Use cases for carbon offsets

BHP has five potential ‘use cases’ for carbon offsets, to complement the structural emissions abatement that we prioritise, as per the table below. This includes contributing to our Scopes 1, 2 and 3 emission reduction targets and goals and complying with emissions regulations (e.g. under the Australian Safeguard mechanism) as we work to decarbonise our business. We use our social investment to fund research into new and emerging natural carbon offsetting methodologies, and to fund offsets projects with social value co-benefits in line with our social value framework¹. We also explore commercial opportunities to work with organisations in our value chain to supply offsets to supplement their focus on emissions abatement, including the bundling of offsets into product transactions². 

¹ For more information refer to Social investment. 
² For example, we undertook a pilot carbon neutral commodity transaction with US copper cable and wire manufacturer, Southwire. We did not retire any of the offsets that tied to that transaction against our own voluntary targets or goals. For more information refer to https://www.bhp.com/news/media-centre/releases/2021/10/bhp-and-southwire-collaborate-for-first-carbon-neutral-copper-cathode-delivery. 

Sourcing and quality of carbon offsets

Carbon offsets have attracted scrutiny over past decades due to varying perceptions regarding their integrity, sometimes referred to as the ‘quality’ of the carbon offset. The quality of a carbon offset has two main components: it must represent at least one metric tonne of additional, permanent and otherwise unclaimed CO₂-e emission reductions or removals and it should come from activities that do not contribute to social or environmental harms. We perform due diligence designed to ensure we invest in carbon offsets that adhere to the following minimum quality standards: 

• Registered under an internationally recognised standard that independently verifies and issues voluntary carbon credits and/or satisfies national carbon offset standards for compliance offsets. 
• Adheres to a robust emission reduction accounting methodology to provide assurance of the volume of emissions reduced through a project. 
• Demonstrates that the emissions reductions are additional to ensure that the emissions would not have been reduced in the absence of a carbon offset market. 
• Has a high likelihood of permanence to ensure the emissions reduction are ongoing and not reversed (e.g. in the case of forestry projects, the trees are not cut down or destroyed by a natural disaster). 
• Provides robust mitigation against leakage ensuring an offsetting project does not increase emissions elsewhere (e.g. an area is protected from deforestation through offsetting but another forest area is destroyed). 
• Demonstrates high environmental and social integrity ensuring no broader social or environmental harm (e.g. hydropower projects that require forest clearing and community displacement). 
• Restrict early vintage years to avoid claiming emissions reduction from activities that occurred a long time ago; typically this means not purchasing offsets with a vintage greater than five years  

BHP’s carbon offsets are from a variety of sources including (but not limited to) spot markets and project origination. We see a role for offsets from solutions that remove atmospheric carbon as well as avoid emissions. While we prioritise offsets from nature-based solutions, we also consider the sourcing of offsets from engineered solutions. 

Investing in natural climate solutions

Investing in natural ecosystems is a cost-effective and immediately available solution to mitigate climate change that often provides sustainability co-benefits, such as biodiversity conservation, improved water quality or support for local communities. We support the development of market mechanisms that channel private sector finance into projects that increase carbon storage or avoid GHG emissions through conservation, restoration and improved management of terrestrial landscapes, wetlands and coastal and marine ecosystems. We focus on project support, governance, knowledge and innovation, and market stimulation for carbon credits generated by these projects. For example, in FY2022 we launched a new A$3 million grants program to help drive the development of the Australian blue carbon market by providing funding and support to emerging blue carbon projects.