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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. The company has the potential to contribute to a more sustainable future, based on its 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.

Mining activity highly dependent on logistical infrastructure sensitive to extreme climate risks.

Fixed assets such as railways and ports are especially vulnerable to extreme climate events, since they have a long term useful life and little, if any, flexibility to change location.

KPIs Report

In 2019, Vale’s activities resulted in 575.3 million tonnes of CO2 equivalent. From this amount, more than 97% was indirect Scope 3 emissions, resulting from Vale’s product utilization in other industries. The direct emissions from scope 1(fuels and industrial processes), and scope 2 (electricity purchases) added 12.6 million tons of CO2 equivalent.

Vale’s GHG emissions (in million tCO2e):

For more information about greenhouse gases emissions (GHG), access our Sustainability Report - 2019

Performance Evolution

Vale's direct GHG emissions (Scope 1) were about 13.3% lower in 2019 compared to 2018, totaling 11.3 million tCO2e. Indirect emissions from electricity purchase (Scope 2) were reduced by 16.6% in 2019, totaling 1.3 million tCO2e, mainly due to the reduction in electricity consumption.

Total GHG Emissions of Vale

(millions of CO2e)

Other Indirect GHG Emissions

(Scope 3 - millions of tCO2e)

Scope 3 emissions, indirect GHG emissions calculated along the value chain, include upstream emissions (related to goods and services purchased or acquired) and downstream emissions (related to goods and services sold). In 2019, these emissions totaled approximately 563 million tCO2e in the year, a result 4% lower than in 2018. Around 97% of these downstream emissions are due to the processing and use of products sold by Vale in the steel and metallurgical chain. 

Goals and Deadlines

Carbon Goal

In 2019, the company reviewed its climate goals, including new commitments to reduce greenhouse gas (GHG) emissions, bolder goals than previously established in 2018, aiming to become a carbon neutral mining company.

The 33% absolute scope 1 and 2 emissions reduction target by 2030, with 2017 as a baseline, is aligned with  the Paris Agreement's objective of limiting global warming to below 2ºC. This target is linked to the variable remuneration of all Vale's employees.


Besides, we approved the target to become carbon neutral by 2050, and and to propel us towards decarbonization, we approved an internal carbon price of USD 50/tCO2e. This price is also aligned with the 2 ºC scenario, following the recommendations of the Carbon Princing Leadership Coalition.

Main factors to reach 2030 goals

Plans to reach the 2030 goal

In order to evolve the net zero strategy, the The Low Carbon Forum was created to set and oversee the implementation of the initiatives. The Forum is coordinated by the Sustainability Executive Board and has the  participation of Vale’s CEO and the Executive Directors of Ferrous, Base Metals, Strategy and Finance and Investor Relations. 

As a competitive advantages in climate's agenda, Vale has more than 1 million hectares of protected forest area and a high pecentage of renewable sources in its energy matrix. To achieve our commitments, Vale will invest around US$ 2 billion in renewable energy over the next 10 years to support and bring solutions to the low carbon economy, with a focus on projects with NPV positive.

In order to prioritize the most cost-competitive initiatives to achieve our 2030 target, we have drawn up a marginal abatement cost curve (MAC curve), which analyzes more than 35 projects and it is constantly evolving.



The projects are oriented towards solutions that expand the self-production of electricity from renewable sources in operations, which promote the implementation of energy management and energy efficiency practices and routines in order to create an environment that encourages the adoption of efficient behaviors and solutions and innovative rational use of energy and that stimulates the search for different technological solutions, considering the social, economic and environmental impacts and that align the business portfolio to the transition to a low carbon economy, leveraging new business opportunities.




As part of the strategy, and in line with the recommendations of the Task Force on Climate Related Finnancial Disclosures (TCFD), Vale conducted a preliminary scenario analysis of its business resilience in the three climate change scenarios, considering the scenarios of the International Energy Agency (IEA).

The construction of climate-related scenarios allows Vale to identify indicators to monitor the external environment and more quickly recognize changes in the scenarios, allowing an agile adaptation to current needs. 


