A shareholder resolution highlighting the chasm between BHP’s stated climate policy and the pro-coal advocacy of the Minerals Council of Australia (MCA) has pushed the company to commit to reconsidering its membership of the group.
The outcome of the move could dramatically reshape the parameters of energy policy in Australia and beyond.
The resolution, which was submitted to BHP by the Australasian Centre for Corporate Responsibility (ACCR) late last week, calls on the company to undertake a detailed review of the advocacy by mining industry lobby groups the company belongs to.
In particular, the resolution identifies some of the key issues to be included in the review, such as the lobby groups’ opposition to carbon pricing, the push to axe the clean energy target proposed in the Australian Government-commissioned Finkel Review and support for new coal plants even if they require public subsidies.
ACCR argues all these positions are contrary to the company’s stated climate policy and positions.
BHP last updated their climate policy in 2014 in order to head off the bid by ex-coal industry lobbyist-turned climate advocate, Ian Dunlop, to be elected as a director of the company.
However, its climate policy left huge loopholes in place.
However, in early December 2015 the company went further and welcomed the Paris Agreement, which aims to keep the global temperature increase to between 1.5 °C and 2 °C.
The agreement, the company proclaimed, represented a “strong step toward a low-carbon, sustainable future” and noted that “delaying action on climate change will have significant economic and human costs.”
While the 175 parties to the Paris Agreement have submitted their emissions reduction plans, the estimates are – according to comments by the coal consultancy Wood MacKenzie – that, at best, these would keep the global temperature increase to between a 2.7°C and 3.3°C increase. (It is worth noting that these comments are featured on the World Coal Association’s website.)
According to Climate Analytics, a non-profit climate analyst group, Australia’s Paris Agreement obligations mean the current fleet of aging coal plants need to be phased out by 2030 and achieve zero emissions from the power sector by 2040.
ACCR argue that, where a “pattern of manifest inconsistency is demonstrated” between 2012 to the present by industry groups BHP belongs to, then the company’s membership of these groups should be “terminated.”
Nowhere to hide
BHP is in an indefensible position.
It is a member of the most vociferous pro-coal and anti-renewables lobby groups in Australia: the Minerals Council of Australia, the Queensland Resources Council and the New South Wales Minerals Council. BHP executives also sit on the boards of several of the lobby groups, including the MCA and the QRC.
(The MCA took over the Victorian Chamber of Mines, making it the primary lobbyist for Australia’s brown coal power generators with companies such as EnergyAustralia and Engie on its membership rolls.)
All these groups have promoted the construction of a raft of new coal plants in Australia and beyond which would render the Paris Agreement targets impossible to achieve.
The MCA has pushed for new black coal plants in NSW and Queensland and even a brown coal plant in Victoria. It has also spearheaded the attack on renewable energy. The QRC has – with support from the MCA – championed public subsidies for Adani’s proposed Carmichael coal mine.
However, BHP cannot claim that it has been the innocent victim of one or more of its lobby groups independently running amok.
At the height of the hysteria after the December 2016 blackout in South Australia, BHP Billiton misleadingly stoked the claim that the company’s Olympic uranium and copper plant had been the victim of the blackout.
The company even complained that “it cannot fall to renewables alone” to cut greenhouse emissions. BHP’s CEO, Andrew Mackenzie, got in on the media circus too, intoning that such blackouts were “crippling business” and a “threat to jobs.”
Credulous journalists lapped it up, all the time fingering renewables as the culprit. The only problem was that there was – as RenewEconomy reported at the time – no blackout affecting the company, only load reduction under the agreed terms of the company’s power supply agreement.
BHP’s involvement in mining coal – while far less than a few years ago – is still significant: it produces about 30 million tonnes of thermal coal a year, almost two-thirds of which come from its vast Mr Arthur mine in the NSW Hunter Valley. While some of the mine’s production is supplied to AGL’s nearby Bayswater Power Station, the rest is exported.
BHP also has a one-third stake in the Cerrejon mine in Colombia, which produces thermal coal for the export market. (BHP also produces – via joint ventures in Queensland – almost 22 million tonnes a year of metallurgical coal.)
BHP’s duck and weave escape plan
While the inconsistency between BHP’s climate policy and the lobbying of its advocacy groups case is stark, the company’s PR plan is to defeat the challenge on a procedural issue while conceding just a little ground on the core concern.
Before shareholders can vote on the ACCCR resolution on BHP’s lobbying, they first have to approve a resolution to amend the Australian listed company’s constitution to allow shareholder resolutions.
While shareholders in the UK section of the dual-listed company already have the power to move resolutions, BHP is opposing its extension to shareholders in the Australian part of the company.
If the company wins on the first resolution, it hopes it doesn’t have to debate the second. It is likely to be a forlorn hope.
Undoubtedly the issue will be raised by shareholders in question time at one or both of the company’s Annual General Meeting’s in London on October 19 or in Melbourne on November 17.
In a move to defuse potential support for the resolution, BHP management has stated that, by the end of the year, they will publish “a list of the material differences between the positions we hold on climate and energy policy, and the advocacy positions on climate and energy policy taken by industry associations to which BHP belongs.”
It also published a defence of its involvement in industry lobby groups insisting its membership “does not mean, however, that we will always agree with every position or approach that every industry association to which we belong adopts on every issue.”
What, if any, of the MCA’s advocacy positions BHP actually disagrees with, is left unstated.
The Australian government’s love-in with coal and hostility to renewables – in no small part stoked by the MCA and its state-based affiliates – grows more intense as the main power generators shift decisively towards embracing renewables.
While the power generation industry and the coal miners were once collaborators in opposing serious climate action, that coalition has now collapsed in large part due to the viability of renewables.
While the MCA is increasingly isolated from other industry groups on climate policy it is also diverging from the broader interests of its largest paying members, BHP and Rio Tinto, which now have far smaller coal interests than they did even just a few years ago.
While tensions between the MCA’s strident pro-coal advocacy and BHP have been bubbling away in the background for some time, the coal lobby group has been experiencing strains on other fronts as well.
Last year AGL Energy, the largest coal power generator in Australia, ditched its membership of the MCA. Australia’s publicly-funded science agency, CSIRO, is also under pressure over its membership of the MCA.
Will BHP quit running with the hare and hunting with the hounds?
BHP now faces an acute dilemma: does it keep trying to both run with the hare and hunt with the hounds? Or does it opt to support the intent of the Paris Agreement and publicly dump the MCA?
The odds are that the company will stick with the MCA and perhaps publicly signal some of the issues it disagrees with the lobby group over. However, the halfway-house option is unlikely to resolve the concern of shareholders and the broader public expectation of policy consistency.
Whichever way it goes, BHP’s troubles with the lobby groups its funds will signal to the public, the media and politicians that Australia’s largest mining industry lobby groups are increasingly divided on climate and energy policy.
Indeed, there is every prospect the controversy over BHP’s double standards with its Australian lobby groups may well expand to engulf the coal industry’s global lobby group, the World Coal Association (WCA). The WCA is a London-based lobby group which is pushing for the construction of new coal plants throughout Asia.
Just last week the WCA was championing the axing of the Finkel Review’s proposed clean energy target. It is also promoting new unabated coal plants for Australia. BHP is also a member of the WCA with one of its senior executives on the Executive Committee.
The WCA is now left as the last promoter for expanding coal power globally even though renewables have become the cleanest and cheapest source of new generation, often even before social costs of coal pollution are accounted for.
Bob Burton is the Editor of CoalWire, a weekly bulletin on global coal industry developments. (You can sign up for it here.)