Reducing GHG emissions at our operated assets is a key component of our climate change strategy. Our current short-term target is, by FY2022, to maintain our total operational GHG emissions at or below FY2017 levels(1), while we continue to grow our business. While our annual emissions are currently higher than FY2017 levels, our asset-level emissions forecasts show we are on track to meet our FY2022 target. Our long-term goal is to achieve net-zero operational emissions by 2050.
We have set a medium-term target to reduce operational GHG emissions (Scope 1 and Scope 2 from our operated assets) by at least 30 per cent from FY2020 levels(1) by FY2030. Our FY2030 target was informed by our Pathways to Net Zero (P2NZ) emissions project that was established to understand opportunities to achieve and maintain net-zero operational emissions by 2050. The P2NZ project has identified a range of options for decarbonisation of BHP’s operated assets. The key areas of focus are renewable electricity, low or zero-carbon material movement (e.g. reducing diesel use in mining equipment), and reducing hard-to-abate emissions, including fugitive methane from coal mining and petroleum production. We will initially focus on decarbonising our electricity supply, which will also facilitate electrification and diesel displacement in our mining operations.
We made strong progress in FY2020 as a result of establishing four new renewable power purchase agreements (PPAs) for our Escondida and Spence copper operations in Chile. The contracts will effectively displace 3 million tonnes (Mt) carbon dioxide equivalent (CO2e) per year from FY2022, compared with the fossil fuel based contracts they are replacing. Our new PPAs have triggered the development of new renewable generation capacity. About half of our new contracted supply will be met by existing capacity and the remainder from new capacity which is currently under construction. This new renewable generation will displace thermal generation, leading to a reduction in total emissions in Chile. The new PPAs also offer financial savings compared with existing arrangements. BHP has also signed a firm renewable power purchasing agreement to meet half of the electricity needs across Queensland Coal mines from low emissions sources. Newly operational solar and wind farms are expected to progressively contribute up to half of the electricity supply under this agreement. Combined with large-scale generation certificates, this will enable BHP to reduce Scope 2 emissions from electricity use in its Queensland operations by 50 per cent by 2025, based on FY2020 levels.
We established our Carbon Offset strategy that describes how we propose that a quantity of carbon offsets be procured and, from the mid-2020s onwards, retired voluntarily at regular intervals. While we will prioritise emissions reductions within our operated assets to meet our medium-term target, by including offsets as an element of our climate change strategy, we will also continue to support a range of projects that offer sustainability co-benefits, including support for local communities and biodiversity conservation.
(1) Baselines will be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction. Carbon offsets will be used as required.
Operational emissions – performance summary
In FY2020, operational emissions (Scope 1 and Scope 2) increased by 8 per cent from the adjusted FY2017 baseline and 3 per cent from FY2019, on a Continuing operations basis. The increase is a result of increased production and energy usage at Western Australia Iron Ore (WAIO), as well as increased energy usage at BHP Mitsubishi Alliance (BMA), BHP Mitsui Coal (BMC) and Nickel West.
FY2018 and FY2019 GHG emissions have been restated due to a move from location-based (grid) emission factors to market-based emission factors (contract specific) at the Escondida and Pampa Norte (which includes Spence and Cerro Colorado) copper operations in Chile. The current electricity supply contracts are with coal and natural gas powered suppliers, and therefore the emissions intensity of the contracted supply is significantly higher than the grid average. The change in emission factors was made to make BHP’s reporting more consistent, as the market-based approach is the primary method of reporting when the relevant information is available.
The main sources of our operational emissions in FY2020 were electricity (40 per cent) and diesel (40 per cent). Fugitive emissions from coal mining and petroleum production accounted for 12 per cent of emissions and gas, used for power and heat generation, contributed 7 per cent of our operational emissions.
Climate Investment Program
BHP will invest at least US$400 million over the five-year life of the Climate Investment Program (CIP) in emissions reduction projects across our operated assets and value chain. It is a demonstration of our commitment to take a product stewardship role in relation to our full value chain. Initial investments will focus on reducing emissions at our Minerals (Australia and Americas) operated assets and addressing Scope 3 emissions in the steelmaking sector, particularly emerging technologies that have the potential to be scaled for widespread application. During FY2020, potential CIP projects have requested approximately US$350 million over five years. Establishing a robust pipeline is critical to drive prioritisation of the best projects across our operated assets and value chain, and to ensure that our emissions targets can be met alongside safety, production and cost targets.
(1) Scope 1 and 2 emissions have been calculated based on an operational control approach in accordance with the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard. Includes data for Continuing and Discontinued operations for the financial years being reported. Comparisons of data over the period FY2015 to FY2016 should be made with consideration of the divestment of South32 during FY2015 (FY2015 data excludes emissions from South32 operations between the date of the divestment and 30 June 2015). Data over the period FY2017 to FY2019 is displayed with Onshore US emissions shown separately for comparability (12 months of emissions in FY2017 and FY2018, and four months of emissions in FY2019 prior to divestment of this asset).
(2) Scope 1 refers to direct GHG emissions from operated assets.
(3) Scope 2 refers to indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat or cooling that is consumed by operated assets. Our Scope 2 emissions have been calculated using the market-based method using supplier specific emission factors, in line with the Greenhouse Gas Protocol Scope 2 Guidance unless otherwise specified. A residual mix is currently unavailable to account for voluntary purchases and this may result in double counting between electricity consumers.
(4) FY2017 is the base year for our current five-year GHG emissions reduction target, which took effect from FY2018. The FY2017 baseline has been adjusted for the divestment of our Onshore US assets to ensure ongoing comparability of performance. The baseline will continue to be adjusted for any material acquisitions and divestments based on GHG emissions at the time of the transaction; carbon offsets will be used as required.
(5) The FY2006 baseline was adjusted as necessary for material acquisitions and divestments based on GHG emissions at the time of the applicable transaction. This was the baseline for our prior five-year GHG emission reduction target.