‘Leave it in the ground’ is a rallying cry among climate activists, demanding that fossil fuel reserves remain untapped. Occasionally a government listens. Usually they don’t. In the UK, the Conservatives even made maximum extraction of fossil fuels a legal duty. It would be breaking the law to stop if there was more to burn.
The rights and wrongs of leaving fossil fuels in the ground are fairly familiar. In Christopher Pollon’s book Pitfall, I came across a more radical idea: leaving gold in the ground.
Pollon’s book is about the mining industry and the huge damage that it does. It’s an inevitable trade-off, as we can’t do without the extractive industries. The clean energy revolution depends on mining, and so we have to learn to do it well. But not every resource is essential, and there is an argument for scaling back extraction of less important minerals. One of the ones we could curtail is gold. Gold is in a different category because, besides a few specific purposes, most of it is used as a store of value. It doesn’t have many practical uses and two-thirds of demand is from those who want to store it for the future.
If people want to own it as an investent but not actually use it for anything, then “we could stop building big dedicated industrial gold mines tomorrow,” says Pollon. Artisanal gold mining could continue. Gold recycling would meet a lot of the demand. And you could still carry on exploring for new gold reserves – you would just leave it where you found it.
Instead – and this is the radical bit – there is a way of “extracting the value of proven gold in the ground, without the social and environmental harm of digging it up.” Investors would be able to buy a share of the proven reserves, using blockchain to certify its authenticity and long term security.
Pollon offers this idea as an afterword to his book, and the chapter title tells you what many in the industry think of it: “‘That’s batshit-crazy’ – a case for leaving gold in the ground.”
Crazy maybe, but the idea originally came from the industry itself. Australian gold firm Barrick pioneered it, and then abandoned their discussions during a merger. I think it’s still a promising concept. If people want gold purely as an investment, couldn’t we skip the mining and processing? We could dramatically scale back one of the most environmentally destructive industries on the planet, without losing the investment class that investors actually want.
Given that the extractive industry is set up to dig stuff out of the ground, it’s counter-inuitive for them to think this way. But somebody will do it sooner or later, not least because you could do it as a start-up. No need for the massive up-front investment in new infrastructure, or the overheads and wages of running a mine or refining the ore. Just secure the gold underground and sell the ownership of it digitally. Then we’d find out if the financial sector agrees that we can have gold without mining.
The Earthbound Report 
Thanks – what an intriguing idea!
I’ve had very similar thoughts regarding using untapped mineral & energy reserves as financial reserves so that a country could use these to develop without the environmental costs associated with actually accessing them.
There’s definitely appetite for alternative financial instruments, and so far a lot of them have been negative and unhelpful – like the mortgage and loan backed instruments that caused the financial crisis. I see no reason why there couldn’t be much more positive investment instruments, things backed by resource reserves, or by standing forests, land restoration or biodiversity. These would all be more ‘real’ than the value held in cryptocurrency, which plenty of people seem happy to pitch their money into.
The only downside is that in order for it to be credible to traditional investors, it would probably need to come from the industry itself and would therefore end up benefitting the wealthiest. But maybe a government or a central bank could give it a go, and the rewards would be spread more evenly.
Sorry for the late reply 🙂 Who knows what will happen once energy & resource restraints impact on Western global finance when the US is losing its reserve status & burdened by so much dept. What I will say though a system similar to what we have now that relies on so much dept & economic growth won’t work.