All big mining companies have set reduction targets of their CO2 emissions to support the Paris agreement. Those commitments make great headlines, but who is auditing the industry's effort, how is it monitored?
Internally we have very strict governance. Our climate change working group is chaired by the board chairman and includes our CEO and CFO. It oversees the target setting process and then monitors the compliance with the target. We also annually report our progress in our annual report and in our sustainability report.
And externally?
Our data are externally assured by our auditors Deloitte. By and at large, I believe this is how a large part of the industry is operating.
To be specific, Anglo American intends to reach net zero emissions by 2040, BHP and Rio Tinto by 2050. Glencore aims at an absolute 40% reduction of its total emissions (scope 1, 2 and 3) by 2035, and net zero emissions by 2050. What are the main drivers, the key innovations to achieve those goals?
Our scope 3 emissions that occur with the use of our products are the most significant in terms of size. They account for about 90% of our total emissions. Our portfolio is diverse, with metals and minerals that enable the transition to a low-carbon economy. So for us the primary driver to cut emissions is through a net depletion of our coal portfolio over time.
In terms of our industrial footprint (scope 1 and 2), the big bucket of our emissions arises from the trucks that we use and from the electricity we consume. For the energy, we are looking at opportunities to switch to renewables and working in partnerships particularly in developing countries to strengthen the renewable energy infrastructure. For example in the DRC the source of the energy for our copper and cobalt operations is hydro. But historically, it has been highly inefficient, resulting in frequent power cuts which we had to supplement with diesel. So we invested to upgrade the power infrastructure.
Late 2019, the International Council on Mining and Metals (ICMM, of which Glencore is member) said it wants all underground equipment to switch to battery power by 2025. Are you on track?
This is a partnership that ICMM has with the manufacturers which build that equipment. Their aim is to develop a technology which at one point enables that switch. Today, a technology that would work in 100% of the cases doesn’t exist yet. Geology for example, is a variable that poses some challenges. Look at open pits. Electric vehicles tend to be better suited where meteorology is stable and dry, like in the middle of a desert in Australia. Those are great conditions for electric vehicles. In a place where rain is less predictable or even where it is very cold it affects the longevity of the battery, the recharging plan and the efficiency of the vehicles.
As for underground, there have been some technologies that looked very promising, but when tested caused some challenges, e.g. fire.
The intermittency of the power supply is another challenge. In some countries, solar panels are great, like in Australia. In others, where solar radiation is less abundant, it can be more challenging. But there’s a lot of work in progress to find solutions.
Coming back to scope 3 emissions, beyond adjusting your portfolio to less carbon intensive products, are you looking at any specific technology? In Zurich, for instance, the company Climeworks captures CO2 from the atmosphere and just partnered with Microsoft to help them reduce their carbon footprint. Would this kind of innovation be of any interest?
Direct air capture looks interesting (even if I don’t know that company specifically). But we do not rely on this to achieve our target by 2035.
For our 2050 ambition however, we do expect to rely on carbon capture utilisation and storage (CCUS), and direct air capture. It is generally recognised that carbon capture is critical to achieving the net zero goal. But today, we don’t see a globally supportive policy environment that would enable it. Carbon capture is very expensive.
Can you be more specific when you ask for policy support?
Incentives, tax breaks, carbon price, technology subsidies... There are also a lot of concerns from the general public regarding where this carbon may go, for example underground. There has been a lot of discomfort with that, in particular among the population in Europe. We need to find ways to sequester this carbon.
In a report last year, the UK based research firm Wood Mackenzie wrote that «carbon pricing can bring parity between hitting emissions targets and the economics». Carbon price has been up 15% since January, close to 40 euros per ton of carbon emissions. Hedge fund Andurand Capital Management expects it to reach 100 euros by the end of the year. How big of a push may that be for mining groups to cut their emissions?
Very significantly! One hundred euros per ton in 2021 would be extraordinary. But yes, under different scenarios we do expect to see carbon prices globally going up to a range between 52 and 115 euros per ton by 2040. A number of jurisdictions where we operate have carbon prices, like Europe but also South Africa and Australia. As the carbon price increases, it is going to make a greater number of GHG (Greenhouse Gas) reduction opportunities more economic.
What is going to be really important is some kind of consideration of a globally harmonised approach to carbon taxation. I hope that we are going to see this being addressed at the UN Climate Change Conference COP meeting in Glasgow [in November]. Probably from any large industrial company perspective, it’s important because at present we have a tax that affects our operation base in those jurisdictions. But if we start to see import taxes linked to carbon, as in Europe for example with carbon border adjustment mechanism, or as in South Korea and China who are also talking about it that affects the whole supply chain. It’s important to have a harmonised approach, otherwise there may be a risk of inadvertent ripple effects that may result in, for example, the EU becoming less competitive.
You’re basically hoping for the creation of just one carbon market…
Honestly, I don’t think we will get there in the foreseeable future... But even a global conversation about the different frameworks and the risk of what we call «carbon leakage», that the carbon footprint simply shifts somewhere else in the world but doesn’t actually disappear, is important.
