BHP Billiton – fuelling growth and tackling emissions

In June, the mining giant BHP Billiton unveiled its second climate change policy. The company updated its 2002 policy, to take into account evolving scientific findings, public expectations and government action. It was a keenly anticipated release. As Australia’s biggest company, and the world's biggest miner, BHP Billiton was expected to take the lead in addressing climate issues. But its policy has, perhaps predictably, left green groups and NGOs under-whelmed. Environment organisations, such as the Australian Conservation Foundation, have criticised the company for not following the examples of BP, Alcoa, Dupont and Duke Energy in setting strong cuts for their carbon emissions – 10% for BP, 25% for Alcoa and 65% for Dupont by 2010. Instead, BHP Billiton has set a target of another 6% cut for emissions, from 2006 levels, per tonne of mineral extracted by 2012. Meanwhile the business continues to grow, extracting an increasing amount of minerals each year. Other competitors in the mining industry have hardly done better. Rio Tinto has pledged to reduce on-site greenhouse gas emissions per unit of production by only 4 percent from 2003 levels by 2008. Anglo American seems marginally more committed, promising a 10% emissions reduction per unit produced by 2014. Juggling growth with climate promises In the 2005/06 fiscal year, BHP Billiton produced some 51 million tonnes of carbon emissions through its own operations – more than half of this from its massive consumption of electricity. Those companies using its products, including coal burning energy utilities in China, produced a further 370 million tonnes. BHP readily admits its own emissions are likely to increase as it continues its dramatic expansion – a predicted 40% increase in the global production of all its commodities, including oil, coal, gas, bauxite (used to produce aluminium). The market counts Ian Wood, the vice president of sustainable development and community relations at BHP Billiton, argued in an exclusive interview with ClimateChangeCorp.com that the company is working to tackle climate change within the constraints of the market. Carbon emissions will inevitably increase as the company grows, he says, either through increased production or through mergers and acquisitions (companies buying other companies). In fact, BHP is widely predicted to make a bid for aluminium producer Alcoa, after big rival Rio Tinto recently snapped up the Canadian aluminium company Alcan. An efficient answer Wood cites some of the practical ways in which BHP Billiton’s climate change strategy will change things. Firstly, the company aims to lessen its emissions by increasing the efficiency of its mining processes. BHP is investing and participating in a large number of new technology projects, and intends to have greenhouse gas management and energy conservation programmes at all of its sites with annual emissions greater than 100,000 tonnes CO2 equivalent. But the head of the Australian Conservation Foundation, Don Henry, has taken issue with this pledge. He points out that the company’s plans to spend US$300 million over five years on low emission technology and energy efficiency represents just a small fraction of BHP’s latest net profit of US$10.5 billion in a single year. Secondly, the company wants to promote the idea that its mineral products can be used to reduce emissions in other industries. The uranium solution One of the biggest projects on the horizon for BHP is the impending expansion of the massive Olympic Dam copper/gold/uranium mine in South Australia. Already, the country’s biggest mining project, BHP’s plans to treble the capacity of the mine will mean a big spike in electricity demand for the company. In fact this will be so significant that the South Australia state government has been forced to quietly abandon its own target of a 20% cut in emissions from within its own state by 2020. But Olympic Dam holds the world’s largest uranium deposit, approximately one third of the world’s supply. Wood says that while BHP’s own emissions increase, the mining of uranium will lead to an expansion of the nuclear power industry and effectively offset the entire greenhouse emissions of Australia. The uranium is likely to be supplied to countries such as China and India. LNG steps up Similarly, Wood cites the use of liquid natural gas as a replacement for oil. BHP produced 60 million barrels of oil equivalent last year, a little more than their petroleum production. The promotion of low carbon alternatives, which mining can contribute to, is an argument central to BHP’s climate strategy. “We have not set absolute targets because we are in a growth business,” Wood says, noting some $US 18 billion of new projects currently in the pipeline, including the Olympic Dam project, the Ravensthorpe nickel project in Western Australia and new oil and gas fields in Australia and the US. Wood adds that BHP’s total CO2 emissions have, in fact, come down from a peak of around 70,000 tonnes in the late 1990s because of asset sales, including the sale of Australian steel making operations, and plant closures. Global carbon trading BHP, along with other heavy carbon emitters, has been offered a central role in crafting the Australian government’s policy on carbon trading. A scheme is to be introduced by 2012, possibly earlier if a change of government occurs in the election later this year. The company wants it to be part of a global carbon-trading scheme, but does not expect one to materialise in the short term. The company has been an active participant in the EU scheme since it completed the scheme’s very first trade in 1995. BHP has been generating carbon credits, many of them raised through UN Clean Development projects, and attaching them to coal sold to customers in Europe, in an attractive offsetting package. Off shoring emissions Environment journalist and author Fred Pearce suggested at an Ethical Corporation climate change conference in March, that companies such as BHP and arch-rival Rio Tinto may consider “off shoring” their carbon emissions away from countries with strict controls and trading schemes. BHP’s four aluminium smelters, which account for around half its direct emissions are all already located in countries which are not subject to the Kyoto protocol, three are in Africa and one in Brazil. Wood, however, says BHP Billiton is not contemplating deliberately situating heavy emitting operations away from carbon emissions and control. “We’re not going to play that game,” he says, although he concedes a carbon penalty may influence the site of any new aluminium smelter if all other factors were equal. Mirrored policies In many ways, the challenges facing BHP are the same facing the government in Australia. And no wonder, with Australian coal exports totalling A$25 billion in 2005/06, making it the country’s biggest export. Both have frustrated climate change campaigners by wanting to move cautiously, happy to pick the low hanging fruit – distribution of low energy light bulbs in the case of the government, energy efficiency at their mines and smelters in the case of BHP. Similarly, both are wary of any dramatic and unilateral measures that might see their economic growth imperilled, at least until new technologies – such as carbon capture and storage from coal emissions – are in sight.