Sat | Sep 19, 2020

Commodities giant Glencore to cap coal output

Published:Friday | February 22, 2019 | 12:00 AM

Commodities giant Glencore said Wednesday it will cap how much coal it mines amid shareholder pressure for it to help reduce global emissions of greenhouse gases.

The move is a sharp reversal for a company that has long championed the extraction and burning of fossil fuels, and which recently announced the purchase of further stakes in two Australian coal mines even as rivals pulled out amid climate concerns.

Glencore said the decision was taken after consulting with investors, known as the Climate Action 100+ initiative, who have clubbed together to lobby for corporate action against climate change.

“As one of the world’s largest diversified mining companies, we have a key role in enabling transition to a low carbon economy,” the Switzerland-based company said.

Burning coal for heat and electricity is a major source of carbon dioxide emissions, which contribute to man-made global warming.

Glencore said it will prioritise future investments to increase production of commodities “essential to the energy and mobility transition and to limit our coal production capacity broadly to current levels”.

The company projects its global coal output this year will be 145 million metric tons.

Noting “the increasing risks posed by climate change”, Glencore explicitly referenced the 2015 Paris climate accord, which set a target of keeping global warming well below 2ºCelsius (3.6ºFarenheit) by the end of the century, compared with pre-industrial levels.

But it also cited a United Nations goal of ensuring millions of people in the developing world get access to affordable fuel, which coal-mining companies have frequently said justifies their remaining in operation.

Australian Resources Minister Matt Canavan said the announcement by Glencore – Australia’s largest coal miner which, in recent years, bought mines from Rio Tinto – was aimed at dissuading rivals from expanding their own coal operations.

“Call me cynical, but I think their announcement overnight appears to be much more to do with the self-interest of Glencore then the planetary interest of trying to save the climate,” Canavan told reporters.

“They obviously want to maintain their dominant position, particularly in the seaborne thermal coal market,” Canavan added.

Canavan described the future of the Australian coal industry as “very bright”.

Coal overtook iron ore last year as Australia’s most valuable export, bringing in US$47 billion.

“In our region, hundreds of coal-fired power stations are being built all the time ... and by 2030, half the world’s middle class will be in this region, and I think it’s going to overcome any European antipathy towards coal,” Canavan said.

Carbon Tracker, a think tank that analyses fossil fuel investments, cautioned patience in apprising the impact of Glencore’s announcement and of energy giant BP’s recent pledge to release more information on its climate impact.

“The devil will be in the detail, and the extent to which these developments will actually drive changes in business models is yet to be seen,” said Andrew Grant, a senior analyst with the London-based group said.