Scope 3

Vale also aims to establish a ambition for scope 3 to encourage clients and suppliers in the same direction. Through active engagement with clients from the steel and metallurgy industries, Vale will work to reduce emissions in its value chain. The company will guide its operations based on win-win relationships, less intensive products, and new technologies. 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.

Creation of a joint venture focused on low CO2 metallics' production (here).

Premium product portfolio which promotes emission reduction through higher quality ore.

International Maritime Organization (IMO) goals – initiatives that have already added significant value to the environment and Vale shareholders:

Valemax 2G (Compared to capsize ships in 2011):

41% less emission

41% less fossil fuels consumption

38% cost reduction

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 resulting from the transition to a low carbon economy and physical impacts, in line with the guidelines of the Task Force on Climate-related Financial Disclosures - TCFD.

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. In addition, the company participates in external forums and has tools for monitoring and controlling transition risks.

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.

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.

As main actions related to the TCFD, in the last years, we highlighted:

2016

  • Technical contribution to the construction of the TCFD framework through the public consultation process;
  • Review of published industry briefs and comment on performance indicators to be reported in financial reports, such as 20 F.

2017

  • We endorse the TCFD framework as one of the first signatory companies;
  • We signed a new positioning letter from the Brazilian business sector in favor of global carbon pricing (letter from CEBDS [1] – Brazilian extension of the WBCSD [2];

2018

  • Definition of the emission intensity reduction target with 2017 as the base year;
  • Vale's first resilience assessment against the climate change scenarios IEA [3];
  • We report and publish the CDP in line with TCFD’s recommendations;
  • Update on carbon pricing risk analysis;
  • Implementation of the Powershift program (transforming the company's energy matrix into renewable) at Vale;

2019

    Between the end of 2019 and the beginning of 2020, Vale conducted a diagnosis of the level of adherence of its risk management to the TCFD guidelines, which can be found summarized in the table below. In addition, it mapped opportunities for improvement and next steps.


The table below shows Vale's main advances in relation to the recommendations proposed by the TCFD:

