The Role of Extractive Industries in a Carbon Constrained World - PowerPoint PPT Presentation

The Role of Extractive Industries in a Carbon Constrained World June 2017

Outline S Climate change & the role of fossil fuels S Government response S Fossil fuel company response S Meeting the Paris Agreement S Implications for resource rich developing countries

Consequences of global warming Source: IPCC, 2014: Summary for Policymakers, In: Climate Change 2014, Mitigation of Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change . Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.

Composition of GHG emissions Source: Ecofys & ASN Bank 2013, Aavailable at https://www.ecofys.com/files/files/asn-ecofys-2013-world-ghg-emissions-flow-chart-2010.pdf

CO2 contained in coal, oil & gas varies Average CO2 emissions per kWh of electricity produced in OECD countries, 2009-2013 Source: IEA 2015, CO2 emissions from fuel combustion: Highlights, Second edition Source: Carnegie Endowment, available at http://oci.carnegieendowment.org/#supply-chain

Outline S Climate change & the role of fossil fuels S Government response S Fossil fuel company response S Meeting the Paris Agreement S Implications for resource rich developing countries

The Paris Agreement Why 2 ºC? Source: UNFCCC, JRC, World Bank, IEA, WMO, Green Climate Fund, US EPA, World Wide Views on Climate and Energy. December 2015

(Intended) Nationally Determined Contributions a step in the right direction (I)NDC country assessments Global-mean temperatures with and without pledges Source: Climate Action Tracker, Accessible at www.climateactiontracker.org

Government policy responses S Subsidies S Carbon pricing S Countries around the world have adopted more than 1,200 S Incentives for fuel switching climate change laws, up from S Tighter emission controls about 60 two decades ago (Grantham Research Institute on Climate Change and the Environment and the Sabin Center on Climate Change Law at the S Government co-investment in Columbia Law School). R&D

Fossil fuel and renewable energy subsidies Fossil fuel receive the greatest amount of subsidies but the gaps is decreasing. Source: Financial Times 2017, The Big Green Bang: how renewable energy became unstoppable, Accessible at https://www.ft.com/content/44ed7e90-3960-11e7-ac89-b01cc67cfeec IMF (2015): Scrapping subsidies = savings of $3 trillon/year = more than CIT collection effort Source: Financial Times 2016, A world map of subsidies for renewable energy and fossil fuels Accessible at http://blogs.ft.com/the-world/files/2016/07/GR262Xcarbon_tax_modern_energy_SR_CHART.png

Prices Carbon Pricing Initiatives US$140/ tCO 2 e 131 Sweden carbon tax … … 86 Switzerland carbon tax 25% US$80/ tCO 2 e 20% 65 Finland carbon tax (liquid fuels) China US$60/ 60 Finland carbon tax (other fossil fuels) tCO 2 e 15% 52 Norway carbon tax (upper) 42 Mexico 38 36 35 US$40/ 31 10% tCO 2 e Japan Share of global GHG emissions 23 26 Denmark carbon tax 5% EU 25 France carbon tax 10 14 15 18 20 24 UK carbon price floor Number of 9 23 BC carbon tax 22 Ireland carbon tax implemented initiatives US$20/ tCO 2 e 19 Slovenia carbon tax Alberta SGER, Korea ETS, 15 Saitama ETS, Tokyo CaT 7 8 13 4 5 6 2 0% 10 9 8 7 1991 1997 2001 2007 2011 2017 1990 1992 1993 1994 1995 1996 1998 1999 2000 2002 2003 2004 2005 2006 2008 2009 2010 2012 2013 2014 2015 2016 6 5 4 3 2 1 US$0/ <1 tCO 2 e Source: World Bank 2016, State and Trends of Carbon Pricing, Accessible at https://openknowledge.worldbank.org/bitstream/handle/10986/25160/9781464810015.pdf?sequence=7&isAllowed=y � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �

Incentives for fuel switching Norwegian Electric Vehicle owner Survey 2015: Purchase incentives and market shares for Batter Electric Vehicles (BEVs) and Rank the electric car incentives and Plug-in Hybrid Electric Vehicles (PHEVs), 2015 ● ● ● 4. Low electricity 8. Free charging ● cost 9. Access to bus 5. Low annual road lanes PHEVs BEVs BEV market share PHEV market share tax 10. Free ferries 6. Charging network 7. Free parking IEA 2016, Global EV outlook 2016: Beyond one million electric cars, Source: Norwegian EV Association 2016, Accessible at https://www.iea.org/publications/freepublications/publication/Global_EV_Outlook_2016.pdf The Norwegian EV owner survey 2015 ● ● ● � ● � � � � � � � � � � � � � � �

