BHP's former chief economist calls for stronger government climate policy

A former chief economist at mining company BHP says stronger climate policy by governments is needed to “move the needle” and incentivise tough decarbonisation decisions at major resource companies.

Internal documents, leaked to Guardian Australia and the ABC earlier this year, showed BHP had delayed vast renewables projects in the Pilbara, scrapped a project that would have delivered significant cuts to global emissions, and war-gamed options to push the electrification of its polluting diesel truck and train fleets into the next two decades.

Experts and analysts have previously said the slowdown in BHP’s decarbonisation progress put Australia’s broader climate targets at risk and exposed significant flaws in a key climate policy, the safeguard mechanism.

Former BHP chief economist Dr Huw McKay, now a visiting fellow at Australian National University’s Crawford school of public policy, told the Guardian that stronger climate policy was needed to drive urgent action.

McKay, who left the company in 2024, said he agreed with the distinguished economist and emeritus professor Ross Garnaut, that voluntary commitments from companies on decarbonisation were unstable and strong government policy was needed.

“That’s absolutely right,” he said. “The preferred policy is, of course, a carbon price that is calibrated to move the needle on hard-to-abate emissions.

“Inserting a carbon-price obligation like that into the investment process at major resources companies would lead to swifter action.”

McKay will this month speak at an ANU seminar on “Heavy industry decarbonisation: insights from the BHP leaks”. The description of the event says he will speak about how “corporate goals and targets are set, the role of broader investment and capital allocation processes, and the influence of policy, financial, and operational environments on decision-making”.

BHP has set itself a target of cutting emissions to 30% below 2020 levels by 2030, which it has already achieved using power purchasing agreements, particularly in Chile, and through the 2024 suspension of its struggling Western Australian nickel operations. But its longer-term net zero goal requires it to make significant emissions reductions from its mining operations, which can be achieved by transitioning away from its diesel fleet and transforming its inland power grid, which is currently powered by gas and diesel generation.

Bowen defends current regime

The climate change, Chris Bowen, has defended the current “safeguard mechanism”, which requires about 200 big industrial emitting sites – including several BHP facilities – to cut emissions intensity year-on-year, either onsite or by buying contentious carbon offsets.

Bowen said the safeguard mechanism did not rely on voluntary commitments. He said it mandated each large facility covered to cut emissions each year and to reach net zero by 2050.

Government data released earlier this year said total onsite emissions covered by the scheme were down 2.3% this year.

“We won’t be imposing a carbon tax,” Bowen said.

The leaked BHP documents revealed how the company had repeatedly balked at making major investments in decarbonisation initiatives, despite publicly describing climate change as an “existential” risk to the world and internally acknowledging that urgent emissions reductions efforts effectively underpinned its “licence to operate”.

The company’s first inland Pilbara decarbonisation project – a 50MW solar farm and 20MW battery at its Jimblebar mine – was shelved after being approved and funded by the board. Another 500MW system of solar, wind and battery was significantly delayed. The company has continued to acquire 62 polluting diesel haulage trucks, despite pledges to electrify its highly polluting fleet as early as 2027-2028.

In the weeks after the revelations, BHP engaged in a concerted public relations push to promote a trial of two battery-electric trucks in the Pilbara. An event held by the company, along with Rio Tinto and Caterpillar, was attended by the press and the Western Australian premier, Roger Cook. An invitation to journalists said that “flights and transport to site are included”, although WA government officials were not provided with transportation by BHP.

The event was held at its Jimblebar mine site. Critics say BHP was simply re-launching a previous announcement about the trial of battery-electric haul trucks.

In a statement, a BHP spokesperson said trials were needed because technology was not advanced enough to scale 240-ton battery-electric haul trucks to an operational fleet.

“To support the acceleration of this technology, BHP is partnering with equipment producers to run trials of battery-electric equipment including two 240-ton battery electric haul trucks being trialled on a BHP site in the Pilbara, and four battery-electric locomotives which we plan to commence trialling in coming months,” the spokesperson said.

“BHP continues to focus on delivering our operational emissions reduction target and long-term net zero goal, including support to accelerate and de-risk the required technology, noting that announced commitments by some companies to acquire new equipment in the future does not mean such equipment currently exists.”