By Rhiannon Hoyle
Rio Tinto PLC accelerated plans to shrink its carbon footprint and said it intends to spend more on projects to mine commodities needed for a global energy transition.
With investor and public pressure mounting for resources companies to respond to climate change, the world's second biggest miner by market value on Wednesday more than tripled a 2030 emissions reduction target and said it will lift annual capital spending with a focus on increasing its output of materials needed for a lower-carbon and more electrified economy.
"We do see the world changing fast right now," Chief Executive Jakob Stausholm told reporters.
"Climate change has not been addressed and we believe it will be addressed. The world is much more aligned than ever before on that topic," he said.
Several major economies, including the U.K., the U.S. and the EU, have recently updated their plans to pivot from fossil fuels. In a recent U.N. address, Chinese President Xi Jinping reiterated his commitments that China, the world's largest consumer and a significant producer of many commodities, will cap its own carbon emissions before 2030 and achieve carbon neutrality before 2060.
Companies that produce metals and energy commodities have been progressively introducing--and raising--carbon goals, as they face calls from investors and activists to respond to ESG, or environmental, social and governance, concerns.
Miners face other risks if they refuse to act, from pushback from authorities and communities on new projects, to consumer brands that could stop buying commodities that come from heavily polluting sources.
Rio Tinto said it would pull forward an earlier target for a 15% cut in its so-called scope 1 and 2 carbon emissions to 2025 from 2030, when compared with 2018 levels. Scope 1 and 2 emissions include those produced by its mining and metals operations, as well as from the generation of purchased energy at those sites.
The company will now target a 50% cut by 2030, and said it expects to directly invest roughly $7.5 billion between 2022 and 2030 to achieve that aim.
"Today we are basically starting an internal race towards decarbonizing our own business while at the same time grabbing the opportunities that the energy transition represents," said Mr. Stausholm.
Rio Tinto, which today relies on iron ore for the bulk of its profits, said it will double growth capital to about $3 billion a year from 2023, seeking to capitalize on what it expects to be rising demand for some commodities used in electric vehicles and renewable energy infrastructure.
Miners have increasingly been touting their role in the shift to a low-carbon economy by producing metals, such as copper, for wind turbines and electric cars.
Electric vehicles are estimated to use roughly four times as much copper as petrol-fueled cars. Wind and solar farms also typically use several times more copper, which has the highest conductivity of any non-precious metal, than coal plants.
Rio Tinto is working on several copper projects, and also said in July that it had approved funding for a project in Serbia to mine lithium, which is used in batteries.
Rio Tinto's total capital expenditure will likely increase to between $9 billion and $10 billion a year in 2023 and 2024, the company said. It also raised its estimate for capital spending in 2022 to $8 billion from $7.5 billion previously, and left its 2021 projection unchanged at roughly $7.5 billion.
"We are making a number of meaningful steps towards a growth agenda," said Mr. Stausholm.
Mr. Stausholm earlier this year told The Wall Street Journal he thought Rio Tinto had become too cautious, after mining companies earlier overpaid for deals and projects during a China-led commodity boom that left them vulnerable to asset write-downs when commodity prices fell. Miners have in recent years focused on making existing operations more efficient and paying out a large portion of their profits to shareholders.
"This series of moves provides a substantial, and in our view, much needed shift in strategy, which we think is a positive over the long term," RBC Capital Markets analyst Kaan Peker said in a note.
Write to Rhiannon Hoyle at firstname.lastname@example.org
(END) Dow Jones Newswires