Emission controls Exhibit 1.� Exhibit 1.� Planned emission standards in select regions CO 2 emissions of selected OEMs and brands 2012 in Europe (NEDC) g CO 2 /km normalized to New European Driving Cycle in g CO 2 /km 148 144 2 ▪ 141 139 137 134 134 2 132 1 132 CHINA 200 129 129 190 122 3 122 121 120 JAP Average 2012 180 EUR 180 167 ▪ -26% -32% -28% -28% -28% -35% -27% -29% -29% -23% -24% -23% US -28% -32% -27% 160 152 EU-target 140 103 101 101 97 95 94 94 95 94 94 93 93 93 93 130 2020 88 ▪ 121 120 125 117 105 100 93 TOTAL 95 1 0 2010 2015 2020 2025 Major OEMs need to cut fleet emissions by ~30% by 2020 to meet EU emissions target Source: Amsterdam Roundtable Foundation and McKinsey & Company 2014, Evolution: Electric vehicles in Europe: Gearing up for a new phase?

Zero routine flaring Check CCSI’s associated gas case studies and framework Source: Carnegie Endowment for International Peace, Oil Climate Index, oci.carnegieendowment.org/.

Outline S Climate change & the role of fossil fuels S Government response S Fossil fuel company response S Meeting the Paris Agreement S Implications for resource rich developing countries

Why FF companies should care? S Moral & ethical reasons S Attract top talent for future workforce S Secure social license to operate S Secure financing & investor support S Play a prominent role in energy supply in the future Source: McKinsey & Company 2015, How companies can adapt to climate change, Accessible at https://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/how-companies-can-adapt-to-climate-change

Reduce carbon footprint of operations & eliminate flaring BHP GHG Emission Intensity Statoil CO2 intensity & flaring intensity Greenhouse gas emissions intensity (tonnes of CO 2 -e per tonne of copper equivalent production) 8 South32 adjustment 6 n 4 y s 2 . 0 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Source: Statoil 2017, 2016 Sustainability Report Source: BHPBilliton 2016, Climate Change: Portfolio Analysis Report

Power operations with renewables Renewable energy investment in the mining industry (base case, US$m), world markets: 2013—22 1,343 1,047 729 688 532 445 379 312 262 174 51 44 38 39 37 North America Europe Asia-Pacific Latin America Middle East and Africa 2013 2018e 2022e Source: Ernst & Young 2014, Renewables in Mining: Futuristic or realistic? Source: Rio Tinto In Queensland, Weipa bauxite mine: Rio Tinto in a 15 year PPA with First Solar co. with help from ARENA, the Australian Renewable Energy Agency. Equipped the mine with a 18-000 solar panel PV farm to complement S diesel base load in times of peak Capacity : 1.7 MW and potential to expand to 5 MW S Saving : 600 000 liters of fuel annually – 1,600 t/ year of GHG emissions S = 700 cars Shared use : covers 20% of electricity demand of township on the Western S Cape York Peninsula.

Use of carbon price Company Country Carbon Price Exxaro Resources Ltd South Africa $8.17 AngloGold Ashanti South Africa $7.70 Essar Oil India $15.00 Total France $27.92 Provides an incentive to 1. Eni SpA Italy $40.00 reallocate resources Royal Dutch Shell Netherlands $40.00 toward low-carbon Statoil ASA Norway $ 50–64 activities; BP UK $40.00 Used to determine the 2. Anglo American UK $ 3.27–8.17 business case for R&D BHP Billiton $24.00 UK investments Exxon Mobil Corporation USA $80.00 Assigning a financial 3. ConocoPhillips USA $ 6–38 value to both emitted and HudBay Minerals Inc. Canada $ 15.32–38.29 avoided carbon emissions Teck Resources Limited Canada $ 11.49–30.64 helps reveal hidden risks Source: CDP 2016, Embedding a carbon price into business strategy and opportunities