Climate risks to APEC commodity production

APEC economies including Australia, China and Chile are the world’s #1 producers of essential commodities like lithium, copper, iron, zinc and bauxite (used to make aluminium). 

In this report, find out how accelerating climate change may disrupt APEC economies’ production of commodities with consequences for businesses across the world.  

APEC economies including Australia, China, Chile, Peru and Canada are among the world’s top three producers of all six commodities in our study. 

In the cases of lithium, copper and zinc, the world’s top 3 producers are all APEC economies. 

Even in a best-case scenario in which greenhouse gas emissions rapidly decline, climate change will cause heat stress and drought to occur with far greater frequency and severity. 

These conditions have the potential to disrupt production of essential commodities. Heat stress can make it too hot for workers to work outside, and drought can disrupt mining which often requires large amounts of water.  

Even modest declines in commodity production can cascade through supply chains, affecting prices and availability.  

Business leaders need to be aware of climate-driven threats to their supplies of essential commodities and take steps to protect their operations.  

We assessed the growing risks of heat stress and drought to commodity production in seven APEC economies: Australia, China, Chile, Peru, Canada, US and Mexico.

• 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. 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. 
• Lithium mines in Australia and China, the world’s #1 and #3 lithium producers, face huge increases in drought risks even if carbon emissions rapidly decline. 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. 
• 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). 
• Future emissions reductions will not protect businesses from a changing climate. Even in an optimistic low emissions scenario, many commodities will see rising levels of risk from heat stress and drought, highlighting the importance of adapting to a changing climate while we strive to reduce carbon emissions to prevent climate change from becoming even more severe.  
• In some cases, risks are rising sharply from low levels, underlining the need for business leaders to prepare to manage increasing risks that, in some cases, they may have little experience in managing.  
• Business leaders can take three steps 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, services, or business models 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.