Whitehaven Coal says it will survive lower-carbon future

WHITEHAVEN Coal, Australia’s largest independent coal producer, expects to survive a range of lower-carbon policy scenarios, according to findings in its inaugural holistic sustainability report.

Sustainability Report 2019 represents the culmination of Whitehaven’s efforts to develop and incorporate a response to the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures (TCFD) within its broader sustainability reporting framework.

According to The Australian, Whitehaven is the first coal company to make disclosures under the FSB’s global climate framework.

Whitehaven “stress-tested” the resilience of its portfolio against the IEA’s most commonly referenced scenarios. Through modelling, the company concluded that it exhibits long-term resilience and value generation in a range of lower-carbon scenarios, including under a 2°C scenario. Furthermore, Whitehaven expects the Australian coal sector to remain robust in the future.

Whitehaven undertook detailed climate risk and scenario planning using a framework provided by the FSB’s TFCD, allowing it to identify climate-related risks. Risks were divided into those related to the transition to a lower-carbon economy and physical risks related to the physical impacts of climate change. Climate-related opportunities were also identified.

Transition risks identified included policy and regulation changes. As mitigations the company says that it monitors global and domestic policy and regulation, and it engages with domestic policy makers to advocate for positive policy outcomes. Another identified risk was increased energy and fuel costs due to potential regulatory pricing mechanisms and/or trading systems that could increase fuel and electricity costs for mining operations. The company said as a mitigation it identifies and implements energy efficient initiatives.

Whitehaven identified two physical risks. The first was an increase in severe weather which could impact operations resulting in increased costs and supply disruption. As a mitigation the company says it designs infrastructure to better withstand extreme weather conditions and monitors contractual arrangements to ensure that appropriate mitigation measures are in place.

Additionally, the company identified that changes in precipitation patterns could disrupt water supply. It mitigates these risks by water balancing at its site, to monitor system water usage, and it investigates opportunities to minimise water use and secure alternate, reliable sources.

The company says that as the world becomes more “carbon constrained”, climate change could increase demand for high-quality coal on the basis that it produces less emissions than dirtier forms of coal.

According to the IEA’s World Energy Outlook (WEO) 2018, in a New Policies Scenario (NPS) overall coal consumption would flatten at around 5400m t of coal equivalent to 2040, with power generation usage declining slightly and industrial coal use showing moderate growth. The NPS represents the current ambitions of policy makers around the world. In a Sustainable Development Scenario (SDS), both power generation and industrial use decrease, with a significant reduction in coal usage in power generation.

WEO 2018 says that unabated coal-fired power generation is increasingly incompatible with the required emissions reductions, and its future is highly dependent on the feasibility of CCUS. It adds that progress in CCUS deployment and investment remains “well-behind” what is needed in the SDS.

Whitehaven points to its investment in low emissions technology through Australia’s COAL21 initiative, which supports minimising emissions from coal-fired power generation and developing carbon capture and storage (CCUS). Between 2006 and 2016 it invested US$300m to develop low emissions technologies, and in 2017 it received new commitments amounting to US$255m to fund CCUS development in Australia to 2027.

Fatih Birol, Executive Director of the IEA, has said: “Without CCUS as part of the solution, reaching our international climate goals is practically impossible.”

The FSB is an international body which monitors and makes recommendations about the global financial system. It promotes international financial stability. The FSB’s TFCD develops voluntary, consistent climate-related financial risk disclosures for companies to use to provide information to stakeholders. Its work and recommendations aim to help companies understand what financial markets want from disclosures in order to measure and respond to climate change risks, and to encourage companies to align their disclosures with investor needs.