Jamas Hodivala KC: “Money Laundering and the Net Zero Gold-Rush”


In this ESG article, Jamas Hodivala KC examines issues relevant to money laundering the proceeds of environmental crime linked to global Net Zero commitments, where demand for essential metals and minerals will outstrip current supply.

San Francisco was literally built on gold. The California Gold Rush began in 1848 when James W. Marshall (a carpenter) found the yellow stuff whilst helping to build Sutter’s Mill in Coloma. Although he and John Sutter – the mill-owner – tried to keep the discovery secret, about 80,000 “forty-niners”, as those prospectors who flocked to California in 1849 became known, quickly descended on the site. Over 300,000 people subsequently flocked to the State in the following six years with the amount of gold extracted peaking in the mid-1850’s. By 1859, it is estimated that more than 28.4 million troy ounces of gold had been mined out of the Californian ground. Some people made their fortunes and San Francisco became firmly founded.

But there were consequences that provide us with salutary lessons we would be wise to consider today. Mining requires water and rivers were re-directed from their natural course. Sediment was washed into watercourses, adversely impacting local farmers. The biggest catastrophe was owing to the use of mercury in the gold mining process; a study by Saiki, Martin, May et al. published in 2009, 160 years later, demonstrated that fish in an 830-hectare reservoir downstream from these historic mining sites remain to this day contaminated with concerning levels of mercury. The California Gold Rush of 1848 made some people rich but its environmental consequences are still felt today.

Net Zero commitments and the modern Gold Rush

As a result of the clean energy transition the modern world still lusts for gold because of its excellent conductivity, making it the metal of choice in modern electronics used in everything from smart devices and photovoltaic cells to wind turbines and electric cars. Demand is vast and increasing: it is estimated there will be 18.2 billion smart devices by 2025 – on average each such device contains 0.034g of gold – and there are predicted to be 142 million electric cars on the world’s roads by 2030 (in 2012 there were just 120,000 electric cars sold globally). The EU predicts that the electrification of transport will be substantially responsible for a 14-fold increase in global demand for batteries by 2030, with the EU accounting for 17% of that demand.

The current demand is not just for “yellow gold”. The requirement for the new “white gold” – lithium – is also exponentially increasing. Although alternative options to lithium-ion-phosphate batteries are slowly increasing, the International Energy Agency (“IEA”), which includes the UK amongst its members, recently reported in its Global EV Outlook 2023 report:

The increase in battery demand drives the demand for critical materials. In 2022, lithium demand exceeded supply (as in 2021) despite the 180% increase in production since 2017. In 2022, about 60% of lithium, 30% of cobalt and 10% of nickel demand was for EV batteries. Just five years earlier, in 2017, these shares were around 15%, 10% and 2%, respectively. As has already been seen for lithium, mining and processing of these critical minerals will need to increase rapidly to support the energy transition, not only for EVs but more broadly to keep up with the pace of demand for clean energy technologies.