Climate Change
Climate change represents a scientifically proven reality and a challenge that affects not only our productive activities, but the entire planet. Combating the impacts of climate change is a strategic priority on Vale’s agenda. Vale has
the potential to contribute to a more sustainable future, based on a renewable energy matrix and the differentiated quality of its product.
We have been acting continuously, guided by scientific and practical references in line with our internal policies and standards, to deal with this issue.
Vale characteristics that highlight its contribution to the fight against climate change include:
The quality of iron ore, specifically in Carajás.
Vale’s iron ore mines located in Brazil have ores with very high iron (Fe) content and low slag content. Consequently, Vale’s iron ore emits less carbon when processed in steel mills. For instance, S11D Eliezer Batista Complex
in Carajás produces iron ore with 66.7% Fe content, besides being the biggest iron ore project in the world. producing about 150 million tons annually.
The predominance of Class I nickel in its reserves (60%), which has a high quality that allows a wide range of applications.
Vale has nickel mines that reserve around 60% of the world’s Class I nickel, a more refined product that enables greater application diversification and stability for sales volumes. With the increase of electric car production,
it is expected that an increase in the demand and price of Class I nickel will enable Vale to benefit as Class II nickel begins to be sold with higher added value.
KPIs Report
In 2018, Vale’s activities resulted in 396 million tonnes of CO2 equivalent. From this amount, more than 95% was indirect Scope 3 emissions, resulting from Vale’s product utilization in other industries, and doesn’t involve
our own activities. The direct emissions from scope 1(fuels and industrial processes), and scope 2 (electricity purchases) added 14 million tons of CO2 equivalent.
Vale’s GHG emissions in 2018 (in million tCO2e):
For more information about greenhouse gases emissions (GHG), access our Sustainability Report - 2018.
Performance Evolution
Vale's direct GHG emissions (Scope 1) were about 4% higher in 2018 compared to 2017, after discounting emissions from sold assets, totaling 12.7 million tCO2e. Indirect emissions from electricity purchases (Scope 2) were reduced
by 7% in 2018, totaling 1.5 million tCO2e on the same basis of comparison. This was mainly due to the reduction of the GRID emission factor of some countries, including Brazil, Canada and the United Kingdom, once that purchased
electricity consumption was not reduced in 2018.
Total GHG Emissions of Vale
(millions of CO2e)
Other Indirect GHG Emissions 2018
Scope 3 - Thousand tonnes of CO2e
Goals and Deadlines
Carbon Goal
In 2012, Vale set a target to reduce direct emissions (Scope 1) by 5% by 2020. The goal was reached in 2017. Once the previous carbon goal was reached, in 2018 we set a new goal of 16% reduction in the intensity¹ of our direct and indirect GHG emissions by 2030. This target includes both direct emissions (Scope 1) arising from the use of fuels and processes as well as emissions related to the purchase of electricity (Scope 2) and is based on the 2017 emission intensity.
In 2019 we revised our commitments and set a new target of:
Reduction of GHG emissions in line with the Paris Agreement by 2030.
Besides, we approved the target to become carbon neutral by 2050, and for this goal we approved US$50/tCO2e as an internal carbon price.
¹Emission intensity is the volume of greenhouse gases, in tonnes of CO2 equivalent, emitted for each equivalent tonne of iron ore produced.
Main factors to reach 2030 goals
Plans to reach the 2030 goal
In addition to the target set for emissions resulting directly from its operation, Vale undertakes to act also on indirect emissions, those resulting from activities related to production, such as maritime transportation and the use of
products in the supply chain.
In particular, Vale's potential for promoting more sustainable shipping logistics and a less polluting steel industry stands out. With the increasing maturity of these initiatives, Vale will have flexibility over the coming years to be
even more aggressive in its emission reduction targets, including its Scope 3 emissions. Among the initiatives already implemented we can highlight:
Inclusion of contractual clauses related to greenhouse gas management for suppliers. For more information, visit the page about Suppliers here.
International Maritime Organization (IMO) goals – initiatives that have already added significant value to the environment and Vale shareholders:
Valemax 2G 2018 (Compared to capsize ships in 2011):
41% less emission
41% less fossil fuels consumption
38% cost reduction
Policies and Procedures
Vale's strategy on climate change is based on the “Global Climate Change Mitigation and Adaptation Policy,” which has the following elements:
The Policy, among other commitments, defines guidelines on fighting climate change for the Company and its subsidiaries, regarding:
Risks
Risks and opportunities related to climate change are the responsibility of the Sustainability Department and are identified based on strategic business planning, existing risk management processes and regulatory environment monitoring.
These topics are periodically presented to the Risk Management Executive Committee, where they are reviewed for quarterly reporting to the Board of Directors and published in the Annual Report and the Sustainability Report. Identified
risks are monitored and reviewed annually if no material change occurs during the year.
Vale uses a risk matrix that considers the severity and probability of each occurrence. In the case of risks related to climate change, Vale has developed specific analysis methodologies divided between impacts arising from regulatory
changes and physical impacts.
Our main risks related to climate change are:
Regulatory / Legal
- Changes in policies to restrict or adapt to the effects of climate change;
- Disputes over non-compliance with policies to mitigate climate impacts.
