14 October 2020
BHP shareholders used the mining giant’s annual general meeting today to call out the glaring inconsistency between BHP’s claimed commitment to the Paris climate goals and its plans to increase fossil fuel production.
Last month, BHP set new targets to reduce its operational carbon emissions (known as scope 1 and 2 emissions) by 30% by 2030. Despite the company’s own scenario analysis demonstrating that a 1.5°C warming outcome presents by far the most positive impact on the value of the company’s portfolio, this target falls significantly short of the level of emissions reduction required to meet the Paris Agreement’s 1.5°C goal.
When asked why BHP’s emission reduction targets are not aligned with a 1.5°C scenario, BHP Chair Ken MacKenzie deftly avoided the question, pointing only to the commitments already announced and failing to address the inconsistency between the 2030 target and the reduction required to limit warming to 1.5°C.
Oil and gas expansion key concern
BHP’s oil and gas production plans were of particular concern to shareholders attending today’s online AGM.
One shareholder question articulated the overriding theme succinctly: “Why has BHP not set any goals or targets with respect to the scope 3 emissions caused by the use of our petroleum products?”
Mr MacKenzie responded that the company had chosen to focus on the scope 3 emission of the steelmaking value chain, and shipping industry, as these are the areas BHP believes it can make the biggest impact.
However, the 40 Mt CO2-e (million tonnes of carbon dioxide equivalent) generated from the use of BHP’s oil and gas products in 2020 are almost 10 times as large as the annual emissions reductions required to meet the company’s 2030 operational emissions target.
Put simply, BHP could reduce its carbon footprint by ten times as much as its scope 1 and 2 targets by ending oil and gas production. Is that not a big enough impact to warrant BHP’s attention?
Petroleum plans would wipe out emission reductions many times over
BHP’s scope 1 and 2 emissions reduction target would result in the company’s 2030 emissions being 4.7 Mt CO2-e below those of 2020. If we assume linear reductions between 2020 and 2030, the cumulative emissions avoided would be around 26 Mt CO2-e.
However, since setting its emission targets, BHP has commenced production at a new oil and gas project which will ramp up to 38,000 barrels of oil (equivalent) per day at peak production. If consumed, this is estimated to release 6 Mt CO2-e per year, more than cancelling out the peak annual emissions abatement under our scope 1 and 2 commitments.
In fact, the total annual emissions that would be enabled by BHP’s ‘in development’ oil and gas projects would be somewhere in the realm of 30 Mt CO2-e, dwarfing the reductions in its operational emissions. This is before considering two other major oil and gas developments announced by BHP, including The North West Shelf project off the WA coast, and the Ruby project in Trinidad and Tobago.
A report released by Carbon Tracker earlier this week showed around half of BHP’s projected capital expenditure on oil and gas development over the next 10 years would go to projects that do not fit within the carbon budget for the IEA’s Sustainable Development Scenario, which aims to reflect the Paris climate goals. BHP’s North West Shelf and Scarborough projects were listed among the most expensive projects in the world due for sanction in the near future that fall outside the SDS budget.
Many shareholders questioned why BHP is undoing its emission reduction efforts by pursuing high cost, high risk expansion of oil and gas production. Shareholder advocates ACCR questioned whether the company’s commitment to spend $400 million on climate action could be taken seriously when the company plans to spend 20 times that amount on oil and gas production.
Disappointingly, instead of addressing the specific content of each question on this topic, Mr MacKenzie and CEO Mike Henry took all questions at once, and provided only a broad summary response.
This response confirmed the company’s view that oil and gas will remain in the energy mix for some decades to come, and its plans to continue investing in oil and gas expansion projects.
However, the company has failed to recognise that the roles for oil and gas in that energy mix must rapidly decline, which clearly does not support the company’s plans to significantly increase production.
The IPCC shows that, in a 1.5°C scenario that doesn’t rely on fanciful assumptions about the deployment of carbon capture and storage technology, the role of gas for primary energy must decline globally by 25% by 2030 (from a 2010 baseline), with oil’s role in primary energy falling 37% over the same timeframe.