Carbon Adjusted Efficiency and Technology Gaps in Gold Mining

Abstract

This paper analyses the gold sector's environmentally-adjusted (i.e., carbon dioxide – CO2 emissions) efficiency using global mine-level data from 2019. Gold mining involves different production environments and technologies such as open pit and underground, which requires the estimation of separate production frontiers. We apply the directional distance function approach to model the joint production of desired (gold production) and undesired (CO2 emissions) outputs in the production process to estimate meta-frontiers for obtaining mine level efficiency under different technologies.  The results show significant disparities in efficiency both at the mine level and across countries varying (i.e., from 18 percent to 100 percent efficient). We note a considerable variation in mines efficiency ranking after it is adjusted for CO2 emissions in the production process. The technology gap appears to be higher for mines operating underground (i.e., 0.556) than mines operating under open-pit (i.e., 0.995) environment. We also find that countries having renewable energy usage in mining operations exhibit an improved environmental efficiency. The findings suggest that advanced technology and effective management of mine-level operating systems could help mitigate carbon emissions and increase mining efficiency.

Keywords: gold mining, DEA, CO2 efficiency, environment, meta frontier, technology gap