24 October 2019
Australia’s biggest gas pipeline company’s plans for gas expansion are inconsistent with the climate goals of the Paris Agreement. But investors don’t seem to care.
With gas use for primary energy expected to fall to 25% by 2030 under a 1.5°C warming scenario, shareholders attending APA’s annual general meeting in Sydney today were rightly concerned about the company’s plans to manage transitional climate change risks.
APA is set to produce its first climate change policy in 2020. However, it was revealed at today’s meeting that the climate policy is highly unlikely to include targets to reduce APA’s scope 3 greenhouse gas emission reduction targets.
Scope 3 emissions are those generated downstream of APA’s operations, as end users burn the gas supplied by APA. These emissions demonstrate significant financial risk exposure, with market and regulatory responses to climate change expected to impact gas demand.
In response to shareholder questioning, board chair Michael Fraser confirmed APA intends to set emission reduction targets in the future, but hadn’t considered even disclosing scope 3 emissions, let alone setting targets to reduce them.
The most concerning aspect of this interaction was the revelation that institutional investors, including Australia’s superannuation funds, are not asking APA to set emission reduction targets, nor disclose its scope 3 emissions.
UniSuper owns a massive 16% of APA’s shares, worth around $2.2 billion. The fund claims to “encourage investee companies… to actively manage their carbon emissions and their exposure to carbon risk and climate change” and “encourage investee companies to be transparent, publicly report on how they’re managing climate change risk and ensure they’ll remain resilient into the future.”
Clearly, UniSuper is failing to live up to these claims.
Gas demand out of line with Paris
APA’s sustainability report states “By expanding global access to gas, the global transition to a lower carbon economy can be both feasible and affordable.” This could only be true if Australian gas were displacing coal, but energy experts have found:
“For the most part, exported gas probably displaces natural gas that would otherwise be produced elsewhere, leaving overall emissions roughly the same. Some smaller share may displace coal. But it could just as easily displace renewable or nuclear energy, in which case Australian gas exports would increase global emissions, not reduce them.”Frank Jotzo & Salim Mazouz, Australian National University
When this was put to the APA board, Fraser pointed to the IEA Sustainable Development Scenario’s projections for energy demand growth. Fraser failed to mention, however, that this scenario relies heavily on the use of carbon capture and storage (CCS) technology, which has shown no signs of viability. Without a miraculous take up of CCS, the energy demand projections Fraser refers to would see us fail to meet the Paris climate goals.
Renewable energy smoke screen
APA has a small renewable energy business, which it likes to point to when challenged over its climate impacts and risk management plans. However, renewable energy currently contributes just 3% of company revenue.
A shareholder at today’s meeting asked how much of the $300-400 million of forecast capital expenditure for each of the next 2-3 years will be directed towards renewable energy, but the company could not provide this. The board also admitted it didn’t have targets to increase the proportion of APA’s business derived from renewables in line with the goals of the Paris Agreement.
Clearly, renewable energy is not a big focus for APA’s growth plans. This leaves the company highly reliant on its expectations for gas expansion, which are totally inconsistent with the goals of the Paris Agreement.
Is your super fund invested in APA or another company undermining a safe climate? See our out of line, out of time report here and tell your super fund to divest from climate-wrecking companies.