Pathway to net zero
| Date: 11/03/2021
Our portfolio enables the transition to a low-carbon economy, while meeting society’s energy needs as it progresses through the transition
CLIMATE REPORT 2020: PATHWAY TO NET ZERO
In late 2020, we published our third report on climate change, Climate Report 2020: Pathway to net zero. This report focuses on how we will deliver our targeted 40% reduction in total emissions by 2035 on 2019 levels and our ambition, with a supportive policy environment, to be a net-zero total emissions company by 2050. These reductions will be underpinned by the managed reduction of our coal portfolio.
Led by the Climate Change working group – see page 92 – we formulated our climate change strategy in partnership with key stakeholders. Our ongoing engagement activities are core to our commitment to inform stakeholders on our progress, and demonstrating our portfolio resilience under a range of scenarios.
We understand the role the commodities we produce and market have in meeting the needs of daily lives. The diversity of our portfolio underpins our strategic ambition to play a leading role in enabling the decarbonisation of global energy usage through providing metals such as copper, cobalt, zinc and nickel that are essential to the transition to a low-carbon economy, and managing down our coal business by 40% or more from current levels by 2035.
We recognise the need for action. We have set ourselves a 1.5-degree Celsius (°C) pathway aligned target of an absolute 40% reduction of our total emissions (Scope 1, 2 and 3) by 2035 on 2019 levels, consistent with the midpoint of Intergovernmental Panel on Climate Change’s (IPCC) 1.5°C scenarios and the 1.5°C pathways set out by the International Energy Agency (IEA). Post 2035, we set ourselves the ambition to achieve, with a supportive policy environment, net zero total emissions by 2050.
OUR POSITION ON CLIMATE CHANGE
We support the global climate change goals outlined in the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. We believe that only through collective global action can the world achieve the goals of the Paris Agreement and limit the impact of climate change. Demand for renewables technologies, and the metals and minerals required to build them, is expected to grow exponentially in response to the decarbonisation of global energy supply and electrification of key sectors, including mobility and its associated infrastructure.
We recognise global climate change science as laid out by the IPCC and the need to meet the goals of the Paris Agreement. The world requires a global transformation of energy, industrial and land-use systems to achieve these goals. As one of the largest diversified natural resource companies in the world, we can support the achievement of the goals by producing, trading and supplying the metals and minerals that are essential to the transition to a low-carbon economy and to meeting the needs of everyday life.
We have a responsibility to contribute to the global effort to achieve the goals of the Paris Agreement by decarbonising our own operational emissions footprint. We believe that our contribution should take a holistic approach and have considered our commitments through the lens of our total emissions footprint. Our commitment to reduce our Scope 1, 2 and 3 emissions and our coal production is consistent with the IPCC and IEA 1.5°C scenarios.
Under all credible scenarios, fossil fuels (coal, gas and oil) will continue to be a part of the global energy mix for many years to come. Facilitating investment into deploying low emission technologies, carbon capture and adaptation efforts should be a priority.
We cannot achieve net zero alone. Continued reductions in emissions will depend on coordinated government policies, including incentives to drive accelerated uptake of lower carbon and decarbonisation technologies, and market-based regulations governing industrial practices that drive a competitive, least-cost emissions reduction approach.
As a member of the International Council on Mining and Metals, our assets consider their Integrated Mine Closure: Good practice guide, which includes a focus on social provision in closure planning, in their management systems. We recognise the need to collaborate with national and regional governments, as well as our communities, to ensure a just transition through the transition to a low carbon economy.
REDUCING SCOPE 3 EMISSIONS
Scope 3 emissions form a material part of the mining sector’s carbon footprint and, as such, we have taken a holistic approach to our commitments, and included Scope 3 emissions in our target and ambition.
The most significant contributor to our Scope 3 emissions is our customers’ usage of the fossil fuels we produce (predominantly coal). Recent years have seen significant declines in use of coal for power generation in Europe, largely displaced by natural gas and LNG. In the Asia-Pacific region, the key destination for our Australian and South African coal production, coal is the predominant source of fuel for power generation and, we believe, will remain a vital transition fuel until such time as alternative infrastructure can be approved, financed and constructed.
