic reasons associated with its age (not the country’s decarbonisation agenda) and the JET aspects were an afterthought. The key message is, therefore, that the JET requires continuous planning throughout a project’s lifecycle and inclusive and participatory engagements with all stakeholders, including affected communities.

To avoid these risks materialising for the JET, key stakeholders including mining companies, labour unions, host communities and government (at all levels and in all departments) must collaborate, and play their respective parts, in building effective and constructive partnerships for post-mine-closure.

Mining companies are legally required to plan for sustainable mine closure (which includes financial, environmental and social components) throughout the Life of Mine. Proposed amendments to the regulations relating to financial provisioning for mine closure (which have not yet been finalised) clarify that the objective of mine closure is to achieve an agreed sustainable end state, which must be informed by regular consultation with government and other stakeholders, including communities on closure objectives throughout the project’s lifecycle. It is therefore not acceptable to delay planning and consultation for decommissioning or mine closure until resources are depleted or a mine is forced to shut down for operational or economic reasons. The JET planning will now also need to feature in decommissioning and post-mine closure consultations. To avoid a scenario where junior miners bite off more than they can chew with respect to their liability for mine closure, it is important for mine closure considerations to feature prominently in transaction negotiations and terms. This is also in the interests of the seller, who remains liable for historic environmental pollution or degradation caused, after disposing of the asset. Failing to do so may have fatal consequences in future for all parties, especially in light of ESG (environmental, social and governance) and sustainable finance trends.

An agreed sustainable end state will differ from project to project, as this depends on stakeholders’ expectations and feasibility, but could conceivably include community-owned climate change mitigation and adaptation projects (which could be eligible for carbon credits), nature or biodiversity positive projects (which could be eligible for biodiversity credits), circular economy projects or social development projects. The rise in ESG and sustainable finance may mean new sources of finance could be made available for post-mine closure projects, especially from development finance institutions and the private sector, which can be used to bolster the mine’s funding for such projects. Mining companies may also need to collaborate with other responsible mining companies and use technology, to address environmental impacts caused by mining.

Informed by practical considerations, stakeholder experiences, science and scenario analysis, the government’s role is to provide decisive leadership through policy and action. Policies and regulations relating to energy, mining, JET, climate change, the environment, tax and sustainable finance must be reconcilable and cohesive. Consistency is key to attracting finance for sustainable development projects. The government can also play an instrumental role in de-risking post-mine closure projects (especially JET-related projects which lack precedent), as it did with the Renewable Energy Independent Power Producer Procurement Programme, to attract private finance. Post-mine closure projects would also need to align with local and provincial government’s JET plans.

Since mine employees are key stakeholders who are affected by mine closure, labour unions will also play an important role in developing effective partnerships for post-mine closure. Labour unions will play an important role in helping mines to facilitate reskilling and training programmes that are necessary for post-mine closure projects and negotiating on behalf of workers.

Establishing appropriate community engagement fora and structures before or during the Life of Mine is an essential ingredient for building effective partnerships for post-mine closure. Host communities are a key stakeholders in mining projects and what the Komati project demonstrates is that any decommissioning or repurposing project that is established without their involvement would be fundamentally flawed.

While mine closure is inevitable for any mine, the JET and the global move toward net zero by 2050 will affect the pace of coal mine closure in South Africa. To avoid unjust consequences, including job losses, stranded assets, community ‘underdevelopment’ and environmental disasters, all stakeholders including mining companies, government (across all levels and departments), labour unions and host communities need to collaborate to build effective partnerships for post-mine closure. Transition planning is key and every coal mine should be considering the JET as part of their iterative decommissioning and mine closure planning processes. Establishing appropriate community engagement fora and structures is also key.

Bruce Dickinson, Partner

Garyn Rapson, Partner

Dalit Anstey, ESG Knowledge Lawyer

Webber Wentzel

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