BHP boss warns climate change escalating towards crisis point
Dependence on fossil fuels poses an “existential” threat to the planet, warns BHP CEO.
The global dependence on fossil fuels poses an “existential” risk to the planet, according to BHP Group chief executive Andrew Mackenzie, boss of the biggest mining company in the world, and climate change is escalating towards crisis point.
In a landmark speech on climate change in London tonight, Andrew Mackenzie said the mining major would extend its climate change policy to include monitoring and trying to influence the carbon emissions of its customers, and would tie its executive pay packets to the success of reducing greenhouse gas emissions.
Mr Mackenzie did not promise BHP would exit the coal industry, as its chief rival Rio Tinto has done, but hinted at a possible move on its coal portfolio next year when BHP releases its next “climate portfolio analysis”, examining the impact of global warming on the outlook for its products.
Instead, Mr Mackenzie called for a nuanced approach to dealing with the problem of accelerating global warming, saying there is no “simple bullet”.
“Renewables, nuclear, hydrogen, long-term storage of electricity, coal and gas with carbon capture and storage (CCS), negative emissions technologies like reforestation and biomass with CCS, and other approaches will all contribute to lower carbon outcomes,” he said.
“Electric vehicles for example, are considered to be lower carbon than internal combustion engines. But if the power is generated from fossil fuels the emissions are just moved up the chain.
“There are similar trade-offs associated with renewables. While renewables are powerful levers for decarbonisation they compete for land which could be used for agriculture and urbanisation, or for conservation and leisure.”
But the BHP boss also ramped up the company’s rhetoric on the need for climate change action, saying that, while coal and fossil fuels had delivered enormous economic benefits across the globe, and still promised to do so in developing economies, their use came with consequences.
BHP has announced a 5-year, US$400m Climate Investment Program to develop technologies to reduce emissions from its operations as well as those generated by its customers.
— BHP (@bhp) July 23, 2019
“We must also face the challenges that come with these benefits. Because the world’s dependence on fossil fuels carries risks with it that could be existential,” he said.
“Previous events when CO2 was added to the atmosphere more slowly, and sometimes in similar amounts, show us what may happen if we do not act. These events coincided with mass extinctions and major rises in sea level. And they also suggest that future heating will more likely be towards the upper end of forecasts.”
Mr Mackenzie reiterated BHP’s long term position that the evidence for human-caused global warming is “indisputable”.
“The planet will survive. Many species may not,” he said.
“We see this period as an escalation towards a crisis. However the global response does not yet match the severity of the threat.”
The BHP boss announced the company will give ground to activists who have been pushing mining majors to monitor and try to reduce so-called “scope 3” emissions — those from downstream manufacturers, such as steel mills, that use the iron ore and other commodities that BHP mines.
The move will mark a major departure from BHP’s peers, with Rio Tinto having fiercely resisted pressure to set targets for carbon emissions from buyers of its own products.
Rio chairman Simon Thompson told shareholders at its annual meeting earlier this year that the scope 3 push was “unworkable”, saying Rio could have little control of how its customers ran their own businesses.
But Mr Mackenzie said BHP has a responsibility to do more than merely reduce its own carbon footprint.
“These emissions are generated as customers transport, transform and use our products to serve the needs of billions of people, and they are almost forty times higher than the emissions from our own operations,” he said.
“We will push for efficient use of all our products as part of our overall decarbonisation strategy and plans. For that we must take a product stewardship role for all emissions across our value chain. And commit to work with the shippers, processors and users of our products to reduce scope 3 emissions,” he said.
“Those who enjoy the benefits of our products should be able to do so with less and less impact. To measure our stewardship of BHP’s products in 2020 we will also set public goals to address scope 3 emissions.”
Mr Mackenzie did not detail how initiatives to reduce scope 3, and BHP’s own emissions, would factor into executive pay.
Reducing BHP’s own carbon emissions is already a part of the executive pay structure, factored into key “non-financial” performance indicators considered by its remuneration panels, along with safety figures and “social investment” initiatives.
But the goals by which executives are measured are not outlined, and BHP does not define the weighting of the various components.
BHP is not due to release a new remuneration policy until 2021, and Mr Mackenzie left the details of the carbon component of that package for a later date, promising only that it would have a higher weighting than current pay scale and the company would be more transparent about how it measures the outcomes.
BHP shares closed up 24c to $41.58 today.