Profile: Marius Kloppers

Profile: Marius Kloppers

His very public assertion of BHP’s preferred political response to climate change caught Australia by surprise. CEO Marius Kloppers’ acknowledgement of  the reality of the impact of carbon emissions on climate and his equally blunt assertion of the policy settings required to deal with the issue have attracted slightly stunned endorsement or blunt scorn. He is providing the leadership from big business that has been lacking to date.

Matthew Stevens in The Australian (18 September 2010):

YOU wouldn’t call it a conversion on the road to Damascus so much as a confirmation on the way home from Copenhagen.

On Wednesday, Marius Kloppers confirmed BHP Billiton was a supporter of the mainstream view on climate science and recommended that Australia embrace a “mosaic” of policy responses based on the prompt introduction of a carbon tax, even if that meant we moved to efficiently price emissions before our international peer group.

From the moment the Copenhagen climate summit collapsed last December under the predictable weight of national economic self-interest, Kloppers set about ensuring BHP would be properly primed for the renewal of the debate over how to price carbon in Australia.

From BHP’s perspective, Copenhagen proved that nations would act in their own interests on emissions. It also established the validity of individual, purpose-built responses to the climate challenge. Essentially it said the debate had moved away from the “silver bullet” responses being promoted by academic economists and that national interest and pragmatism had won the day.

Without the possibility of global consensus on emissions trading and carbon pricing, Australia’s proposed emissions trading scheme, the Carbon Pollution Reduction Scheme, looked as politically improbable as it was essentially economically irrational.

Kloppers’ public assertion of BHP’s preferred political response to climate change caught Australia by surprise. His plain English acknowledgement of BHP’s long-standing position on the reality of the impact of carbon emissions on climate and his equally blunt assertion of the policy settings required to deal with the issue have attracted slightly stunned endorsement or blunt scorn.

It’s a strange world where Bob Brown’s Greens and Tony Maher’s coal union find themselves in alignment with BHP while the Coalition is left in an angry lather about what it perceives as a sudden shift in the miner’s attitude.

Needless to say, none of them seems yet to fully appreciate what Kloppers has promoted. The Greens hear him talk about a carbon tax and the necessity of properly pricing emissions and little more. The noise from the Opposition reflects not only a worrying ignorance of BHP’s consistent views on emissions management but a similar failure to actually go to the source material and attempt to digest and appreciate the complexity of the BHP position.

Like so many of the core strategies that have shaped the modern BHP, the approach to climate change was established in the early 2000s by then boss Paul Anderson. A former heavy in the US gas industry (and now a director of BP), Anderson asserted that climate science was authentic; carbon pricing was coming; a carbon tax was the only way to go; and BHP needed to “get involved or get trodden on”.

When he left, the greenhouse nettle was grasped by Chip Goodyear, who went on to articulate a climate change policy and in 2005 committed to spending $US300 million on emissions mitigation. A year later BHP had formalised greenhouse targets and established reporting standards that are reported annually in its sustainability report.

In the end, though, for all its quiet commitment to the emissions management task, BHP felt it had been caught flat-footed by the rapid redirection of Australian industry policy in the wake of Kevin Rudd’s election in November 2007. And nowhere was that more apparent (until the super-profits tax debacle, at least) than in the rapid and comparatively isolated progress of the Garnaut Climate Change Review.

The fact that the Garnaut process ran ahead of any debate reflects, in part, its strange genesis but also that industry was working to a completely different set of rules to the newly elected Rudd.

Garnaut’s review, you may recall, was created by Rudd and the state premiers in April 2007, while the Queenslander was still in Opposition. It was then something of a sideshow until Rudd’s election in November. But by then, Garnaut had a full head of steam.

In what became a fairly familiar story during Rudd’s prime ministership, before industry really had a chance to properly articulate its individual or collective views, the Garnaut report steamrolled through the green paper and white paper stages and by the end of 2008 Australia was on the way to embracing the slick, elegant European emissions solution: a giant trading scheme.

But when Rudd’s progress to an ETS was interrupted by the Copenhagen debacle and the trickiness of the Greens, BHP was back in the game. And this time it was ready to get very much on the front foot by first plainly articulating and then strongly promoting its preferred approach.

To do that, Kloppers called in the recently appointed boss of Heath, Safety, Environment and Community, Ricus Grimbeek — one of a community of South Africans at the pointy end of BHP.

Grimbeek’s task was to ready BHP for the return of carbon pricing to the political agenda. Kloppers wanted a very specific, totally informed program that expressed the company’s point of view and supported that view in deep detail. Kloppers insisted that it was time to move beyond general platitudes about climate change and corporate life. Rather he wanted Canberra to be presented with a fully formed, simply expressed, platform of carbon mitigation initiatives.

It is said at BHP that, from December until Wednesday, Grimbeek has “put in man-years of work” in capturing and digesting all the available underlying data on climate change policy around the globe and in assessing what can work and what can’t work.

The response Grimbeek, Kloppers and the rest of the senior BHP management settled upon is supported, rather typically, by six simple principles. It sends a clear price signal, it is revenue neutral, it is trade friendly, broad based, predictable and gradual in transition and it is simple and effective.

The platform is built on the idea that through a direct, simply constructed carbon tax, the federal government can become a clearing house to reprice carbon and then recycle the funds generated back to the energy users.

It is not, in other words, a great big new tax. It is merely a means of forcing a pricing disincentive on energy use and, at the same time, a pricing incentive to make more carbon-friendly energy choices over the medium and long term.

For example, it will encourage generators to invest in combined cycle gas-fired power stations rather than coal stations. And that will leave Australia more cost-competitive when the rest of our trading world starts pricing carbon properly.

