Mining giant Glencore recently published a new climate action plan which appears to send it on a new journey toward net-zero emissions. But dig deeper and corporate restructuring plans, off the books methane emissions and greenwashing statements all cast doubt on Glencore’s decarbonisation promises.
Glencore describes itself as: “one of the world’s largest global diversified natural resource companies and a major producer and marketer of more than 60 commodities that advance everyday life”.
Last year Glencore faced an investor revolt led by investment behemoth and shareholder Blackrock. But in a sign of the times this revolt was not over lack of corporate profits, instead it was focused on Glencore’ climate plan. Blackrock and others rejected the company’s climate plan deeming it not ambitious enough in terms of how fast it would phase down its coal operations. In the face of this pressure Glencore responded with a new three-year action plan which makes detailed promises around how the firm will decarbonise and reach net-zero carbon emissions by 2050.
For now, the plan appeared to have settled the concerns of investors and shareholders. But look a little closer and there appear to be some issues with the plan.
Glencore’s Climate Transition Action Plan 2024 – 26 outlines its efforts to decarbonise. For 2026 the target is 15 % reduction in emissions and there is an eye-catching promise to fully decarbonise by 2050. Including its scope three carbon emissions.
Scope three emissions are those emissions not directly caused by the companies but materialise further down, or up the supply chain. In other words, scope three emissions represent all the coal produced by Glencore and shipped around the world to be burned (for steel production and energy). Note: Scope 1 emissions are those directly produced by the company, scope 2 are emissions made indirectly – like purchasing gas for heating.
Those scope 3 emissions represent around 90 percent of all Glencore’s carbon emissions (and around 1.3 percent of total global emissions). In its climate plan Glencore has indicated that it will wind down its coal business, stating they are not progressing new greenfield coal mines but will continue to progress “certain brownfield sites”.
Elk Valley and Corporate Restructuring
However, the shareholder revolt coincided with Glencore’s take-over bid of the coal mining arm of Teck Resources (called Elk Valley Resources). The plan is for Glencore to take over Elk Valley Resources’ coking (or metallurgical) coal assets in Canada. Glencore then plans to then dispose of its current thermal coal assets. If this restructure is approved Glencore would then have two arms: a coal company, and a metals focused company. Crucially, each arm of the company would have its own climate plan.
What is Glencore plan?
From Glencore’s point of view this plan will allow it to focus on producing coking coal for steel making which is less carbon intensive than thermal coal. The idea is that this will reduce Glencore’s emissions by moving away from dirtier thermal coal, but still allow it to remain a player in the more “climate friendly” coking side.
Glencore can then present demonstrate decarbonisation on its larger metals company, while shifting its carbon emissions to its coal arm, which on paper will also be decarbonising as production is focused on lower emissions coking coal. High coal prices have lifted Glencore’s share price in recent years giving a big clue as to why its wants to keep supplying this lucrative commodity.
Methane Emissions
However, there is evidence that coking coal is not as climate friendly as often believed. In fact, coal is a major carbon emitter before it is even burnt. Just digging coal up releases methane, a gas which is 28 times more potent at trapping heat in the atmosphere. Satellite imagery has caught that the Glencore owned Hail Creek coal mine in Queensland released more methane in 16 days than the company reported over an entire year. Figures like this throw Glencore’s climate plan into serious doubt.
Large open cut mines like Hail Creek appear to be “gassy” and more prone to emit methane than closed mines than previously thought. These emissions are not picked up by traditional corporate carbon accounting. But new satellite imagery techniques allow a more independent view of calculating carbon emissions. Glencore has declined to provide its own estimates of methane emissions from the mine and admits they cannot be stopped.
Glencore’s climate plan rather oddly describes coal as transition enabling commodity. And it is true that coking coal is required to make steel, which is needed to make wind turbines and other climate tech, but only a tiny percentage of total steel production is used for this purpose. One of steel’s biggest customers? The oil and gas industry, which needs steel to build pipeline, terminals etc.
Policy Environment
Glencore have made their climate plans dependent on a “supportive policy environment”. Of course a climate change friendly policy environment is extremely important for firms trying to decarbonise. But the plan does not elaborate on this, so it can be interpreted in many different ways: will Glencore be expecting government compensation for lost earnings as coal use winds down. Or is this an all purpose caveat which can be used as an excuse when decarbonisation doesn’t happen.
Overall Glencore’s emissions have fallen since 2019. Impressive. But again, look closely and in the last year the emissions have rising again. Most of the overall fall is due to a big drop in emissions from 2019 – 2020. What happened in 2020? A global pandemic which cut demand for all energy – coal included.
Carbon Capture
Longer term the aim is to be net-zero by 2050 but the last part (around 20 %) is assuming the use of carbon capture technology – an unproven technology at scale. Of course, technology can progress over the next 25 years but there is no certainty this will happen.
In fairness Glencore is a major supplier of critical materials like copper, cobalt and nickel which are needed for energy transition. The company has recognised the importance of these commodities in its reporting. But there appear to major holes in Glencore’s plan for reducing carbon emissions stemming from its commitment to the coal sector which suggest it will struggle to meet its net-zero targets.