Australia's top emitters told to draw net zero road map

Climate Action 100+, a group of the world's largest institutional investors, has written to the CEOs of Australia's top 12 emitters demanding they develop and publish plans to reduce their carbon emissions to net zero.

The letter went to the bosses of BHP, AGL, Rio Tinto, Woodside, Woolworths, Qantas and six other Australian companies. In total 161 companies around the world, which together account for up to 80 per cent of global greenhouse gas emissions, received the letter.

The letter calls on the companies to provide "good faith" plans to decarbonise every aspect of their operations by 2050. Crucially, it demands companies address their scope three emissions, which cover emissions from a company's entire supply chain.

That means Australian fossil fuel producers will not be able to get away with simply reducing their direct emissions and emissions from electricity usage (scopes one and two), but must present a plan to reduce to zero the emissions produced when a customer burns their coal, oil or gas.

While the Minerals Council of Australia has said its members are committed to reducing emissions to net zero, scope three is excluded from that pledge. Scope three is by far the biggest source of emissions for the coal, iron ore and gas sectors.

Iron ore's reliance on coking coal in the steelmaking process is the main stumbling block to reducing its scope three emissions. A plausible route is the replacement of coking coal with green hydrogen.

However, coal and gas will rely on carbon capture and storage, an expensive technology that has yet to be developed on scale, and that at this stage is unlikely to be cheaper than simply replacing coal and gas power with renewables backed up by emission-free firming technology such as batteries or pumped hydro.

Climate Action 100+ will measure a company's performance using the new "Net-Zero Company Benchmark", to be released next year, which clarifies investor expectations and provides a more standardised approach to emissions reporting.

The Investor Group on Climate Change, the Australian body closely linked to Climate Action 100+, could not reveal the total emissions of the 13 Australian companies Climate Action 100 monitors because scope three emissions reporting was not sophisticated or reliable enough to give a clear figure.

However, it estimated those 13 companies' scopes one and two emissions alone were just more than 420 megatonnes of CO2-equivalent in 2018-19, or about 80 per cent of Australia's overall annual emissions.

Scope three emissions are increasingly becoming a point of concern for big emitters. Last week BHP announced measures to reduce its scope three emissions, including initiatives to "support industry to develop technologies and pathways capable of 30 per cent emissions intensity reduction with widespread adoption expected post-2030".

It also said it would reduce emissions by transporting its products using LNG-fuelled ships. However, the pathway to scope 3 net zero by 2050 remained unclear.

Rio Tinto, which last week lost its CEO in the fallout from the demolition of a sacred Aboriginal site in Western Australia, has also come under pressure to set scope 3 targets, but so far has not done so.

Climate Action 100+ includes local giants AustralianSuper, AMP Capital, BT, First State Super, Unisuper and others, as well as some of the biggest institutional investors in the world including BlackRock, CalPERS, Aberdeen Standard Investment and PIMCO. More than 500 investors managing around $US47 trillion are signatories to the initiative.

The 13 Australian companies monitored by Climate Action 100+ are: BHP, Rio Tinto, BlueScope, Boral, Adelaide Brighton, Origin, AGL, Santos, Woodside, Woolworths, Qantas, South32 and Wesfarmers. Wesfarmers did not receive a letter because its inclusion is under review following its sale of coal assets and food retailer Coles.