Rio CEO Says World Must Sacrifice Growth to Meet Climate Goals
Rio Tinto Rejects Setting Targets for Customers’ Pollution
(Bloomberg) --
Rio Tinto Group’s chief executive officer said the world must be prepared to sacrifice growth to achieve climate goals as the natural resources industry comes under increasing pressure to curb emissions.
“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,” Jean-Sebastien Jacques told investors on Wednesday. “This will require complex trade-offs.”
Jacques said consumers, governments and shareholders must all be willing to make sacrifices -- in the form of lower consumption, growth and returns -- if climate targets are to be met. The mining industry, a key pillar of growth in many developing countries, is facing investor demands to cut the scale of emissions created by its products, from thermal coal to iron ore.
“There are no easy answers,” Jacques said. “There is no clear pathway right now for the world to get to net zero emissions by 2050. The ambition is clear but the pathway is not.”
Earlier, Rio reiterated its position on refusing to set any targets for reducing the carbon emissions generated by its customers, taking a firm stance on an issue that’s quickly dividing the natural resources industry.
Instead, the world’s No. 2 mining company put the focus on its own operations. In a presentation on Wednesday accompanying its full-year earnings, Rio said its own business will be carbon neutral by 2050 and promised to spend $1 billion over the next five years to make that happen.
The announcement draws a sharp line between Rio and other extraction companies amid a debate about who bears responsibility for Scope 3 emissions -- the pollution created when customers burn or process a company’s raw materials. The producer can take a different approach on addressing Scope 3 emissions because it sold off coal mines and doesn’t have oil assets, according to Jacques.
“People are totally mixing drinks, because Scope 3 for a company like Shell and for a company like Rio Tinto is completely different,” Jacques said. “I’m not selling coal, I’m not selling carbon, and I’m not selling oil and gas -- and therefore we’re not starting from the same point.”
Still, Rio has huge iron ore operations that create the vital ingredient for steelmaking, a highly polluting industry that involves adding coking coal to make carbon steel. It was a surge in iron ore prices last year that helped Rio post an 18% increase in underlying earnings to the highest since 2011.
Rio argues any targets on its Scope 3 emissions would be impossible to meet because it has no control over how steelmakers use iron ore.
It’s a stance that sets Rio at odds with its biggest rival, BHP Group, which has urged the industry to take responsibility. Both BHP and Vale SA have promised to introduce targets on Scope 3 emissions. In the oil industry, BP Plc has vowed to cut almost all its customer emissions by 2050.
Yet, no one is providing much detail about their plans and the deadlines are usually decades away.
While Rio’s refusal to set targets may draw the ire of some investors who have been pushing for concrete plans, the company may find support elsewhere. Last week, the CEO of Glencore Plc, the biggest coal shipper, criticized BP’s announcement.
“2050 is a long way to go, and we don’t want to come out with wishy-washy ideas,” said Glencore boss Ivan Glasenberg. Instead, Glencore said its Scope 3 emissions would fall as coal mines are depleted.
| What are the different kinds of emissions? |
|---|
|
Rio has previously said it will work with China’s top steel producer, China Baowu Steel Group, to find methods to lower the sector’s emissions and improve its environmental performance.
On Wednesday, the company also said that any future growth projects between now and 2030 would also have to be carbon neutral. It plans to expand the electrification of equipment and use more renewable energy.
To contact the reporters on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net;David Stringer in Melbourne at dstringer3@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Dylan Griffiths, Nicholas Larkin
©2020 Bloomberg L.P.