BHP Gets a B

Ater BHP CEO Marius Kloppers demanded action on devloping a proper climate change policy for Australia last week, the Carbon Disclosure Project (CDP) released this year’s Global 500 and S&P 500 results on Monday 20 September during New York Climate Week. BHP received a “B” for its disclosure of greenhouse gas emissions and climate change strategies.

The CDP is the only global climate change reporting system, attempting to harmonise climate change data from organisations around the world and develop international carbon reporting standards. The CDP acts on behalf of 534 institutional investors, holding $64 trillion in assets under management and some 60 purchasing organisations such as Cadbury, PepsiCo and Walmart. 2,500 organizations in some 60 countries around the world now measure and disclose their greenhouse gas emissions and climate change strategies through CDP, in order that they can set reduction targets and make performance improvements. Participation is voluntary.

Data is made available for use by a wide audience including institutional investors, corporations, policymakers and their advisors, public sector organizations, government bodies, academics and the public. Based on the data provided by BHP, the CDP gives BHP a Carbon Performance Score of “B” and a Carbon Disclosure Score of 71. In comparison, Rio Tinto scored a “B” and  89 respectively. Other mining companies include Xstrata (B/75), Newcrest Mining (C/57) and Newmont Mining (C/87) .

The Carbon Disclosure Score assesses the quality and completeness of companies’ reporting and carbon management.  The score is based on, e.g., the integration of climate change risks and opportunities into overall their corporate strategy, formal accountability for oversight and management, verification of emissions data through an external third party, and the implementation of energy or emissions and/or reduction initiatives.

The Carbon Disclosure Score is designed to aid investors making informed decisions about the carbon management of participating companies. The qualifying threshold to receive a performance score was a minimum disclosure score of 50. Carbon performance scores are based solely on information disclosed in a company’s CDP response and should be considered in conjunction with other carbon metrics to provide a more comprehensive picture of a company’s performance on mitigating climate change.

Top of the class are Siemens (A/98), Deutsche Post (A/97), BASF (A/96), and Bayer (A/95).

Australia Trails World in Climate Policy

Australia is trailing the rest of the world in climate change policy and risks becoming uncompetitive, says climate change economist Cameron Hepburn, senior research fellow at the Smith School of Enterprise and the Environment, at the University of Oxford.

Dr Cameron Hepburn, at the Mining under the Microscope Conference in Wollongong, NSW, said that “There is no risk of Australia taking a leadership position,” and that Australia ”is so far behind the post we risk coming last.”

The G20 emerging nations, especially China and India, had already taken strong steps.

“China says it will introduce an emissions trading scheme in the next 5 years… They are very serious about it. India has just in July imposed a carbon tax.”

India has introduced a clean energy tax on coal, at the rate of Rs. 50 (~USD 1) per tonne, which will apply to both domestically produced and imported coal. This money will go into a National Clean Energy Fund that will be used for funding research, innovative projects in clean energy technologies, and environmental remedial programmes.  The expected earnings from this tax is around USD 500 million for the financial year 2010-11.

Japan prepares the implementation of an emissions trading scheme in 2013, and South Korea is also considering an emissions trading scheme. And that is in addition to the trading schemes in place in the EU and the US.

Dr Hepburn said Australia needed a price on carbon if it was to remain in step with global trends and stay competitive.

“If we don’t price carbon soon we will be forced to do it at some point, in a way we don’t like very much. If you do things rapidly, they tend to cost more. The mining industry has an interest in moderate and stable carbon prices.”

That’s exactly what BHP CEO Kloppers said - or meant to say in a raoundabout way.  But while Australian business is doing everything to delay that very necessary process, companies overseas have or will develop a perceptible advantage for a possible worldwide greenhouse gas market, and significant experience with regard to the operation of

Business & Society Special Issue: A New Future for Business?

In the recently published post by Management INK (the management blog of international publisher SAGE), we discuss our paper “Beyond Adaptation: Resilience for Business in Light of Climate Change  and Weather Extremes” which is part of a Business & Society Special Issue on “A New Future for Business?”.  The paper argues that new conceptual and practical approaches are needed to consider the effects of climate change and a greater occurrence of weather extremes in corporate strategy and decision-making. The paper is available for download via the Business & Society website.

Australian Business Response to Call for Price on Carbon

After Mr Kloppers called for a price on carbon last Tuesday, BHP’s former CEO Michael Chaney, too,  said yesterday that a price on carbon was necessary to address the issue of climate change. However, while Mr Kloppers’ initial comments seem to have revived the debate about a price on carbon and recived positive feedback from the Australian Petroleum Production & Exploration Association, his statements have come under fire by a number of Australian business groups.

