BHP Billiton Ltd, the world's biggest miner, says a global agreement on climate-change action would slow but not stop demand growth for most of the commodities it produces.
Revealing projections for the first time as December's Paris Climate Conference nears, BHP Chief Commercial Officer Dean Dalla Valle assured investors in London on Tuesday that the company has "stress-tested" its global resources business, which includes coal mines and oil fields.
The test: Could it withstand policy shifts that would follow an agreement limiting carbon emissions to cap global average temperatures at no more than 2 degrees Celsius (3.6 degrees Fahrenheit) above preindustrial levels?
The conclusion, according to the BHP report: "Even in an orderly or rapid shift to a 2-degree world, we forecast growth in long-term demand for most of our commodities, although at a slower pace than in [our] central case." That "central case" assumes an average temperature rise of 3 degrees.
Mr Dalla Valle added, though, that "the opportunities and risks associated with climate change will not be spread evenly between businesses or sectors." Energy coal, used to generate electricity, would be worst hit, BHP projected, as energy providers switch to natural gas or renewable technology. BHP added, though, that this switch could drive up demand for its own gas and uranium.
Mr Dalla Valle, who called the report "a major step forward in disclosure," said measures to reduce emissions in steel manufacturing could also increase the price BHP receives for its iron ore, which tends to be higher-quality than some rival miners'.
Assuming "an orderly transition" between now and 2030 to meet a 2-degree climate target, BHP forecast a doubling in earnings before interest, taxes, depreciation and amortization. That is only marginally below the company's core outlook, based on a 3-degree trajectory.
"As climate change risk continues to evolve, so too will our approach," said Mr Dalla Valle, referring to BHP's strategy. In recent times the company has shifted its investment focus to copper and oil from coal and iron ore.
Climate change has been high on US President Barack Obama's agenda as he approaches his final year in office. He has been working to secure support for an international climate-change agreement ahead of the Paris meeting, which will bring world leaders together with the aim of clinching a deal to succeed the Kyoto Protocol.
United Nations officials concede an accord on a 2-degree cap is unlikely, given that many major carbon emitters haven't submitted emissions targets. Indian Prime Minister Narendra Modi this week expressed "uncompromising commitment on climate change" but stopped short of making new pledges for reducing emissions.
Mr Dalla Valle separately said BHP remains confident China's economy is on track despite a drop in industrial profits in August that was the biggest in four years, and shook world resources markets. "No doubt there is going to be a lot of volatility, and I think people are reading into that," he told reporters. But "we haven't changed our position."
In August, BHP forecast China's economy will pick up speed to meet Beijing's growth target for 2015 of about 7 per cent.http://www.businessspectator.com.au/news/2015/9/29/resources-and-energy/bhp-tests-climate-deal-scenario