The Australian miners and explorers are narrowing down their focus on reducing the carbon footprints in line with Accord de Paris. While BHP Group Limited (ASX: BHP) had adopted measures to bring down the Scope 3 (or the value chain) emissions, Rio Tinto (ASX: RIO) also signed an MoU to curb down the value emissions, which represented the Australian miners’ stance to contribute towards the global drive of reducing the carbon emission.
Origin Energy Limited (ASX: ORG)- an Australian Exchange-listed energy producer also stepped forward to deliver on Australia’s international emission reduction commitments.
The Paris Agreement
The consortium of nations reached a landmark agreement in 2016 to accelerate the actions and investments needed for a sustainable low-carbon future with a vision of tackling the climate change, which was then later adopted across the globe as Accord de Paris (Paris agreement) or Euro-6 standards.
The agreement reached by the consortium aimed to ignite the global response towards the changing climate by keeping the global average temperature rise this century below 2o Celsius above the pre-industrial levels and limiting the temperature increase below 1.5o Celsius.
Later, the United Nations Framework Convention on Climate Change (or UNFCCC) invited the Intergovernmental Panel on Climate Change (or IPCC) on behalf of the signatory nations to assess the impacts of global warming of 1.5o Celsius above the pre-industrial levels and associated GHG (or greenhouse gas) emission.
The IPCC published the report over the assessment of global warming of 1.5o Celsius above the pre-industrial levels in October 2018- the Global Warming of 1.5o Celsius report.
The report published by the IPCC called for an urgent need of actions across all the levels (national, city, industry, firm, and individual) to counter the climate challenges ahead.
The key messages delivered by the report are stated below:
- The global annual emissions have to decrease by 50 per cent by 2030 with no overshooting post- 2050.
- The scale at which the decarbonisation has to happen is unprecedented.
- The risk of warming around 1.5o Celsius above the pre-industrial level is lower against the 2o
- The global emissions have to reach net-zero by 2050 from all pathways, with all pathways relying on carbon removal to some extent.
Australia Emission Perspective
Australia- a significant producer of natural resources, is already facing the dire impacts of global warming and the nation is witnessing a rise in ocean temperatures by around 1o Celsius since 1910 with increasing emission. The impact of the rise in the ocean temperatures could be seen with increased frequency of extreme heat cases, the falling rate of rainfall, severe droughts, increased events of extreme fire, etc.
As per the Great Barrier Reef Marine Park Authority, the climate change remains the most substantial threat to the Great Barrier Reef and coral reefs, which as per the IPCC, would decline with losses over 99 per cent at 2oCelsius.
Origin’s Stance on Climate Change
Origin is structuring its generation portfolio to sustain in the low-carbon environment with a focus on the growth in generation from renewables and via incorporating gas and storage in the generation process. The company also endorsed an independent science-based emissions reduction target.
In FY2019, the energy market business of the company accounted for 93 per cent of the Scope 1 emissions and 89 per cent of the combined Scope 1 and Scope 2 emissions.
Emission Reduction Targets
- Origin intends to reduce the absolute Scope 1 and Scope 2 emissions by 50 per cent till 2032 from the base year of 2017.
- The company also plans to reduce the absolute Scope 3 emissions by 25 per cent till 2032 with the base year of 2017.
The Five Pillars Framework
The company invested over $800 million in renewable technologies and options, which include solar, geothermal and hydro, since 2000. To ensure convenient, seamless and secure energy solutions of the future for the customers, ORG invested an additional $50 million.
Origin is looking forward to integrating the risk and opportunities of climate change in the business strategy and portfolio decisions, and the company runs climate change assessment modules to decide the future investment and strategy.
By 2020, the company is targeting renewables and storage to account for over 25 per cent of the owned and contracted generation capacity, as compared to the present share of 19 per cent and 15 per cent in 2017.
Switching from Coal to Gas
ORG believes that substituting coal with natural gas for energy generation could benefit the company in the 2o Celsius assessment scenario.
- First, by substituting coal from the natural gas in energy generation could reduce the carbon emission by 50 per cent for every unit of electricity generated.
- Second, the gas-fired generation technologies could support the variable renewable energy (or VRE) integration.
(Co2 savings from coal-to-gas switching) (Source: Company’s Report)
The company’s integrated gas business includes 37.5 per cent ownership and upstream operatorship of APLNG, which secured a bumper sale in FY2019.
APLNG sells the gas to customers in various nations such as China, Japan, Australia, etc., and the switching of coal by gas at APLNG could play an important role in limiting the growth in carbon emissions.
However, the Australian electricity market has benefited from the vast low-cost coal resources by generating energy through coal-fired stations. Which would make it tough to replace the low-cost coal supply for energy generation on a large scale with high-cost natural gas in Australia marred by low supply.
In FY2019, coal-fired energy generation stood at 74 per cent of the total electricity generated in the National Electricity Market (or NEM), and apart from replacing the coal with natural gas, replacing Australia’s coal fleet with renewable generation backed by the battery and hydro storage is also uneconomic as per the prevailing scenario.
However, gas can still play a crucial part to meet the low emissions energy requirements and could ensure reliable capacity in a cost-effective manner by integrating intermittent renewable technologies into the electricity generation grid for the energy hungry- Australia.
To conclude, the changing climate problems call for various nations to gather and take stringent actions to restore the balance. Australia is facing significant problems because of climate change, and individual firms in Australia are taking a step ahead to play a part in carbon and GHG emissions.
While, giant miners such as Rio and BHP had adopted certain measure to curb down the scope 3 emissions, the electricity player- ORG is also supporting the cause and taking measures to reduce the carbon footprints.
Origin is doing so by banking on the increased generation from renewable energy, decentralisation and digitalisation of the energy market, replacing coal by natural gas, and integration of natural gas in the variable renewable energy systems.
The share of the company was trading at $8.070 on 17 October 2019, marginally down by 0.616 per cent from its previous close on ASX (AEST: 2:16 PM).
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