Rio Tinto will spend US$1bn on reducing emissions

RIO Tinto has announced that it will spend US$1bn over the next five years to reduce its carbon footprint as part of plans to get to net zero by 2050.

The US$1bn will be invested in emissions reduction projects, R&D, and enhancing climate change resilience. As part of an ambition to reach net zero emissions by 2050, the company has also said that it plans to reduce emissions by 15% – which equates to 4.8m t CO₂e – by 2030 compared to 2018 levels. It is also aiming to reduce the carbon intensity of its operations by 30% for the same time period. This will mean that the company will need carbon-neutral growth up to 2030.

Julian Kettle, Vice Chairman of Metals and Mining at Wood Mackenzie, said: "The announcement by Rio Tinto regarding its plans to decarbonise is a small but significant step in the right direction. However, changes need to be far bolder at a corporate, government and societal level. Setting Rio Tinto’s US$1bn in context, this represents just 16% of the dividend it distributed in 2019 or just under 5% of its reported EBITDA of US$21.2bn for the same year.”

Rio’s climate report, published the same day as the financing announcement, outlines four areas where the company can work to meet its target. It will produce materials that play a part in a low-carbon future, reduce the carbon footprint of operations, reduce the carbon footprint across the value chain, and enhance climate resilience. The report says this strategy is consistent with the Paris Agreement goals.

The report describes how Rio will provide the metals and minerals needed in the transition to a low-carbon economy, and gives examples of the role that its products can play, such as electric vehicles needing more copper than conventional ones, and energy-efficient building materials requiring borates.

One of the ways that Rio will reduce the emissions of its operations is by deploying more renewable power projects. Currently, 76% of its operations are powered by renewable energy, but its iron ore business in Pilbarra, Australia, uses natural gas to power the mines and processing plants. One of Rio’s planned renewable projects is a US$100m solar plant at the Koodaideri mine in Pilbara. It is also attempting to reduce emissions from aluminium production, which releases emissions during the smelting process due to the degradation of a carbon anode. In 2018, the company announced that it was developing carbon-free aluminium smelting technology which has now been piloted successfully.

To reduce its carbon footprint across the value chain, Rio plans to work with partners to explore solutions to the climate crisis. This includes initiatives such as a partnership to develop solutions to decarbonise steel production, which was announced last year. It will also engage with governments on climate policy.

The company is assessing risks to its operations as a result of increasing number and intensity of extreme weather events due to the climate crisis. This includes implementing structural integrity programmes and upgrading certain sites. It also describes a case study of the Oyu Tolgoi copper – an arid region in Mongolia being impacted by increasing desertification – and how it has implemented measures to recycle and conserve water.

Jean-Sébastien Jacques, Chief Executive of Rio Tinto, said: “Climate change is a global challenge and will require action across nations, across industries and by society at large. New technologies, partnerships and effective government policies will be key in achieving this goal but today there is no clear pathway for the world to get to net zero emissions by 2050.

“The ambition is clear but the pathway is not and the challenge for the world, and for the resources industry, is to continue the focus on poverty reduction and wealth creation, while delivering climate action. This will require complex trade-offs, which means we all need to face up to some challenging decisions and have an honest conversation.

“For Rio Tinto, it is about setting a long-term ambition and establishing stretching, but achievable targets, like we have done for 2030 and 2050. We are fully committed to meeting that challenge and being part of the solution”.

No targets on scope 3 emissions

Rio has refused to set a target to reduce scope 3 emissions, which are those produced by its customers. In its report, it noted that the production and shipping of 270m t of iron ore in 2019 resulted in 3.2m t of emissions, compared to 373m t generated by customers processing the iron ore into steel. The steel industry is responsible for around 7–9% of global CO₂ emissions, according to the World Steel Association.

“We will not set targets for our customers,” said Jacques, according to The Financial Times. “It does not make sense for us. But we are happy to work with them.” Jacques also said that rival companies still produce fossil fuels, whereas Rio is no longer mining for coal, which makes scope 3 emissions harder to implement.

Rio has been criticised by activist investors who say that it hasn’t gone far enough with its climate goals. Friends of the Earth affiliate Market Forces has lodged a shareholder resolution to demand that Rio sets short-, medium-, and long-term targets for its own emissions and those of its customers. The resolution also points out that Rio is lagging behind peers that are addressing scope 3 emissions. The resolution will be discussed at the annual shareholder meeting in May.

BHP announced a US$400m climate programme last year, which includes addressing scope 3 emissions, and also has a 2050 net zero target. Glencore has said that it expects its scope 3 emissions to fall by 30% by 2035, which includes through the depletion of coal reserves. It is expected to set a long-term emissions target later this year.

According to The Financial Times, Julien Vincent, Executive Director of Market Forces, said: “Rio Tinto had set expectations that we would see Paris-aligned targets to reduce their operational emissions this year, but what they announced falls well short of anything that could be considered consistent. The company doesn’t seem to have even considered the question of how much its emissions need to fall to be consistent with the Paris climate goals.”