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Understanding BHP’s ‘Climate Investment Program’

26 July, 2019

Australia's largest miner, BHP, will become the world's first to pledge to tackle pollution caused when customers use its products.

Under their new 'Climate Investment Program', the first decarbonisation plan of its kind by any major miner, BHP will undertake a $AUD570 million commitment to reduce the company’s own carbon emissions, and those produced in the use of their products.

Crucially, this includes BHP’s ‘scope 3’ emissions – those generated when the company’s commodities, such as coal, are used by their customers.

In fiscal 2018 alone, BHP’s scope 3 emissions were almost forty times larger than the 16.5 million tonnes of carbon emissions directly generated by its operations.

That's equivalent of the emissions produced in a year by 126 million cars or 153 coal-fired power plants, according to a calculator on the US Environmental Protection Agency's website.

This plan represents a landmark departure from the traditional attitude of Australian resource exporters to the emissions generated by their customers in other countries.

Resource companies (like Adani) and governments have consistently failed to recognise or take responsibility for the scope 3 emissions produced when Australian coal is burned overseas, despite their massive contribution to catastrophic climate change.

In a speech accompanying the announcement, BHP Chief Executive Officer Andrew Mackenzie emphasised the need for the company to take responsibility for emissions produced in their own operations as well as those of their customers.

“We must take a product stewardship role for emissions across our value chain and commit to work with shippers, processors and users of our products to reduce scope three emissions,” he said.

“Over the next five years this program will scale up low-carbon technologies critical to the decarbonisation of our operations. It will drive investment in nature-based solutions and encourage further collective action on scope three emissions.

To achieve these targets, BHP intend to invest in any technologies that would reduce greenhouse gas emissions, including renewable energy, but also potentially including nuclear and carbon capture and storage, believing there was a need to take an “all of the above” approach to emissions reduction technologies.

As of next year, BHP has confirmed they'll set a medium-term, science-based decarbonisation target in alignment with the Paris Agreement, and a long-term goal of net-zero emissions for the company by 2050.

“We require a considered and orderly transition to a lower-carbon world, in which resource companies like BHP have both critical expertise and a key role to play.”

It remains to be seen if the announcement will be supported by concrete actions that will reduce the company’s vast carbon footprint, and whether others in the resources industry will follow suit.

Tim Buckley, Director of Energy Finance Studies at the Institute for Energy Economics and Financial Analysis (IEEFA), welcomed the announcement, but said BHP must follow through on its promises.

“As CEO of BHP, Andrew Mackenzie has acknowledged that the world’s dependence on fossil fuels carries existential risks and that the evidence of global warming is indisputable,” Buckley said.

"IEEFA sees BHP as finally stepping up to take a leadership role in this critical, global debate to transition to well below 2 degrees. Now we need to see BHP’s actions match its important new rhetoric.”

The Australian Petroleum Production & Exploration Association Chief Executive Andrew McConville responded that while he welcomed BHP’s announcement as a “significant contribution”, their new stance was the prerogative of an individual company and should not set an example for policy makers to follow.

The full transcript of Mackenzie’s London announcement speech is here.

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