Climate Change Report

Over a year ago, we put the low-carbon transition at the heart of our new strategy, setting a clear pathway to deliver long-term value as well as ambitious targets to decarbonise our business.

Our purpose is to find better ways to provide the materials the world needs. Meeting the incremental demand of the energy transition, and ensuring local supplies of critical minerals globally, deepens our relevance to the world and ensures our long-term profitability. We are creating real momentum, and seeing early results gives me conviction that we have the right objectives, the right team, and the right strategy.

Our Scope 1 and 2 emissions targets of 15% reductions by 2025 and 50% by 2030 are aligned with 1.5°C – the stretch goal of the Paris Agreement – and are really challenging. In contrast to many of our peers, about 80% of our emissions are driven by processing and producing metals and minerals, which are high temperature, hard-to-abate activities. The remaining 20% are from our mining operations. The low-carbon transition is complex: developing new technologies and implementing major projects to decarbonise our business will take time.

We estimate that we will invest $7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy. So we need to be disciplined about our capital investment and make a commercial case for each mitigation project. Our experience shows that we cannot solve this simply by allocating capital. We also need to attract the right talent, deploy new technology at scale, secure approvals from regulators and partner respectfully with local communities and Indigenous peoples. In addition, higher carbon prices and other government incentives are needed to drive the production and consumption of low-carbon metals and minerals.

In 2022, our Scope 1 and 2 emissions were 30.3Mt CO₂e (31.0Mt in 2021), a reduction of 7% below our 2018 baseline. This is primarily the result of switching to renewable power at Kennecott and Escondida in prior years, as well as lower than planned production from the Kitimat and Boyne aluminium smelters in 2022. We did not advance the actual implementation of our abatement projects as fast as we would have liked last year, so our capital expenditure on decarbonisation projects was $94 million, lower than we anticipated when we set our targets. Challenges have included late delivery of equipment, resourcing constraints impacting study progress, construction and commissioning delays, and project readiness.

6+1 abatement programmes

In response, we established six abatement programmes, with dedicated people, to focus on the decarbonisation challenges that cut across our product groups: repowering our Pacific Aluminium Operations, renewables, ELYSIS^TM, alumina process heat, minerals processing and diesel transition. We are building capability and gaining a deeper understanding of our decarbonisation challenge (both constraints and opportunities), and our related operational expenditure increased to approximately $140 million in 2022. As a result, we are better placed to deliver the complex and large-scale structural changes to our energy system needed to achieve our 2030 target.

Given the long lead times for some of these projects, we established one additional programme to increase our investments in nature-based solutions projects and now expect these to make a more significant contribution to our targets. If done well, these projects can play a substantial role in addressing carbon emissions and biodiversity loss, while also providing benefits to local communities. Our people working on these “6+1” abatement programmes, and our substantial investments in technology, will drive the innovation and transformation needed to accelerate our low carbon transition and ensure the long-term resilience of our business.

Scope 3 partnerships

Our Scope 3 emissions were 584Mt CO₂e in 2022 – over 1% of the global total. These are primarily from our customers in Asia, processing our iron ore into steel and bauxite into aluminium, so our level of control is limited. The best way to tackle these emissions is to work in partnerships to develop the technologies needed to produce low-carbon metals and minerals. Last year we increased our engagement with our customers, governments, universities and others. It is encouraging that the initial testing phase of our BioIron^TM process showed great promise and demonstrated that using microwave energy and sustainable biomass as a reductant is well suited to Pilbara ores. And we are continuing to scale up the ELYSIS^TM technology – the world’s first carbon-free aluminium smelting process – towards the demonstration of even larger commercial-size cells.

In the past year, I have spent time engaging with a diverse range of stakeholders on the need to work together and address climate change with urgency. Given the structural changes we must make to our energy system, 2030 is just around the corner. Our success relies on our ability to strengthen our resilience to the physical, societal and economic effects of climate change and the energy transition, while building partnerships and capabilities that enable us to secure new opportunities.