The World Coal Association: fit for the modern era?

2 July 2018 (Last Updated July 2nd, 2018 09:57)

After much deliberation, BHP has decided to leave the World Coal Association due to differences in their stances on climate change. But what is the WCA’s standpoint on climate change, is the association keeping up with current trends, and was BHP right to leave?

The World Coal Association: fit for the modern era?
BHP leaving the WCA raises questions about the relevance of coal lobbying groups today.

After announcing last year that it would review its membership, BHP has decided to leave the World Coal Association (WCA).

“Following publication of the review, BHP had a number of engagements with the secretariat of the WCA,” BHP said in a statement released in April. “In light of the material difference identified by the review and the narrow range of activities of benefit to BHP from membership, BHP has reached a final view that it will cease membership of the WCA.”

The move is a blow to the global coal lobbying group, which described BHP’s decision as “disappointing”. The association currently includes 44 of the largest mining companies in the world, representing as much as 20% of world coal production.

The decision followed BHP’s pledge to review its industry associations in light of its commitment to the 2015 Paris Climate Agreement. The company reviewed 21 industry associations, evaluating their climate and energy policies to determine whether they were in line with BHP’s own.

The review found seven material differences across three industry associations. Alongside the WCA, this included the US Chamber of Commerce and the Minerals Council of Australia (MCA). The Industry Association Review, published in December 2017, determined that due to the broader range of benefits provided by the MCA it would remain a member, whilst seeking additional information from both the Chamber of Commerce and the WCA, the deadline for which it set as 31 March.

In April of this year, BHP officially announced its intention to leave the WCA due to material differences which the WCA denies exist.

BHP’s efforts to become environmental

BHP has put in a lot of effort in recent years to convert to greener practices. In 1996, BHP acknowledged climate change and began investment and initiatives to reduce greenhouse gas emissions and improve energy efficiency. This has led to the company spending billions of dollars developing technology and retesting its portfolio.

“We have consciously aimed to exceed minimum compliance requirements to protect the environment,” BHP chief executive officer Andrew Mackenzie said in the company’s most recent sustainability report. “We have worked hard to reduce the impact of our own operations and promoted the conservation and sustainable use of natural environments. Due to our early actions to reduce greenhouse gas emissions and transparently disclose our position on, and actions to address, climate change, we have established ourselves as a leader in our sector.”

But BHP remains the world’s largest miner, and one of the biggest miners of coal, which accounts for around 20% of its revenue. As such, it is one of the top emitters of greenhouse gases in the world, according to research by Bloomberg New Energy Finance.

Since 2015, BHP has amped up its efforts to reduce emissions and create more sustainable mining operations. It is currently aiming for net zero emissions by the second half of the century, expanding the efforts that have allowed it to cut emissions by 61% between 2010 and 2016.

The WCA and the shift from coal

Similarly, the WCA has been working to change its image and build its green credentials. “The WCA’s position has always been clear; we support a balanced approach that integrates climate and energy policy that works towards a low-emission future,” said WCA chief executive Benjamin Sporton in April. “We believe a balanced approach should not exclude high-efficiency, low-emissions power generation and carbon capture and storage.”

Set up originally in 1985, the WCA’s role has changed alongside the industry. The demand for coal around the world is stagnating, and many agree that its cards are marked. In 2016, coal demand fell by 1.9% and the trend is expected to continue downwards. While developing countries such as India still remain reliant on coal, there has been a shift towards renewables and energy-efficiency that is predicted to see the share of coal in the worlds energy mix drop by 26% by 2022.

It has, therefore, become essential for coal companies to engage with climate change and move to become more sustainable. This is something BHP and the WCA seemingly agree on.

“BHP is one of the world’s largest exporters of coal,” said Sporton. “We have compared our position on energy and climate policies with those set out in BHP’s Industry Association Review and believe there are no material differences between the two.”

Material differences and association benefits

The specifics of the material difference between the WCAs stance on climate change and BHP remains unclear, although there are clues in recent disagreements.

Tensions arose between the two organisations due to WCA’s call for Australia to drop its clean energy targets. The WCA had instead promoted the use of lower emission coal, and is a big advocate for technologies such as carbon capture and storage (CCS). “We recognise that the use of coal has environmental consequences, but the technologies exist to address these,” the WCA states.

The Industry Association Review took into account aspects beyond the WCA’s position on climate change, evaluating the direct benefit of membership for BHP. The MCA has continued to advocate for greater use of coal in Australia’s energy mix, despite BHP’s threats of leaving if the MCA cannot become technology-neutral. But the benefits of its membership were rated as high, unlike those of the WCA.

“BHP identified a range of broader benefits provided by its membership of the MCA, relating to health and safety, environment, community, workforce and economics,” BHP’s industry report stated. “BHP continues to assess the benefits of membership in these areas as high.”

Thus, BHP’s decision to leave may be seen as more complicated than simply a criticism of the WCA’s approach to climate change. “BHP acknowledges the contribution made by the WCA in a range of areas, including environment and community practice, and appreciates the constructive approach undertaken by the WCA in discussions following the review,” BHP noted in its report.

BHP leaving the WCA raises questions about the relevance of coal lobbying groups today. As exploration companies drive towards lower emissions, is promoting CCS enough?

Environmental groups and NGOs have responded positively to BHP’s move, but many believe it is not enough, particularly given its continued commitment to the US Chamber of Commerce and the MCA. “While we welcome BHP’s formal withdrawal from the World Coal Association, it is nowhere near enough to wash off the stink of the company’s support for other organisations whose activities undermine the Paris Agreement,” Australian Centre for Corporate Responsibility executive director Brynn O’Brien  said.

The WCA will undoubtedly continue to play an important role within the coal industry however, and recently, Russia’s leading coal producer SUEK joined. “We will continue our important work representing many of the world’s largest coal producers and allied companies and organisations, who are committed to working with us on a low-emission future for coal,” said Sporton.