Extract from The Guardian
Fiona Wild, the executive overseeing the company’s ambitious climate plan, outlines three things that must happen to slash emissions.
‘A company with a large footprint also has a significant opportunity to reduce it’: Fiona Wild, BHP’s vice-president sustainability and climate change.
Last modified on Sun 16 May 2021 06.02 AEST
Fiona Wild knows people don’t believe BHP is serious about taking action on climate change – she gets the letters, some of them in all capitals, accusing the global miner of not doing enough.
Wild is the executive at BHP charged with overseeing the company’s ambitious plan, announced in September, to slash emissions by 30% over the next decade and achieve net zero by 2050.
Over coffee at BHP’s Melbourne headquarters, Wild brims with enthusiasm for the mammoth task ahead. But she understands why Guardian readers – she’s one herself – might not think a company that has made a fortune from fossil fuels is serious when it says it wants to lead the charge towards a decarbonised economy.
“I completely understand why people are sceptical, because you could look at a company like BHP and say, there is a company with a large emissions footprint in terms of its operational emissions,” she says.
“The reason I work at BHP is, a company with a large footprint also has a significant opportunity to reduce it. But to make it real, you have to be able to translate what we commit to, what we say we’re meant to do, into action.”
There’s plenty to be done.
Most of the company’s profit comes from the extraordinary boom in the price of the iron ore it digs up in Western Australia’s Pilbara. But BHP – for the moment at least – still owns coalmines, including the Mt Arthur mine in New South Wales that until last year fed fuel directly into nearby power stations.
Digging up iron ore doesn’t cause an enormous amount of global heating but the process of turning it into steel uses yet more coal – including some from mines BHP plans to hang on to – and pumps vast quantities, up to 320m tonnes a year, of carbon into the atmosphere.
BHP reckons it stands to make more money if the world meets the Paris target of limiting heating to 1.5C than if it fails. Windmills aren’t made of wood, they’re made of steel, which is refined from iron ore. BHP also owns mines producing copper, needed to electrify cars, and nickel, crucial to making batteries.
I’m a climate scientist by background … and getting to 1.5C is going to be a real challenge
The realisation that cash and climate action can align is not a conclusion BHP reached by itself – investor pressure has steadily ramped up over the past few years.
A key turning point came in July 2019, when BHP’s then chief executive, Andrew Mackenzie, said global heating was “indisputable” and fighting it would require “the biggest global mobilisation since World War II”.
“It’s going to be very, very, very hard,” Wild says.
“I’m a climate scientist by background … and getting to 1.5C is going to be a real challenge. Sometimes there isn’t an understanding in the market just how hard it is. Hoping we’re going to get there, crossing our fingers, is not enough.”
Decarbonising the steel industry
From the outside, BHP looks like it underwent a fairly sudden conversion to the cause, under significant pressure from investors impatient to see BHP get out of areas like coal that have little future if runaway global heating is to be avoided.
However, Wild insists BHP “first started thinking about how to address greenhouse gas emissions in the 1990s” – as did other fossil fuel companies concerned about their exposure to climate risk.
“We’ve had a whole series of both absolute emissions reduction targets and emissions intensity targets that we set from the 90s, all the way through to where we are today,” she says.
Wild argues three things must now happen at BHP.
“We have to reduce our emissions, we have to adapt to the impacts of climate change, and we have to be completely transparent and engage with the market, policymakers and others in what we’re doing and why we’re doing it and deliver what we say we’re going to do.”
Reducing emissions from transport is relatively easy. BHP is using gas-powered ships instead of those driven by bunker fuel – the incredibly dirty oil that powers most bulk freighters. That significantly cuts carbon.
But shipping produces just 4m tonnes a year, a tiny fraction of the 320m tonnes produced by BHP’s steel mill customers, most of whom are in China.
Decarbonising the steel industry is the main game, and Wild knows it.
Many in the industry have pinned their hopes of making carbon-neutral steel on green hydrogen, which can be made cheaply and at industrial scale from water so long as solar and wind power is abundant and inexpensive.
But BHP is keeping its mines that produce what’s known as metallurgical or coking coal, higher-quality coal that’s burned in steelmaking furnaces.
Wild denies BHP’s efforts to decarbonise the steel industry are backloaded into the later years of its plan.
“The steel sector is really hard to decarbonise,” she says. “Power generation, for example, is relatively easy to abate because there are alternatives available today for you to generate power without emissions, so you can switch from coal-fired power to renewables, and in some places, it’s even cheaper.”