The trade friendliness is built around the idea that carbon tax generated by exports will be rebated until there is a level playing carbon playing field. This means Australia might successfully reduce its emissions while not undermining the ability of its exporters to compete globally.

While refuting the effectiveness of a broad-based ETS, mostly because of its indescribable and constraining complexity, the BHP plan recommends a trading scheme for the electricity sector, which speaks for 51 per cent of Australian emissions.

And finally, the BHP scheme would seem to be predicated on the idea that where carbon pricing won’t change consumer habits, then you have to regulate. So government has to get down and prescribe the way we construct our homes and the efficiency of the services we install in them.

Now, if you think this is a strange level of detail for BHP to be burying itself in, then you would have been right until about three years ago. Before Rudd’s election, it would have been unimaginable that the simplifying Global Australian would go to such efforts to establish itself a base camp at the broadest points of the climate change issue. But one of legacies of the ill-fated Rudd government is an erosion of confidence in the quality of the governance of the commonwealth.

Over 25 years federal governments from both sides have reinforced a consultative, reforming pragmatism that encourages business to maintain an historically light and deeply confidential engagement with Canberra. But the days of quiet are over.


Mathew Murphy in The Age (21 September 2010):

LESS than a week after BHP Billiton chief Marius Kloppers called for immediate action on climate policy, a world report card has given his company a B grading for its carbon-management policies, ranking it lower than rival Rio Tinto.

The Carbon Disclosure Project, which represents 534 institutional investors with more than $64 trillion of assets under management, has found that 85 per cent of leading companies had entrusted board members or senior executives with responsibility for climate policy, up from 82 per cent a year earlier.

The report ranked National Australia Bank as the best-performing of the Australian companies, scoring 93/100 or ninth of all companies globally. Rio Tinto scored 89/100 and a B grading, putting it among the top handful of companies in the materials index.

The scores, which are based on consideration of business-specific risks related to climate change and good internal data management of emissions, put BHP further back with a score of 71/100. Companies scoring above 70 are considered to have achieved a high grade.

The report found that Australian companies were still lagging behind the rest of the world – only 40 per cent of S&P/ASX 200 Index companies had emission reduction targets, compared to an average of 70 per cent for the Global 500. The top 200 Australian companies lagged in every indicator except the percentage of companies that perceived regulatory risks associated with climate policy (69 per cent of ASX 200 companies compared with 66 per cent of the Global 500).

Chief executive of the Investor Group on Climate Change Nathan Fabian said Australian companies should follow Mr Kloppers’s lead on the mitigation of greenhouse gases.

”It is a positive that BHP is describing their policy view. We need all leading companies to do that. Keeping quiet on the issue won’t make it go away or aid a smooth policy transition,” he said. ”Part of the score is calculated on the public position of companies. Determining the policy for your company should not be underestimated, but that does not get the company to a strong position on abatement or mitigation and every company that is emissions exposed is going to have to go through that hard process.

”I think the global results are showing that companies around the world are getting on with the job. Even in the US, which you would argue has had substantial regulatory uncertainty, the S&P 500 numbers increased by a substantial amount,” Mr Fabian said.

BHP Billiton is due to release its annual sustainability report tomorrow. It is expected to show that its greenhouse gas emissions have reduced from 51.7 million tonnes in 2008 to 45.9 million tonnes. This is tracking at 93.2 per cent of its 2006 levels, meaning it has, in effect, already met its 2012 target of reducing emissions by 6 per cent.

Mr Kloppers’s intervention on carbon policy mirrors a global trend – 80 per cent of companies surveyed said they were engaging with policymakers, up from 71 per cent a year earlier


From the 2010 BHP Billiton Sustainability Framework

The issues associated with climate change continue to be a challenge for governments, communities and industry around the world. The urgency and complexity of these issues require responses from all of us. BHP Billiton shares the view that the rational choice is to accept that the mainstream science is right in pointing to high risks from unmitigated climate change.

Risks of climate change may include changes in rainfall patterns, water shortages, rising sea levels, increased storm intensities and higher average temperature levels, which may result in damages to crops, buildings, infrastructure and ecosystems.

As a global community we have the potential to reduce the worst impacts of climate change, and clearly the greatest benefits will come from acting early. Alliances to tackle this challenge will need to cross national and cultural boundaries, but the developed world has a clear leadership responsibility in achieving a global approach.

Scientists tell us the world must aim to stabilise global carbon dioxide concentrations in the range of 450 parts per million to avoid the most severe impacts. An international climate framework must establish binding commitments for all developed and major developing economies if real reductions in emissions are to be achieved.

From our perspective, the key principles for an effective international response include:

• A global regime that prices carbon to allow enough certainty for investment in new technology and abatement opportunities to occur while still promoting economic growth.

• Strong measures to help avoid deforestation and fund reforestation (large landholders like BHP Billiton have a role to play here).

• Support for the poorest countries in adapting to the physical impacts of climate change and pursuing low carbon pathways to development through energy efficiency or the adoption of alternative energy technologies.

• Business leadership and ingenuity is critical to achieving low carbon growth and, as a major resources company, we are committed to playing our part.

In addressing this and other issues affecting all of us, we appreciate that governments have to consider the needs of industry and communities as well as the global implications.

Carbon Pricing Protocol

BHP Billiton maintains an internal mechanism for costing carbon and determining carbon price impacts on Greenfield and brownfield developments, and on mergers and acquisitions.

The Carbon Pricing Protocol includes a range of prices for developed and developing countries based on likely scenarios of government requirements and technology deployment, as well as the associated costs and economic impacts. Our valuations for investment decisions and planning processes include the expected impacts of carbon emissions (both cost and price impacts). The Carbon Pricing Protocol is updated annually to reflect internal and external carbon price modelling and proposed treatment of carbon permits in countries where we operate.


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