By Rhiannon Hoyle
SYDNEY -- Global miners have spent years trying to shrink their
carbon footprint. Now they face the threat of lost business if they
don't help customers do the same.
An Australian regulator recently told Peabody Energy Corp. and
Glencore PLC they couldn't export coal from a new mine to countries
that haven't signed the Paris climate agreement. Two other
Australian coal projects were scuttled this year, partly out of
concern about greenhouse-gas emissions overseas.
Investors, too, are growing inquisitive about miners' records on
customer emissions -- partly out of fear about potential liability.
Miners are responding by increasing carbon-impact disclosure,
forming alliances with buyers and investing in technology to cut
emissions from steel mills and power plants.
BHP Group Ltd. said its scope 3 emissions -- pollution mostly
created when customers transport and use the commodities it
produces -- are almost 40 times greater than those generated at its
own operations.
"We recognize that we must work with our suppliers, customers
and others to reduce these emissions across the value chain to
protect demand for our products," said Geoff Healy, chief external
affairs officer at BHP, the world's largest mining company by
market value.
In the oil industry, facing similar pressures, there is friction
among large companies over whether to commit to reducing
greenhouse-gas emissions from products such as gasoline -- in big
part because emissions vary hugely depending on the vehicle.
"Saying you won't buy from someone is relatively easy. Saying
you won't sell to someone is really hard," said Paul Mitchell,
Ernst & Young's global mining and metals leader. "But if we
ignore societal expectations, we do it at our peril."
It is almost inevitable that miners' scope 3 emissions will be
regulated in some way in the future, said Mr. Mitchell, who advises
companies on such issues. The mining sector's carbon footprint made
its debut in fourth place on an annual EY industry survey of
business risks published this month.
Taking action on emissions requires miners to work closely with
China, the world's top buyer of iron ore and burner of coal. While
China is committed to the Paris accord -- and authorities are
pressing the phaseout of old factories and imposing stricter
emissions standards for vehicles -- the economy remains dominated
by state-owned giants that are often inefficient and hard to
influence.
Miners' experience in Australia illustrates what increased
regulation could involve. The approval recently given for the
Peabody-Glencore United Wambo coal mine came with a big condition:
Some export markets must be blacklisted.
The Independent Planning Commission for New South Wales state
insisted thermal coal from the project go only to places where the
Paris climate agreement or other similarly tough greenhouse-gas
targets are in effect. That could rule out Taiwan, which relies on
coal for roughly one-third of its energy use.
"It may be a brave call by the commission, but it's gotten
attention," said Debra Townsend, a partner at law firm King &
Wood Mallesons.
The miners said spurned customers might turn to lower-quality
supplies from elsewhere, adding to global pollution, but the
regulator decided the need to appropriately manage greenhouse-gas
emissions overrode that worry.
That decision is deeply concerning, a project spokesman said.
New South Wales planning minister Rob Stokes said the state
government is considering new guidelines or legislation to clarify
how regulators treat scope 3 emissions.
Threats to miners' business go beyond pushback on new projects.
Consumer brands could stop buying commodities they consider too
dirty, experts say. Many are already innovating with recycled
materials.
In July, BHP pledged to spend $400 million over five years to
develop technologies that can reduce emissions both from its
operations and its customers'.
"We won't stop at the mine gate," BHP Chief Executive Andrew
Mackenzie said. "Use of emissions-intensive products from the
resources industry have contributed significantly to global
warming."
BHP plans next year to publish goals for addressing emissions.
Rio Tinto PLC is also drawing up scenarios for decarbonizing the
steel industry. Success could materially affect the value of its
core iron-ore business, it said.
Meantime, miners are touting their role in the shift to a
low-carbon economy by producing commodities such as copper and
nickel for wind turbines and electric vehicles.
On Sept. 25, Rio Tinto joined with China's biggest steelmaker,
China Baowu Steel Group Corp., and Beijing's Tsinghua University on
a venture to explore ways to reduce the carbon footprint of the
steel industry -- which accounts for up to 9% of direct emissions
from fossil fuel use, according to the World Steel Association, an
industry body.
Rio Tinto is part of a group aiming to improve sustainability in
the aluminum sector a9nd last year joined with Alcoa Corp. and
customer Apple Inc. to develop a carbon-free smelting method.
Those alliances attracted interest from China's steel-industry
association in a meeting with Rio Tinto in Beijing in August. "We
said we should do the same for the steel supply chain from the
Pilbara to Shanghai and other regions of China," Rio Tinto Chief
Executive Jean-Sébastien Jacques said. "Now the real work will
start."
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
October 09, 2019 09:12 ET (13:12 GMT)
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