Glencore pressured to withdraw from new coalmines to prove climate change commitment

Extract from The Guardian

Glencore

Australia’s largest coal producer says decision to cap production doesn’t mean it intends to drop greenfield coal projects

Lisa Cox

Thu 21 Feb 2019 16.35 AEDT Last modified on Thu 21 Feb 2019 16.54 AEDT

Environmental groups and investors are putting pressure on coal producer Glencore to align its business with the goals in the Paris climate change agreement. Photograph: Reuters

Green groups say Australia’s biggest coal producer Glencore should commit to withdrawing from new coalmining projects if it is serious about aligning its business with the goals of the Paris agreement.
The company has moved to cap its output of thermal and coking coal at current production levels of 145m tonnes a year after pressure from investors who want companies to take stronger action and factor in the financial risks of climate change.
Glencore says the decision to cap coal production and focus investment on commodities including nickel, copper and cobalt used in the renewables industry does not mean it intends to drop greenfield coal projects in Australia, such as its Wandoan coal project in Queensland’s Surat Basin.

The project has been on hold for several years for economic reasons because it would require investment for both the mine and associated new infrastructure.
In New South Wales, the company’s proposal for the expanded United Wambo Project in the Hunter Valley is being assessed by the NSW Independent Planning Commission and the forecast tonnes of that project are already contained within the 145MT cap.

“Glencore has been very clear that we closely consider market conditions before bringing on new coal projects as they need to be economically sustainable over a long period,” a company spokesman said following the announcement.

“As older mines in our portfolio come to the end of their economic life, all coal projects will be considered. This includes our Wandoan Coal Project.”
Lock the Gate, which has been campaigning for communities that would be affected by the Wandoan or United Wambo projects, said the company’s statement on Wednesday sent “a powerful signal that thermal coal is in decline globally”.
But Carmel Flint, the group’s campaign coordinator, said it may not go far enough, because deep cuts were needed to meet Paris climate targets, “and maintaining current levels of production is not sufficient to deliver on that”.

“The true test of the statement will be in whether Glencore acts immediately to withdraw from new coalmining projects it has on its books – especially the proposed Wandoan coal project on the Western Downs of Queensland and the United Wambo project in the Hunter Valley in NSW,” she said.
The Australian Conservation Foundation said the company had been “dragged” by investors to implement a cap and it should be a warning to promoters of coal in public debate, including the Morrison government.

“As a result of this decision Glencore should make an unequivocal announcement that controversial greenfield coalmine proposals in Australia that local communities have been opposing for years, such as Wandoan on prime farming country in Darling Downs, will not proceed,” ACF’s climate and energy program manager Gavan McFadzean said.
Rod Campbell, research director at the Australia Institute, said “it’s not like Glencore has suddenly gone green”.
“But I think they’re getting good publicity out of some very sensible thinking that coal production doesn’t need to increase,” he said.
“It’s only in the bizarre energy politics of Australia that this is really big news.”
Glencore’s announcement is one of a number by major companies in recent months – including BP, Shell and Maersk – about their responsibilities around climate change.
It follows work by the Climate Action 100+, an investor initiative pushing the world’s biggest emitters to reduce emissions and improve financial disclosures related to climate change.
Emma Herd, the chief executive of the Investor Group on Climate Change and a member of the Climate Action 100+ steering committee, said more companies would be making similar statements in the future.
“I can definitely say there will be more announcements in the months ahead from very big companies related to climate change,” she said.
“People tend to think of this as climate activism or investor activism but actually what it is is these are very big, very mainstream investors who want very big and mainstream companies to have a plan on climate change.
“This is some of Australia’s and the world’s biggest institutional investors and pension funds saying you have to have a plan on climate change. They’re asking because they’re trying to manage risk in their own portfolios.”
Energy research and consulting firm Wood Mackenzie said Glencore’s announcement suggested it was chasing “value over volume” because of its dominant position in the premium thermal coal market.
“In a 2C scenario, premium thermal coal demand is expected to be resilient compared to other coal types,” research director Prakash Sharma said.

“That means companies holding on to high-energy thermal coal assets stand to gain and will realise higher prices. Glencore sits comfortably in that space due to its competitive cost position.”