Rio Tinto鈥檚 new carbon emissions reduction targets have triggered heated criticism from some investors and environmental groups, with a group led by a Friends of the Earth鈥檚 subsidiary tabling a shareholder motion to improve what it calls 鈥渨eak鈥� climate goals.
The world鈥檚 second largest miner last week vowed to spend $1 billion over the next five years to reduce its carbon footprint and have 鈥渘et zero鈥� greenhouse gas emissions by 2050.
Rio also said its total Scope 1 and Scope 2 emissions (indirect聽emissions聽from the generation of purchased energy consumed by a company, such as electricity) would be 15% lower by 2030 than 2018 levels.
鈥淩io Tinto is essentially telling its shareholders it is aware of a massive financial liability sitting on its books, but isn鈥檛 planning to manage that risk down鈥�
Market Forces鈥� executive director, Julien Vincent.
The no emissions goal would be easier to achieve for Rio than other global miners, such as rival BHP because it does not mine coal or oil.
The company, however, did not set a target to reduce so-called 鈥淪cope 3鈥� emissions 鈥� those produced when customers burn or process a company鈥檚 raw materials.
Market Forces, a subsidiary of activist investor Friends of the Earth,聽said the company鈥檚 announcement is a 鈥渟imply a reflection of business-as-usual鈥� energy cost savings and efficiency measures.
鈥淩io Tinto is essentially telling its shareholders it is aware of a massive financial liability sitting on its books, but isn鈥檛 planning to manage that risk down,鈥� executive director Julien Vincent .
He noted that Rio鈥檚 absolute emissions would have to decline 30% in the next decade to hit the 鈥渨ell below鈥� 2掳C global pre-industrial levels outlined in the 2015 Paris Agreement on climate change.
UBS analyst Glyn Lawcock said the group could almost instantly achieve the 2030 target if it sold or closed its coal-fired alumina refineries and aluminum smelters in Australia.
鈥淲e couldn鈥檛 help but notice that the closure of Pacific Aluminium alone would reduce emissions by (about) 25%,鈥濃�� he said in a note.
鈥淢aybe this is the elegant solution to Rio鈥檚 desire to reduce carbon dioxide as well as lifting margins within the aluminium business unit,鈥� Lawcock said.
For Julian Kettle, Wood Mackenzie鈥檚 vice chairman of metals and mining, Rio鈥檚 plans to decarbonize its globe-spanning operations are a 鈥渟mall but significant鈥� step in the right direction.
鈥淪etting Rio Tinto鈥檚 $1bn in context, this represents just 16% of the dividend it distributed in 2019 or just under 5% of its reported EBITDA of $21.2bn for the same year,鈥� Kettle said.
鈥淧ut another way, on a 100% basis, Rio Tinto reported iron ore production of 327Mt in 2019. A $1bn dollar green investment, while laudable, could be funded by a 30c/tonne rise in the iron ore price. The industry needs to do much more,鈥� he noted.
Rio鈥檚 bulk of earnings come from iron ore, its main commodity and a key ingredient for steelmaking. The highly polluting industry process involves adding coking coal to make carbon steel and is responsible for up to 9% of global greenhouse emissions.