Our integrated approach to addressing climate change has four areas of activity: mitigation, adaptation, low-emissions technology and portfolio evaluation.
Rather than use an intensity metric to define our current Company GHG target (for the period FY2013–FY2017), we have set ourselves a challenging goal to limit our overall emissions by keeping our absolute FY2017 GHG emissions below our FY2006 baseline.
As we grow our business, our GHG target encourages us to improve our energy efficiency, increase productivity and implement additional GHG reduction projects across our operations. All our operations are required to identify, evaluate and implement suitable GHG reduction opportunities, including during project design and equipment selection. We focus on addressing material GHG emissions sources at our operations, which may include electricity use, liquid fuel use (predominantly diesel) and fugitive methane. Projects tracked since FY2013 as part of our current GHG target achieved more than 950,000 tonnes CO2-e of annualised abatement in FY2016 at our continuing operations.
We have delivered reductions in GHG emissions by improving operating methods in our North American shale operations. In developing a program to optimise power generator performance across our Eagle Ford-operated drill rigs, the team analysed generator-loading practices and made several recommendations. The pilot study proved a success and the program was applied to all Eagle Ford and Permian-operated rigs. As a result, maintenance costs were reduced, average diesel fuel consumption dropped significantly and greenhouse gas emissions were reduced by 18,000 tonnes CO2-e.
The Company’s total GHG emissions of 18.0 million tonnes of carbon dioxide equivalent (C02-e) in FY2016 is significantly lower than our total GHG emissions in FY2015, primarily as a result of the demerger of South32. When compared to our adjusted baseline, which takes into account the demerger, the Company’s emissions are 13 per cent below FY2006 emissions. We are on track to meet our FY2017 target.
In addition to identifying opportunities within our Company, we also seek to contribute to global GHG emissions reductions. We are currently implementing a strategy to support REDD+ - Reducing Emissions from Deforestation and Forest Degradation.
Our assets are long-lived, therefore we must take a robust, risk-based approach to adapting to the physical impacts of climate change. Effective analysis of climate science is critical to informing our resilience planning. We continue to work with the CSIRO (Australia’s national science agency) to obtain regional analyses of climate change science. This informs climate change resilience planning at an asset level, improving our understanding of the material climate vulnerabilities that our operations face.
There are many opportunities for us to take action now to build climate change resilience into our operations and future investments. It is a requirement for all our operations to do this as part of Our Requirements for Environment and Climate Change standard. We also require new investments to assess and manage risks associated with the forecast impacts of climate change.
A leading example has been provided by our Western Australia Iron Ore (WAIO) operations. For the Pilbara region, climate conditions are expected to be hotter (both averages and extremes) and drier in coming decades, with higher sea levels along the coast. Tropical cyclones may decrease in number, but are likely to increase in intensity and duration over the same period. WAIO undertook an integrated and system-wide study to identify the climate vulnerabilities in the production system, assess the material climate risks and evaluate the effectiveness of existing controls in the face of the changing climate. Following the study, a Climate Resilience Plan for WAIO was developed. Action Plans will be implemented over the next five years to address the critical strategic priorities.
The most appropriate approach to building climate change resilience will vary depending on the life of the asset, its exposure to climatic factors and its function. In nearly all cases, collaborative approaches with a range of stakeholders will be necessary to ensure we have effective approaches to climate change resilience. We are also looking at ways we can contribute to community and ecosystem resilience outside of business resilience planning.
Find out more about some of the ways we are building capacity for climate change adaptation.
Technology and innovation have the potential to significantly reduce global emissions and enable long-term climate goals to be met. Given that fossil fuels are likely to continue to be a significant part of the energy mix for decades, it is vital that low-emissions technology is available at scale, lower cost and much faster than the usual commercial timeframes to meet the challenge of climate change. We believe industry has a significant collaborative role to play with government, academia and the community to facilitate this necessary step-change.
We have established an integrated strategy that invests across a range of technologies to reduce material emissions in our operations and across our supply chains, including from the use of our products. When evaluating opportunity areas for potential investment, we look at several different factors, including the potential to materially reduce emissions, and the opportunity to use our own skills and expertise to accelerate the change required.
Our roadmap for investment includes developing and demonstrating carbon capture and storage, technologies to reduce fugitive methane emissions from coal and petroleum operations, battery storage and high-efficiency/low-emissions power generation and transportation. Read more on our carbon capture and storage partnerships.
BHP’s approach to climate change has always been underpinned by engagement, and in October 2015, BHP entered into a partnership with GE Ecomagination to jointly assess opportunities for significant emissions reductions in our business and within our supply chain. The partnership is an example of how industry can work together to identify potential solutions to this critical issue.
Read more on our commitment to the Lakeland Solar and Storage project.
We continue to identify and assess the impacts of climate change on our portfolio. Our corporate planning process uses scenario analysis to encompass a wide spectrum of potential outcomes for key global uncertainties. This planning starts with the construction of a central case, a forecast built through an in-depth, bottom-up analysis using rigorous processes and benchmarked with external views. This central case is thoroughly reviewed and endorsed periodically by the Executive Leadership Team and the Board.
Scenarios that describe the different ways the world could evolve beyond our central case allow us to explore potential portfolio discontinuities and opportunities. In our Climate Change: Portfolio Analysis report (released in September 2015), we outlined four different scenarios, each designed to be divergent, plausible and internally consistent. Our four scenarios assess the timing and implementation of various government policies, emission reduction targets and technology developments. In one of the scenarios, we see a more unified focus on limiting climate change, including an orderly transition to a two degree Celsius world.
We also stress test our portfolio against a shock event that leads to a much more rapid transition to a two degree Celsius world by 2030. This is driven by higher government emission reduction targets and faster technology developments. We include a price on carbon in all scenarios. For our central case, this equates to US$24 per tonne, with a range between US$50 and US$80 per tonne for scenarios that deliver outcomes consistent with a two degree Celsius world.
The analysis highlights that our uniquely diversified portfolio of high-quality, low-cost assets is robust under both an orderly and a more rapid transition to a two degree Celsius world. We also have a strong project pipeline with many capital-efficient growth options that continue to generate high shareholder value in a two degree Celsius world.
While demand continues to grow for most commodities in our two degrees Celsius scenarios, there are winners and losers in our portfolio. Oil and coal are most impacted; however, fossil fuels are still likely to supply the majority of the world’s energy in 2040, even in a two degree Celsius world. Based on our analysis, copper, uranium, potash and gas are predicted to be robust and mitigate potential negative impacts on other commodities, as will higher-grade products in iron ore and metallurgical coal. The analysis shows that our portfolio is highly unlikely to result in assets being ‘stranded’.
Since the release of our Climate Change: Portfolio Analysis we are seeing signs that might indicate a movement to a two degree Celsius world. Some of the relevant themes we are tracking include emerging climate policy (e.g. COP21), low global growth and low carbon energy transition. Following the significant shifts we have seen in the last 12 months, we have also issued - Climate Change: Portfolio Analysis – ‘Views after Paris’.
There will be many risks and opportunities as the world continues to respond to climate change and they will be faced by companies in all sectors, albeit to varying degrees. With the right market settings, including a price on carbon, the greatest opportunities will emerge for those who can produce the lowest cost and most efficient solutions, in line with the expectations of communities and policy makers.
Over BHP’s long history, we have continually demonstrated our ability to reposition ourselves for future growth by divesting those parts of our business that do not align with our strategy or by investing in new commodities where we see a strong long-term growth story.