We Produce the Materials Essential for a Low-Carbon Future
Aluminium for electric vehicles, copper for wind turbines, iron ore for critical infrastructure and minerals for rechargeable batteries, such as lithium.
Each of the commodities we produce has a role to play in the transition to a low-carbon future.
Overall, our portfolio is expected to perform more strongly in scenarios with proactive climate action.
We have considered climate change in our strategic thinking and investment decisions for over two decades. We continually test our portfolio for further threats and opportunities from climate change. The pace and shape of global decarbonisation remains highly uncertain, which is why we consider a range of scenarios capturing potential transition pathways. We do this through the use of a comprehensive and robust scenario framework – structured around three global forces: geopolitics, society and technology – and fully integrated into our corporate strategy.
Climate change presents a range of risks as well as opportunities for our portfolio. These risks are expected to increase over time, with higher probabilities of more extreme events in scenarios such as Realpolitik 2.0, in which climate action is delayed. The direct carbon footprint of our operations and the potential introduction of climate policies is another transition risk for our portfolio. Overall, even the most carbon-intensive assets in our portfolio tend to compare favourably against the rest of the industry, with two exceptions: Richards Bay Minerals, which relies on a predominantly coal-based power grid in South Africa, and our coal-based Boyne and Tomago aluminium smelters on the east coast of Australia. These assets account for less than 5% of the Group’s revenues.
We believe our portfolio is well positioned across both the value chain and operational transition risk dimensions. In fact, over 95% of our Group revenues are from assets with favourable operational carbon intensities and outside high Scope 3 risks categories. Approximately 22% of our revenues also currently sit in the lowest carbon segment of our framework – this is where we direct over 90% of our growth capital today.
The favourable positions for most of our assets on both industry cash cost and carbon intensity curves strengthen our businesses’ truly tier 1 status, not just today but also in a low-carbon future.
Our analysis shows that our portfolio is resilient to climate change both in absolute as well as relative terms, compared to other companies in our sector. Beyond resilience, the optionality of our assets and products offer a wide range of opportunities across our scenarios. Overall, our portfolio is expected to perform more strongly in scenarios with proactive climate action.
We Are Working to Reduce the Carbon Footprint of our Operations
Our ambition is to reach net zero emissions across our
operations by 2050.
Our 2030 targets are to reduce our carbon intensity by a further 30% and our absolute emissions by a further 15%.
Since 2018, we have reduced Scope 1 and 2 emissions by 1.1Mt CO2e, or 3%, which is on track with our 2030 target for absolute emissions. However, in 2020, our emissions remained at the same level as in 2019 at 31.5Mt CO2e. We expect progress on emissions to accelerate later in our 2030 target period as we develop and implement our mitigation projects, studies and R&D.
At the Group level, the two most important decarbonisation levers between now and 2030 are:
- To continue switching the electricity we generate and purchase to renewables
- To optimise processing plants in our alumina and minerals businesses and start trialling new technologies to reduce emissions from the use of coal and natural gas for process heat
We also have several initiatives under way to develop low-carbon solutions that will reduce and displace the use of diesel in our rail and mobile fleets, but at this stage we do not expect material emission reductions from these before 2030.
Each of our product groups face different medium-term opportunities and challenges. These have shaped detailed five-year decarbonisation roadmaps to 2024 with the following priorities:
Identify low-emission alternatives to the use of coal and gas in calcination and digestion at our refineries, including pilots at Yarwun in Gladstone, Australia; continue work to develop a repowering solution at our Pacific Aluminium smelters; advance renewables at bauxite mines; complete the first industrial pilot and continue to advance ELYSIS™ technology.
- Copper & Diamonds
Secure cost-effective renewable energy certificates and/or renewable power options to extend Kennecott’s current low-carbon footprint beyond 2025; progress studies on low-emission copper processing technologies; develop carbon-neutral growth plans at Winu, our copper-gold mineralisation project in Western Australia; advance alternative fuels truck trials.
- Energy & Minerals
Progress investment in renewables in Africa at both Richards Bay Minerals and QIT Madagascar Minerals (QMM); evaluate renewables options at Boron in the US; develop low-emission process heat technology including the trialling of plasma torches at our iron ore business in Canada; develop carbon-neutral growth plans as part of the feasibility study for our Jadar lithium project in Serbia.
- Iron Ore
Execute stage one of the Pilbara renewables pathway and advance individual stage two studies and projects including for new wind power options; in parallel explore commercial partner options to accelerate the energy transition across the Pilbara system; continue to develop low-emission alternatives for mobile fuel use in haul, load and rail.
We Are Partnering to Reduce the Carbon Footprint Across our Value Chains
We have defined a series of measurable and impactful Scope 3 emissions reduction goals to guide our partnership approach.
We Are Enhancing our Resilience to Physical Climate Risk
We take and manage risk responsibly to run our business safely, efficiently and in a way that creates value for our customers, shareholders, employees, partners and the communities where we work.
We continually strive to improve how we identify and manage risks across our business.
Effective risk management is necessary to manage both threats and opportunities to our strategy and operations. Our risk management process helps us identify, evaluate, plan, communicate, and manage material business risks that have the potential to impact our business objectives.
In 2020, we strengthened our control framework by developing a set of control management principles aim to drive consistency and quality in the definition of our Group control requirements to guide implementation.
For example, we have a series of controls in place to manage the threat of extreme weather at our iron ore operations in the Pilbara, Western Australia such as emergency control plans, cyclone tie-down procedures, flood management plans, communications plans and coordination with local, regional and state agencies. In 2020, we continued our work to enhance asset resilience at these operations. We started site construction works for the project to strengthen the Cape Lambert A jetty and wharf. These works also include replacing the berthing and mooring dolphins, longitudinal strengthening of the jetty and protective coating remediation. We expect to complete this in early 2022.
We also completed the feasibility study for the Dampier Resilience Project and granted funding approval in December 2020. The project will be executed over the next three years, upgrading the 220kV transmission line between the Yurralyi Maya power station and Port Dampier, and developing a new bulk supply substation at Kangaroo Hill and 33kV distribution connections to Dampier and Horizon Power.
In many important applications, there are no low-carbon alternatives to steel, aluminium and copper; furthermore, these materials are essential to enable the low-carbon transition. The challenge is to produce them sustainably – not only with lower emissions, but also in a way that respects communities. I am personally committed to ensuring that Rio Tinto plays its part.
In 2021, we will continue to execute our climate strategy, working in partnership with other businesses, technology developers, investors, consumers and civil society. We also recognise the essential role of governments around the world to create the legal and regulatory certainty and incentives necessary for investment and innovation. We believe the best solutions will come from partnerships and global collaboration.