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Anglo-Australian miner Rio Tinto said it would miss its 2025 decarbonisation target owing to “underlying emissions growth as our production plans evolve”, as it reported it lowest first-half earnings in three years.
Rio had originally targeted a 15 per cent reduction in direct and indirect emissions (including emissions from the power it consumes) by 2025, and a 50 per cent reducing by 2030, relative to a 2018 baseline. Those targets were adopted in 2020.
However, the company said on Wednesday it would not be able to meet the 2025 target without using carbon offsets, due to evolving production plans and “factors including engineering and construction timelines”.
The missed climate target — one of the first admitted by a major mining company — highlights the difficulties faced by heavy industries in trying to cut emissions.
Earlier this year, chief executive Jakob Stausholm said he “regretted” setting emissions targets for 2025 and 2030, adding that reaching them would require some “hard choices”.
Rio announced a $1.2bn pre-tax impairment charge on Wednesday, including writing off the entire value of its Yarwun alumina refinery in Gladstone, Australia, due to the country’s new carbon credit legislation and the difficulty of decarbonising the facility.
Rio’s first-half earnings were lower than the previous year — and the lowest in three years — due to softer commodity prices. Net profit was $5.1bn for the period, compared with $8.9bn the previous year.
“We saw lower prices, in general, for our commodities, in line with slowing global demand, with the Chinese recovery predominantly led by the service sector,” the company said in its earnings statement.
It announced a dividend of $2.9bn, a cut of 34 per cent compared with the same period last year, representing 50 per cent of its underlying earnings per share.
Most of Rio’s emissions come from the processing of metals, such as aluminium smelting, which requires very high temperatures and is often powered by coal. Mining accounts for just 20 per cent of the company’s emissions. About half come from its Australian aluminium refineries, on which it announced the $1.2bn pre-tax impairment charge.
“The problem is that in the short term, you add cost to a business where you are not really making money,” said Stausholm in an earnings call on Wednesday, referring to the impairment charges. Capital will be required to decarbonise the aluminium facilities, which are also facing increasing payments for their carbon emissions under Australia’s new carbon credit scheme, he added.
So far, the company has managed to reduce emissions by 7 per cent, relative to its 2018 baseline, largely by installing large-scale renewable power alongside its operations.
Rio expects to spend $7.5bn on decarbonisation efforts between 2022 and 2030, but said its capital expenditure on decarbonisation projects during the first half of this year was just $95mn, lower than it anticipated.
The company also said that reaching its 2030 emissions target would depend on whether it could reduce emissions from its aluminium refineries and smelters in Australia.
