BHP (ASX, NYSE:BHP) has committed to invest $400 million over five years to reduce greenhouse gas emissions from its operations and mined commodities, as the world’s number one mining company looks to take an industry lead on tackling climate change.
The move, the first of its kind by a top miner, follows a series of recent steps BHP has been taking to become an environmentally friendly company, including carbon capture and storage and other innovations such as direct air capture.
The Melbourne, Australia-based giant has also been moving away from thermal coal, which currently makes up about 5% of its revenue, at a very fast pace.
Last year, BHP left the World Coal Association (WCA) over differences on climate change, noting it only wanted to belong to groups aligned with the company’s climate and energy stance.
Early this month, the diversified miner announced it was hoping to divest its thermal coal business, which includes NSW Energy Coal in Australia and Cerrejón in Colombia.
Speaking in London on Tuesday, chief executive Andrew Mackenzie announced he planned to tie executive pay more closely to environmental targets.
“For many years performance against emissions targets has been considered in BHP’s executive remuneration plans. From next financial year  we will clarify and strengthen this link and further reinforce the strategic importance of action to reduce emissions,” he said.
Mackenzie also endorsed carbon pricing, but said it was not enough to combat the looming threat of mass extinctions and major sea rises due to global warming, which he called an “indisputable” fact.
“The planet will survive. Many species may not,” he said. “This is a confronting conclusion but as a veteran geologist once said, ‘you can’t argue with a rock’.”
Despite its good intentions, BHP directly produced 16.5 million tonnes of carbon dioxide-equivalent emissions in the 2017/18 fiscal year, mostly from energy and diesel use at its operations.
That’s the equivalent to the greenhouse gas emissions from 3.5 million cars or 4.2 coal-fired power stations for a year, according to a calculator on the US Environmental Protection Agency’s (EPA) website.
Emissions are divided into categories. Scope 1 and 2 are those directly generated by an organization as well as indirect emissions from the power it buys to run its operations.
Scope 3 emissions are caused when a company’s products are used, for instance, in steel-making or when they are shipped to customers.
Unlike some of its biggest competitors, including Rio Tinto, BHP plans to work on reducing its Scope 3 emissions, which are 40 times greater than those generated by its mines and oilfields.
Mackenzie said the company would also set public goals to address Scope 3 emissions, while continuing to mine for much-needed metals.
“It may be uncomfortable for some, but many solutions to global warming — such as the increased electrification of transport — will require more mined resources rather than less. Electric motors contain 80 per cent more copper than an internal combustion engine,” he wrote in an opinion piece for the Financial Times.
“That is why we must change the current storyline around easy, single solutions and acknowledge that there are many competing perspectives that must be taken into account.”
BHP’s announced investment in emissions reduction across its value chain reflects Mackenzie’s belief that commerce, science and politics must work together to develop “a multi-modal” solution to climate risk.
“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 noted.
The executive cited the case of electric vehicles as an example of unintended consequences of so-called green technologies.
If those cars simply draw on the power generated from fossil fuels then “the emissions are just moved up the chain,” Mackenzie said.
“There are similar trade-offs associated with renewables,” he added. “While renewables are powerful levers for decarbonisation they compete for land which could be used for agriculture and urbanization, or for conservation and leisure.”
BHP’s main boss concluded his presentation by noting that while the price of tackling global warming is high, the cost of failing to do so will be even higher.