Technological
Substitution of products/processes for more efficient/current technologies.
Market
Changes in supply and demand due to awareness of cleaner products.
Reputation
Consumer and investor perceptions of the Company's adherence to greener policies.
Physical risks
Direct damage to assets and indirect impacts on the supply chain such as floods, droughts, etc.
Vale methodologies for climate change risks and opportunities
Regulatory risks: Vale has developed an internal carbon pricing model to assess the risks linked to climate change through projections of possible impacts on the operating costs of each business unit. This model takes into account impacts
on direct and indirect costs, including impacts on the supply chain.
Physical risks: Based on the Intergovernmental Panel on Climate Change (IPCC) studies, Vale developed, together with the Vale Technological Institute, a projection and mapping model of the possible physical impacts that pose risks to the
Company's operation. Climate projection is performed using a climate modeling system that allows future temperature and precipitation scenarios to be obtained. Projections were made for the North Corridor, South Corridor and Corumbá
sections.
Carbon Pricing
In 2017, Vale signed the CEBDS¹ letter about carbon pricing, which is a CEBDS initiative with Mundial Bank and Business Initiatives on Climate (IEC in Brazilian Portuguese) to foster the discussion about carbon pricing in Brazil.
What would be the impact of carbon pricing to our operations?
Direct cost (Process)
Indirect Cost – fuels (Purchase)
Rising cost of products and services (Purchase)
Direct Cost: Accounts for the increased cost due to taxes on Vale’s emissions.
Indirect Cost: Accounts for the cost increase due to the taxation of fossil fuel production and fossil-fueled electricity.
Currently 20% of global emissions are priced. 27% of mining emissions are subject to carbon pricing (in South Africa, Chile, Canada and the EU). Vale has a low exposion to carbon pricing, but if Brazil
adopts carbon pricing, this reality changes completely.
¹The Brazilian Business Council for Sustainable Development (Conselho Empresarial Brasileiro para o Desenvolvimento Sustentável)
Vale’s Carbon Cost Balance
External Engagement
We follow trends and studies related to climate change in global forums that aim to define regulatory and economic strategies for mitigation and adaptation worldwide. In Brazil, we participate in discussions on the theme, collaborating
on policies and strategies aimed at transitioning to a resilient and low-carbon economy.
Examples of relevant agreements and initiatives on climate change in which Vale participates:
TCFD
In 2017, Vale adhered to the Task Force on Climate-related Financial Disclosure (TCFD) recommendations led by the Financial Stability Board, containing guidelines for reporting financial risks related to climate change by companies and
financial institutions.
Upon signature, the Company also began an in-house project to tailor climate risk qualification and quantification to the TCFD recommendations.
What we already do:
- Emissions quantification – Greenhouse Gases Inventory;
- Definition of climate risks;
- Variable compensation targets linked to GHG emissions reduction performance;
- CDP Response.
What we still have to work on:
- Carbon pricing;
- Climate consideration and governance quantification in strategic planning.
CDP Worldwide
Following its mission to provide investors and clients with greater transparency regarding climate change, we respond to the CDP Worldwide questionnaire annually.
Business Case
Autonomous Truck
Huge 240-tonne off-highway trucks travel on the roads of a large mining area without a cab operator. Controlled only by computer systems, GPS, radar and artificial intelligence, vehicles move efficiently between the mine front and the
unloading area. Autonomous trucks are a reality at Brucutu mine, in the state of Minas Gerais, Brazil. The autonomous operation of iron ore transportation has a higher productivity, generates less wear on parts and extends equipment
life by 15%. The initiative has great importance to the Company’s ability to reduce both emissions and fuel and to decrease CO2 particulate emissions.
PowerShift
Vale has created an internal program called PowerShift to support its sustainability goals, focusing on the transition to a low-carbon economy. The program aims to make the Company's energy matrix clean by focusing on the use of renewable
energy and alternative fuels, greater efficiency of operations using new technologies, and forest promotion. PowerShift-linked initiatives are expected to contribute approximately 40% of Vale’s planned reductions to help us reach the United Nations 2030 Agenda target.
Sentinela Project – Artificial Intelligence
Vale's AI Centre, located in Vitória in the state of Espírito Santo, has been developed in partnership with researcher Ali Soofastei from the University of Queensland in Australia. It is a new tool that uses artificial intelligence for
better off-highway truck operation. The tool offers the best speed option for the least fuel consumption on the vehicle operator panel.
This technological solution was tested on 50 trucks in Itabira, Minas Gerais, resulting in a reduction of 585 thousand liters of diesel consumption and generating savings of R$1.8 million. In terms of environmental impact reduction, the
reduction in diesel consumption prevented the emission of 1,500 tonnes of CO2. This is the equivalent of planting 3,000 trees in the Atlantic Forest.
Perspectives
Vale is constantly evolving its climate change risk management guidelines. In 2018, we collaborated with an external consultancy to survey and detail the impacts of this theme on the Company's long-term strategy. The results of this work
will allow us to refine, over the next cycle, our climate change management by focusing on identifying risks and opportunities.
