Our perspective on climate change
Climate change is a complex, global challenge, but we approach it through the framework of our strategy and values. Rising living standards in emerging economies depend on economic growth driven by industrialisation and urbanisation. We aim to safely, reliably and profitably supply the resources to support that growth. We understand that we are not successfully implementing our strategy unless our asset portfolio is sustainably developed to deliver superior long term shareholder returns.
We acknowledge that there are many views on what an appropriate response to climate change should include, but BHP Billiton’s position is clear and well-established. We accepted the science of climate change almost 20 years ago and spend considerable time understanding and assessing the risks and opportunities for our business. We report each year on these risks and opportunities in our Annual Report. Responding to climate change requires us to understand the risks and opportunities it poses for our operations and markets, focus on reducing emissions (mitigation), address the physical impacts of climate change (adaptation) and engage in the development of an effective policy response.
Managing our portfolio
Our approach to corporate planning and portfolio management ensures climate change risks are identified, assessed and appropriately addressed through investment and divestment decisions. We have been incorporating a carbon price into our investment decision-making for over a decade, and we have been focussing our growth capital expenditure on lower carbon options within our diversified portfolio.
Portfolio diversification is something we actively manage. We believe it brings great strength and resilience to BHP Billiton’s asset base and long term value. As an example, the copper intensity of wind based power is significantly higher than that of coal fired power generation, creating potential upside in the demand for one of our key commodities as renewables are deployed.
We work with a broad range of scenarios to assess and stress-test our portfolio on a multi-commodity basis, including the impacts of a range of responses to climate change. Our models suggest that BHP Billiton’s overall asset valuation is not at material risk due to the diversified nature of our portfolio and the relatively low contribution from our thermal coal assets.
Reducing our emissions and addressing physical impacts
We first outlined our plans to reduce our greenhouse gas (GHG) emissions in 1996. Our most recent target is to ensure that our FY2017 GHG emissions remain below our FY2006 baseline while we continue to grow our business. This has led to the use of gas as a transition fuel in our new power plant in the Pilbara, Western Australia, and another planned power plant to service our Escondida copper mine in Chile. All our operations where emissions exceed or are anticipated to exceed 50,000 tonnes of CO2-e per annum are required to implement and maintain an Energy and GHG Management Plan. We invested over US$430 million in emissions reduction and energy efficiency projects across our operations globally between FY2007 and FY2012 and achieved a 16 per cent reduction in the GHG intensity of our production over that same period, compared with our target of 6 per cent.
Since 1996 we have reported our performance every year through our independently verified Sustainability Reports. We participate as a founding signatory in the Carbon Disclosure Project, a not-for-profit organisation that provides a global approach for companies to transparently report data and disclose approaches to climate risk management.
Potential physical impacts of climate change on our operations may include changes in precipitation patterns, increased storm intensities and higher average temperatures, which may adversely affect the productivity and financial performance of our operations. As we look to the future, we anticipate climate change will place further pressure on natural resources as a result of increasing temperatures and more frequent extreme weather events, such as drought and floods, which in turn will have implications for biodiversity. We test the resilience of our operations under a range of scenarios.
Engaging in policy development
Climate change cannot be considered in isolation. The world needs more energy, primarily affordable, low carbon energy, if we are to sustain and enhance living standards globally, particularly in the developing world. There are different views on how this can be achieved and there is no global consensus about the way forward. Governments around the world will adopt different policies on GHG emissions reductions to suit their particular circumstances.
We believe that an effective policy response should be long-term, broad-based and use a portfolio of complementary measures, including an effective carbon price, support for energy efficiency improvements and low emissions technological innovation.
We actively engage with our industry associations and seek to ensure that our views are discussed, debated and where possible reflected in their positions. We also engage with policy makers on climate change policies in the key regions where we operate, including Australia, US, South Africa and Chile. We are looking at ways that we can better share knowledge across our industry and with policy makers to contribute to more sustainable technical, economic and policy solutions.