Rio Tinto to Invest US$1 Billion to Reach Zero Emissions Goal by 2050

Mining giant Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) is set to invest US$1 billion in the next five years to reach its new climate change targets.

The company is aiming to reduce emissions intensity by 30 percent and absolute emissions by a further 15 percent from 2018 levels by 2030.

“Climate change is a global challenge and will require action across nations, across industries and by society at large,” Rio Tinto CEO Jean-Sébastien Jacques said.

Under its new targets, Rio Tinto’s overall growth between now and 2030 will be carbon neutral, the company said. The miner is hoping to achieve net zero emissions from operations by 2050.

“The ambition is clear but the pathway is not and the challenge for the world, and for the resources industry, is to continue the focus on poverty reduction and wealth creation, while delivering climate action,” Jacques added.

Rio Tinto’s absolute emissions have declined by 46 percent since 2008, when the company first introduced climate change targets, mostly as a result of divestments.

Commenting on Rio Tinto’s pledge, Julian Kettle, Wood Mackenzie’s vice chairman of metals and mining, said the company’s plans to decarbonize are a small but significant step in the right direction.

“However, changes need to be far bolder at a corporate, government and societal level,” she said. “Setting Rio Tinto’s US$1 billion in context, this represents just 16 percent of the dividend it distributed in 2019 or just under 5 percent of its reported EBITDA of US$21.2 billion for the same year.”

Kettle added that miners are caught between a rock and a hard place.

“The coronavirus, falling prices and the spectre of oversupply across most mined commodities are issues that are not conducive to a massive expansion of capex or expenditure that will take years to provide a ‘green dividend,’” he said.

Anglo-Australian Rio Tinto is taking a different approach than BHP (ASX:BHP,,LSE:BHP,NYSE:BBL) and Vale (NYSE:VALE), which have pledged to reduce Scope 3 emissions — those produced by a company’s customers or end users.

Despite not mining coal or producing oil, Rio Tinto’s iron ore is a key ingredient in steelmaking, which involves adding coking coal to make carbon steel, and it’s an industry that is responsible for up to 9 percent of global greenhouse emissions.

“We will not set targets for our customers,” Jaques said. “Having said that, we are looking to partner with our customers and the customers of our customers to look for ways to work together in order to improve emissions across the value chain.”

On Wednesday (February 26), Rio Tinto also released its 2019 annual results, posting its biggest profit in eight years at US$10.37 billion — an 18 percent increase supported by a jump in iron ore prices last year.

However, the company warned that the coronavirus outbreak may disrupt its operations in the coming months.

“We are closely monitoring the impact of the Covid-19 virus and are prepared for some short-term impacts, such as supply-chain issues. Our products are currently reaching our customers,” Jacques said.

Shares of Rio Tinto were trading down 1.83 percent on Wednesday at AU$91.89. The company’s share price has fallen more than 9 percent since the start of the year.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.