Australian Industry Group’s Chief Executive Heather Ridout said

In revisiting the climate change debate, a number of issues need to be at the forefront. These include:

• The reasons for and the actual implications of climate change policy need to be much more widely understood than is currently the case. We are talking about a major change for the whole community. So far it has been overly politicised and we need to shift the focus to being more about the reform and how it can be done.
• Australia is not alone in grappling with how to respond to climate change. Responses will vary around the world until a common position can be developed. Australia needs to develop its approach and if we are smart about it we will build our response around the idea of least cost abatement. 
• Whatever our approach, the international competitiveness of Australian industry – big and small – needs to be at the forefront of that debate. The arrangements negotiated under the CPRS were a start but there is plenty of room for improvement.

A carbon tax is one option that needs to be looked at. However, we need to acknowledge that all of the competitiveness issues that are associated with an emissions trading regime are also present with a carbon tax. From that point of view there is no real advantage in using a tax Vs a trading regime.

When the CPRS plan failed late last year the issues facing industry did not go away.

Firstly in the absence of a national plan, we face underinvestment in electricity generation, a rise in costs as capital equipment ages and the threat of electricity shortages a few years down the track.

Secondly, Australian industry is currently facing a death by a thousand cuts. Everyone seems to have their pet idea and most are incredibly costly for business and for households.

• The proposals developed by the Victorian government over the past month or so are a case in point. These include a potentially intrusive licensing regime for industrial projects.
• Many of the proposals in the ‘feel-good’ renewable energy space also fall into this high cost category and business is facing large increases in energy prices because of the Commonwealth Government’s renewable energy target.
• With very few exceptions these proposals do not include arrangements to ensure that competitiveness is not eroded.

 

Mr Greg Evans, director of economic and industry policyat the Australian Chamber for Commerce and Industry, comments

We unambiguously represent the views of energy users rather than producers. Our members are concerned about the impact of either of a carbon tax or an ETS.

They believe action should be aimed at energy efficiency rather than imposing extra taxes 

We certainly don’t believe Australia should pre-empt any international action.

 

And here the statement from the National Farmers Federation

Does the NFF support a price on carbon?

• Not if this means putting Australian farmers ability to compete on international markets (or, indeed, against imports on the domestic market) in jeopardy.
• A price on carbon in reality means higher costs for energy and energy-dependent inputs such as fuel, electricity and fertilizer – inputs which Australian farmers and their supply chains are highly dependent on. It is this perspective that causes the most concern for the NFF in relation to having a price on carbon.
• However, we do realize that having a price on carbon may also provide opportunities for farmers, particularly through the potential for bio-sequestration through vegetation and soils and other abatement activities on-farm. Unfortunately, due to faults in the international carbon accounting rules, these opportunities are limited and would not outweigh any of the costs emerging from the emissions side of the ledger.
• The question, therefore, must be more about the design of mechanisms to impose a price on carbon, rather than the price on carbon itself. However, at this stage, the NFF has not seen a mechanism that does not pose risks for farmers ability to compete internationally – including the CPRS.

But BHP Billiton wants a carbon price and they are exposed to the international market?

• The major difference here is that the minerals sector in the currently market environment is very much a ‘price maker’, not a ‘price taker’ like the agriculture sector.

The Australian Conservation Foundation today released survey results showing that rural Australians are more likely to support large-scale clean energy than their city counterparts

• Absolutely. Rural Australian’s are very positive about the opportunities of developing clean, renewable energy and believe that there are real opportunities in the bush in this area, particularly considering that many of the renewable energy sources are based there. For example, rural Australia has significant stock of biomass, solar, wind and geothermal reserves that would feed into the development of utility scale renewable energy in regional Australia.
• The NFF believes this is one area that the Government should be steadfast in pursuing.
• However, this is very different to calling for a price on carbon.

Australian farmers. An important part of Australia’s future.

 

A wait-and-see-approach accross the board? One thing should be clear: Despite the current uncertainty over the way forward, climate change, climate change policy, and any related national legislation remain vital matters for businesses and industries. The link between economic decisions that businesses must consider, and the considerations of the impacts of climate change, remains strong. In the recent October issue of the Australian Institute of Management’s publication “Management Today“, we speak about how businesses can use mandatory emissions reporting as a means to comprehensively assess the potential liability in a low-carbon economy – and even to identify means to reduce that liability. The main problem appears to be a “business-as-usual” approach to addressing climate change, a reluctance to doing things differently and insisting on (out-dated) approaches to doing business. It is these path dependencies which will be difficult to overcome if Australia does not act soon and with conviction.

BHP CEO Marius Kloppers Outlines Carbon Price Concerns

BHP Billiton chief executive Marius Kloppers

 

Yesterday, September 15, BHP CEO Marius Kloppers spoke to the Australian British Chamber of Commerce in Sydney, and outlined the global mining giants’ concerns with measures likely to be taken in Australia to cut carbon emissions and address climate change. 