Our total Scope 3 emissions in 2020 were 271 million tonnes CO2e, a decrease on the 343 million tonnes CO2e in 2019, reflecting lower energy use by industry in this most challenging year. Our customers’ usage of the fossil fuels we produced totalled 253 million tonnes CO2e (2019: 326 million tonnes CO2e), being around 93% of our total Scope 3 emissions. Emissions resulting from customers’ use of the oil products refined at the Astron refinery are excluded from our Scope 3 emissions total as we neither originate nor consume the products.
We expect our coal portfolio to produce no more than 85mt by 2035, down 40% from 2019 levels. By 2050, our only remaining coal mines, if any, will likely be in Australia, with any post-2050 production, including for metallurgical purposes, assumed to be neutralised directly through carbon capture, utilisation and storage, or indirectly through offsets.
Our 2020 Sustainability Report will provide a full disclosure on all of the Scope 3 categories that are relevant and material to our activities.
REDUCING OUR OPERATIONAL FOOTPRINT
We have set ourselves a 1.5°C pathway aligned target of an absolute 40% reduction of our total emissions (Scope 1, 2 and 3) by 2035. Given the impact of the coronavirus pandemic on both mine supply and industrial demand, particularly for thermal coal, we have taken 2019 rather than 2020 as the baseline year.
We work with global specialists and draw on the local expertise within our operational teams to identify ways to further reduce our Scope 1 and 2 emissions. Our approach has led to the implementation of initiatives that reduce these emissions, while continuing to meet our obligations to our customers.
Our group-wide marginal abatement cost curve (MACC) identifies and quantifies opportunities to reduce our carbon footprint and supporting our assessment of cost-ranked emission reduction initiatives. These include utilising more power from low-carbon sources and delivering operational improvements and technologies that enhance efficiencies, resulting in emissions reductions.
We are continuing to manage our assets responsibly and to collaborate with governments and local communities to deliver sustainable economic benefits.
We divide CO2 emissions reporting into three different scopes, in line with the Greenhouse Gas Protocol, and measure both the direct and indirect emissions generated by the industrial activities, entities and facilities where we have operational control.
Scope 1 (measured in CO2e) includes emissions from combustion in owned or controlled boilers, furnaces and vehicles/vessels, from the use of reductants and fugitive emissions from the production of coal and oil (direct emissions).
Scope 2-location-based emissions (measured in CO2) principally relate to purchased electricity for our operations. In particular our metals processing assets, which require secure and reliable energy 24 hours a day, 365 days a year. For the calculation of the Scope 2-location-based emissions the relevant grid emission factors to all our purchased electricity, regardless of specific renewable electricity contracts (indirect emissions), are applied.
Scope 3 emissions (measured in CO2e) relate to the indirect greenhouse gas emissions further up and down our value chain. These include upstream emissions associated with the products and services we purchase from suppliers and downstream emissions that include emissions resulting from our customers’ use of the fossil fuels that we produce, their processing of our metals and concentrates, the emissions resulting from timechartered vessels and emissions resulting from joint ventures.
We have exceeded our 2020 target of reducing Scope 1 and 2 emissions intensity by 5% compared to the 2016 baseline, with a 13.2% reduction achieved. We achieved the reduction of our carbon intensity through a range of measures, including operational abatement and production changes, as well as lower coal seam emissions due to the closure of a coal underground operation in Australia.
Going forward, we will report annually on progress against our new target of a 40% reduction in Scope 1, 2 and 3 emissions by 2035.
INVESTING IN TRANSITION METALS
A key input into reducing our overall footprint will be our allocation of capital in a way that prioritises investment and sustaining expenditure in our portfolio’s transition metals.
We disclose how we ensure our material capital expenditure and investments align with the goals of the Paris Agreement, including our costs relating to the exploration, acquisition or development of fossil fuel production, resources and reserves, as well as for the metals essential to the transition to a lowcarbon economy.
We have adopted the IEA’s global energy and emission scenarios and extended the scenario analysis to include the evolution of metals demand as the world transitions to greater electrification and adoption of metal-intensive wind, solar and battery technologies. However, as no single pathway can define how individual economies and the world will transition, the IEA’s scenarios describe a range of potential outcomes dependent on the rate at which transition policies are implemented. We use each of these scenarios to test the resilience of our portfolio, assess the market fundamentals for our products and to inform our decisions on capital allocation.