Rio Tinto (ASX:RIO)
Historical Stock Chart
2 Months : From Sep 2019 to Nov 2019
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 email@example.com
(END) Dow Jones Newswires
October 09, 2019 09:12 ET (13:12 GMT)
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