For corresponding news items, please see the Sydney Morning Herald, The Australian, and Bloomberg.  In a nutshell, Mr Kloppers is pro-carbon-pricing. However, he emphasises the importance of a price on carbon to be “revenue neutral”. What does revenue neutral mean? Evil tongues might say it is simply another expression for “axe the mining tax”. Or “let’s try to get a carbon price in place before the Greens get control in the Senate next year”. 

Mr Kloppers also said that “a single encompassing trading system and the academically elegant economics surrounding it is not the solution” – nobody said that (I would like to use this opportunity for some shameless self-promotion and link to our recent AICD publication). No one policy by it self is sufficient to address the issue. As outlines in a previous post, there is a number of policies instruments available: regulations and standards, taxes and charges, emissions trading, voluntary agreements, subsidies and incentives, and R&D. It seems as if BHP’s CEO favours a tax over an emissions trading scheme. There are, however, a number of issues which need to be addressed when implementing a carbon tax. 

When implementing an emissions tax, the government must decide on the level at which the tax should be set, particularly in the case of pre-existing taxes, or other potential distortions such subsidies to certain industries, fuels, or technologies. How will the tax be used? Should the tax income go directly into Penny Wong’s coffers? Should it be used to offset other taxes (i.e., the double-dividend effect)? Maybe it should be transferred across national boundaries to an international body and allocated to those most adversely impacted by either the costs of emission reduction or damage from climate change (i.e., adaptation and mitigation funding)? Or should it be invested in specific abatement projects, such as renewable energy?  And if the tax is intended to achieve a given overall emissions limit, the tax rate will need to be increased to offset the impact of inflation, new technological progress, and new sources – as in, for example, the 12 new coal power plants (to which, by the way, the new climate policies promised during Labor’s election campaign will not apply). 

 

  

 

Australian Coal Industry Safe…

…at least accoring to Australia’s new Minister for Climate Change, Greg Combet. In an interview with The Australian, he today vowed to fight for and protect the Australian coal industry – AND implementing a price on carbon. Of course, all based on trust and commonsense. But what do trust and commonsense mean in an Australian climate change policy context, where coal, and the resource sector in general, are an important backbone of Australia’s economy? How can the pursuit of renewable energy, energy efficiency, and a price on carbon be combined with a vow to fight for coal?

However, there already appears to be some confusion within the government regarding the treatment and classification of coal. While PM Gillard announced during her election campaign that under Labor, new coal power plants would have to be equipped with carbon capture and storage technologies (read: clean coal technologies), Mr Combet made a commitment not to use the word “dirty” when speaking about coal. So, what should the debate be then about? Here is an excerpt from the interview:

“People will use whatever language they want. But you won’t hear me using it. You do not take the back of the axe to the fundamentals of the Australian economy. We just work through it very carefully with reforms such as energy efficiency improvements, where you can reduce emissions quite significantly. With investment in renewable energy sources, which will help us reduce emissions significantly and work towards introducing a carbon price. The key thing about a carbon price, from my point of view, from the outset is that it created an incentive to reduce emissions . . . but do it sensibly. And we did do it with the CPRS (carbon pollution reduction scheme), with all the negotiations we had with industry. We’ve got to keep it on it a commonsense frame.”

Working carefully through reforms, delivering efficiency improvements – where possible, and working towards a price on carbon. It seems that, once again, the purpose of putting a price on carbon is not quite clear to everyone. The purpose of emissions trading or a carbon tax is to make the fossil fuel industry unattractive, and, yes, to put them out of business eventually. Artificially prolonging the shift to a low-carbon economy will only hurt Australia, as other countries and regions, such as China, Japan, and the EU, are moving towards, or have already implemented corresponding policies. So what then is commonsense? Maybe this:

 

Deepwater Horizon’s Blowout Preventer Pulled From Gulf, FBI Present | Huffington Post

ON THE GULF OF MEXICO — A crane hoisted a key piece of oil spill evidence to the surface of the Gulf of Mexico on Saturday, giving investigators their first chance to personally scrutinize the blowout preventer, the massive piece of equipment that failed to stop the gusher four months ago.

By Huffington Post’s Harry R. Weber.

Minding the Sustainability GAAP | World Resources Institute

WRI’s Janet Ranganathan on how limited transparency around corporate sustainability risks can lead to investments that are bad for the environment, and investors’ bottom lines.

A very good summary of some of the more contemporary issues around sustainability reporting. There are a number of different (voluntary) reporting schemes out there… which ones ought an organisation to use, how do reporting requirements differ, what are the consequences of inaccurate reporting? The  International Integrated Reporting Committee initiative to “create a globally accepted framework for accounting for sustainability” seems like a good start.

While sustainability reporting is important, it should not distract from the fact that there also exist mandatory requirements such as pollutant inventories, energy and emissions reporting, emissions trading, and so on. It is crucial that any voluntary and mandatory reporting be combined into one comprehensive, meaningful statement about the reporting organisations’ intention, position on climate change and sustainability, and be of sufficient integrity. Saving some random rainforest frog seems more than insufficient.