One of the main difficulties is the long life of steelmaking furnaces, which can operate for decades. It can be hard to convince a steelmaker that a mill that works just fine needs to be replaced, at huge cost to them, just so that BHP can reduce carbon emissions.
“The steel sector is a bit different because the technology currently used to make steel cannot easily be replaced at a reasonable cost,” Wild says.
“Does that mean you wait until technology magically becomes available in 20 years’ time? No. It means you have to start thinking ‘Well, what can I do today’.”
Hydrogen in steelmaking
BHP’s own work on replacing coal with hydrogen in steelmaking is not particularly encouraging.
“Our understanding at the moment is that hydrogen has a really important role to play, but it’s unlikely to displace current technologies in every location quickly,” Wild says.
“There are areas where you’re likely to see more uptake of hydrogen, for example in Europe, [but] it’s probably going to be a little slow in other regions, and also the cost of hydrogen is still pretty high in some locations.”
Investors have also pressured BHP over its membership of industry associations that haven’t shared the company’s enthusiasm for action on global heating.
In Australia, investor angst has concentrated on BHP’s membership of the Minerals Council of Australia and an associated body called Coal21, which is now known as Low Emission Technology Australia.
BHP reviewed its membership of the minerals council in 2019 and decided to stay, although it did suspend its membership of the Queensland Resources Council in October after it campaigned against the Greens in the state election.
Coal21 was set up to research technology to reduce emissions, in particular carbon capture and storage. CCS is divisive – some critics say it is impractical and a “dangerous distraction” while other scientists say it will be vital.
Despite tipping more than $500m into research on CCS, Coal21 has yet to successfully commercialise the technology.
Coal21 is probably best known, however, for its connection to a 2017 ad campaign extolling the virtues of coal as “an amazing thing” – a campaign now scrubbed from the internet with only parodies easily found.
Coal21 planned another ad blitz in 2019 to “invoke national pride” in coal but abandoned the idea after BHP supported a change to its constitution banning such activities.
“That organisation has perhaps made some missteps in terms of its remit,” Wild says. “So if the mandate of the organisation is to focus on investments in low emissions technology then that’s what the organisation should be doing.”
She doesn’t agree CCS will never be real.
“I wouldn’t describe it as fantasy technology,” she says. “The interesting thing about carbon capture and storage is it is really broadly applicable. So you can apply carbon capture and storage technology to power generation, you can apply it to oil and gas production, you can apply it to industrial processes – it’s actually very versatile technology.”
We’ve been pretty clear that we don’t think energy coal has a role in our portfolio
For the moment at least, BHP is directly involved in digging up and selling thermal coal, including from Mt Arthur. That it wants to sell its thermal coal assets is perhaps no surprise, given the grim outlook for the industry.
But, if it does succeed in getting rid of them, they’ll still continue to create carbon emissions in someone else’s hands. So why not close them down?
Wild says shuttering assets can be complicated because often BHP holds licences to produce minerals that don’t allow mines to be closed.
“But I understand where people are saying well, you should look at the managed decline of those fossil fuels, and that’s certainly something we think of among all the other levers that we pull,” she says. “We’ve been pretty clear that we don’t think energy coal has a role in our portfolio.”
‘It gives me great hope’
Wild says Joe Biden’s election win has “reenergised the debate” over global heating, both in the US and internationally.
“It gives me great hope, and it gives me great optimism that we are going to be able to avoid the worst impacts of climate change,” she says.
She is more cagey when asked whether BHP would like to see stronger action on climate from the Morrison government – although she does repeat the company’s long-standing support for a price on carbon.
Absolutely the right thing to do and the thing that adds the most shareholder value
“The important thing for companies like BHP is to show what can be done,” she says. “What I hope is to be able to encourage others including the Australian government to understand what possibilities there are, and encourage further action where we can. In Australia, we will get on and we will reduce our emissions, regardless.”
In 2019, Wild told a conference she received “shouty letters” from people asking why BHP was spending shareholders’ money fighting global heating.
Now the message has changed.
“The balance of the shouting has been moving much more towards the importance of action on climate change,” she says.
“Perhaps surprisingly, a world that decarbonises really, really rapidly is actually the world in which BHP does best, so this is the kind of perfect alignment between what is absolutely the right thing to do and the thing that adds the most shareholder value.”
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