BHP ‘laughing’ at Australia’s key climate policy while pocketing hundreds of millions in tax breaks, Pocock says

Original article by Christopher Knaus, Adam Morton, Dan Jervis-Bardy and Graham Readfearn

The independent senator David Pocock says leaked BHP documents show that the mining giant is “laughing” at Australia’s key climate policy while pocketing hundreds of millions of dollars through a generous diesel tax break.

An exclusive investigation based on documents leaked to by the Guardian and the ABC show BHP has scrapped a project to significantly reduce global emissions, delayed vast renewables projects in the Pilbara and war-gamed options to push the electrification of its polluting diesel truck and train fleets into the next two decades.

It did so despite internal memos as recently as 2023 saying: “Urgent decarbonisation in line with BHP’s public commitments effectively underpins [the Western Australian iron ore division’s] licence to operate, sustain and grow.”

Experts and analysts say the slowdown in BHP’s decarbonisation progress shows the failure of a key climate policy, the safeguard mechanism, and the influence of the diesel tax break the federal government gives to big miners including BHP.

Analysis provided to the Guardian suggests BHP paid less than $9m under the safeguard mechanism for its excess emissions last financial year. At the same time, the analysis suggests it received $622m in fuel tax credits from the federal government for its use of diesel, including about $379m for its WA iron ore mines.

Its use of diesel is a major contributor to BHP’s emissions.

Australia’s safeguard mechanism requires the country's largest polluting industrial facilities to cut their greenhouse gas emissions intensity year on year.

It applies to about 200 facilities that each year emit more than 100,000 tonnes of carbon dioxide, or the equivalent in other greenhouse gases. These include mines, gas facilities, processing plants, smelters and manufacturers.

Facility owners can make cuts onsite or by buying carbon offsets. 

The policy was introduced in 2016 by the rightwing Coalition government with a promise it would stop industrial emissions increasing. But it was not applied as promised and total pollution from the sites continued to rise.

The Albanese Labor government revamped the scheme in 2023, setting new emissions limits, known as baselines, for each facility.

Under the changes, facilities are required to reduce emissions intensity – the amount of pollution per unit of production – by up to 4.9% a year. Companies can choose whether they make direct cuts or buy carbon offsets to meet their reduction obligations. 

They have access to two different types of carbon credits to offset their pollution. They can buy Australian carbon credit units, which are created through government-approved projects said to draw CO2 from the atmosphere or prevent its release. 

Or they can also use "safeguard credits", which are created when a facility emits less than its safeguard baseline. The owner gets one safeguard credit for every tonne of CO2 they are below their baseline. These within-scheme credits can be sold to other polluting facilities that emit more than their baseline and need offsets.

New polluting facilities, including gasfields and coalmines, are allowed to open and enter the scheme with baselines set at “international best practice”. For new gasfields, that means offsetting all CO2 pollution so they are net zero.

A deal between Labor and the Greens introduced an absolute "cap" so that total emissions under the scheme need to come down over time. The pace of reduction was not stipulated under the deal and is set by the climate change minister.

At Senate estimates on Tuesday, Pocock questioned environment department officials and Tim Ayres, the industry and science minister, about the revelations.

“BHP had [to pay] $8m for emissions [under the safeguard mechanism] last year while getting $379m in fuel tax credits … you have to admit that’s pretty ridiculous,” he said. “They are spending 2% [of what they receive in diesel tax credits]. That sounds like a joke to most Australians.”

Ayres defended the safeguard scheme, saying it had reduced emissions by 5.5m tonnes in the two years since the government reformed it.

An official told Pocock it did “not make a lot of sense” to compare the company’s payments under the safeguard mechanism to the credits it received under the diesel fuel tax rebate.

Pocock responded: “We have a government that’s telling us we are very ambitious and are doing everything we can with all these things in place, then we have leaked documents from BHP who internally they are laughing at the safeguard mechanism and they don’t have to worry about it for 14 years …

“I am concerned that no one has thought to go, ‘Hang on, these two things don’t really work together.’”

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Earlier on Tuesday, the environment minister, Chris Bowen, said he had made his expectations “crystal clear” to emitters publicly and privately.

The safeguard did “provide some flexibility”, he said, because the roughly 200 major industrial polluters that it applied to faced “different challenges and opportunities” to cut emissions.

“But I want to see all large emitters reducing emissions onsite,” he said. “That applies to BHP and everyone else.”

The resources minister, Madeleine King, said she was not concerned about the revelations and BHP was “doing their job”.

“BHP is committed to cutting emissions,” she told ABC radio. “They will make their commercial decisions, as do others. BHP and other miners are subject to the safeguard mechanism.”

The independent MP Kate Chaney said the safeguard needed to be tightened so companies had stronger incentives to cut emissions onsite, rather than pay for an unlimited number of contentious carbon offsets.

“It’s important that companies have flexibility in the way they reduce emissions, but it’s the government’s job to drive ambitious decarbonisation for a safe climate and stable economy,” she said.

Chaney said the government should also reform the diesel fuel tax credit scheme that gives some industry a full rebate on the 52.6c a litre applied to fuel. Chaney said the rebate should be limited for the “largest and most profitable companies like BHP” but left in place for farmers and small businesses.

She said the current version, under which BHP receives more than $600m a year in fuel tax credits, meant “we have our foot on the break and accelerator at the same time”, as the incentive to keep burning diesel was greater than that to cut emissions by shifting to renewable energy and electric trucks and trains.

“Large resource companies like BHP produce a huge chunk of Australia’s emissions,” she said. “Without strong decarbonisation from these companies, Australia will not be able to meet its emissions targets and international commitments.

“But companies will always play within the rules that have been set. This speaks more to weakness in government policy than a failure of business.”

Labor’s grassroots environment action network also renewed calls for the fuel tax credit scheme to be capped in the wake of the revelations.

The Labor Environment Act Network, (Lean) national co-convener, Louise Crawford, said: “[We] have been saying for months that the diesel fuel tax credit needs reform – it should be pushing the biggest miners toward electrification, not the opposite.

“Capping the rebate at $50m would free up funds to invest in electrification for those companies and others. And it would send a clear signal to get on with it.”

More than 270 local ALP branches have passed motions supporting Lean’s internal push, which is expected to be debated at Labor’s national conference in July.

Bowen played down the prospect of immediate changes to the fuel credit scheme when asked on Monday.

“We just had a budget a couple of weeks ago – we decided not to make that change,” he said, maintaining that the government’s focus was on the safeguard mechanism.

In a statement, BHP said it was making significant strides in emission reduction, cutting emissions by 36% from 2020 levels. It has a medium-term target of 30% by 2030 and a goal of net zero by 2050. BHP points to analysis that it is one of the best performers on emission reductions of large publicly listed companies and has transitioned 70% of its energy use to renewables.

The company blames its slowed progress on operational decarbonisation on the lack of availability of battery-electric trucks. It says it is trialling the technology but it is not yet ready to deploy at scale.

Fortescue, one of its main competitors, says the technology is ready and has ordered hundreds of battery-electric trucks. It is expecting to be able to run without any fossil fuels for 24-hour periods by 2027, though it recently was responsible for a spike in emissions.