Key elements of the disclosures on climate risks and opportunities recommended by the TCFD
TCFD Recomendation Disclosure Vale Reference
1. Governance - transparency regarding the governance of risks and opportunities related to climate change
1.1. Description of the supervision of the Board of Directors Sustainability Committee and Board of Directors responsible for validation sand low-carbon monitoring of guidelines Chapter “Governance” or “Sustainability Governance”. CDP item C1
1.2. Role of executives in mapping and managing the agenda Low Carbon Forum, with monthly meetings to assess the deployment and implementation of the Vale Carbon Neutral strategy. This forum is coordinated by the Executive Officers for Sustainability and Institutional Relations, with the support of the Executive Officers for Coal, Strategy and Mineral Exploration, Business Support, Ferrous and Base Metals, and with the participation of Vale’s CEO and CFO. The meetings involve top management and technical groups from the business and corporate areas. Chapter “Climate Change and Energy”.CDP item C1.2
2. Strategy - current and potential impacts on the company’s business, strategy and financial planning
2.1. Transparency on risks and opportunities identified in the short, medium and long term Preliminary and qualitative assessment of potential transition and physical risks, as well as low carbon opportunities. The studies will be further developed over 2020 Chapter “Climate Change and Energy”.CDP items C2.4, C2.5
2.2. Impact of identified themes on portfolio and strategy Adoption of ongoing internal carbon pricing (shadow price) of USD50/t CO2 and in line with what is required to limit temperature increase to 2°C, to be integrated into analyses of capital projects, current projects, budget cycle and strategic planning in 2020 Chapter “Climate Change and Energy”.CDP items C2.4, C2.5
2.3. Business Resilience to Climate Scenarios Initial exercise prepared in 2018 in relation to EBITDA sensitivity to International Energy Agency scenarios, including 2°C scenario.
Preliminary analysis of physical risks of temperature increase and rainfall regime prepared by Instituto Tecnológico Vale.
Sensitivity analysis to climate scenarios in progress within the current Strategic Planning cycle, based on the scenarios of the International Energy Agency.
Chapter “Climate Change and Energy” CDP item C3.1
3. Risk management - process of identification, evaluation and management of corporate risks
3.1. Process for mapping and assessment of climatic risks Environmental and climate change issues are embedded in the corporate risk management process. Physical risks related to impacts that climate change may have on Vale’s assets and their surroundings, as a result of increased temperature, altered rainfall patterns, increased extreme events and rising sea levels, for example, affecting Vale’s operations [5]. Other risks, such as possible impacts of climate legislation on the company’s activities, through the imposition of limits on the emission of greenhouse gases by sector and increases in direct and/or indirect costs due to carbon pricing, are also among the risks identified by the company. Chapter “Climate Change and Energy” CDP Item 2.2
3.2. Climate risk management process The main climatic risks are part of the company’s risk management process.
In addition, the monitoring of the main risks is also communicated in the framework of the Low Carbon Forum
Chapter “Climate Change and Energy” CDP Item 2.2
3.3. Integration into the corporate risk management process Climate risks mapped by the different areas within the scope of Corporate Risk Management (CRM), and included in the Operational and Business Risk matrices Regulatory and physical risks included in risk factors (20 F) 20 F Chapter “Risks Management”
4. Metrics and goals
4.1. Metrics Reporting used to monitor climate risks and opportunities
  • Absolute emissions and intensity
  • Absolute emissions and intensity Energy consumption, intensity and matrix profile
  • Water and land use
Chapter “Climate Change and Energy: Performance and Energy” “Water Resources and Effluent”
4.2. Transparency regarding scopes 1, 2 and 3 emissions Emissions reporting scopes 1, 2 and 3 in the Sustainability Report, ESG Portal and CDP Questionnaire Chapter “Climate Change and Energy: Performance”
4.3. Setting goals clearly In December 2019, Vale assumed more ambitious goals in its climate agenda, with 2017 as the base year. These are the goals:
  • Achieve carbon neutrality in scopes 1 and 2 by 2050
  • Reduce scopes 1 and 2 emissions by 33% by 2030, a level compatible with a global temperature increase of up to 2 ºC. This target is linked to the variable remuneration of all Vale employees 
  • Produce 100% of the electricity consumed globally from renewable sources by 2025 in Brazil and globally by 2030
  • Establish ambition to reduce scope 3 emissions • Recover and protect 500,000 hectares by 2030
Chapter “Global Sustainability Goals” and “Climate Change and Energy” CDP item C1.3

The table below shows Vale's main advances in relation to the recommendations proposed by the TCFD:

Key elements of the disclosures on climate risks and opportunities recommended by the TCFD
TCFD Recomendation Disclosure Vale Reference
1. Governance - transparency regarding the governance of risks and opportunities related to climate change
1.1. Description of the supervision of the Board of Directors Sustainability Committee and Board of Directors responsible for validation sand low-carbon monitoring of guidelines Chapter “Governance” or “Sustainability Governance”. CDP item C1
1.2. Role of executives in mapping and managing the agenda Low Carbon Forum, with monthly meetings to assess the deployment and implementation of the Vale Carbon Neutral strategy. This forum is coordinated by the Executive Officers for Sustainability and Institutional Relations, with the support of the Executive Officers for Coal, Strategy and Mineral Exploration, Business Support, Ferrous and Base Metals, and with the participation of Vale’s CEO and CFO. The meetings involve top management and technical groups from the business and corporate areas. Chapter “Climate Change and Energy”.CDP item C1.2
2. Strategy - current and potential impacts on the company’s business, strategy and financial planning
2.1. Transparency on risks and opportunities identified in the short, medium and long term Preliminary and qualitative assessment of potential transition and physical risks, as well as low carbon opportunities. The studies will be further developed over 2020 Chapter “Climate Change and Energy”.CDP items C2.4, C2.5
2.2. Impact of identified themes on portfolio and strategy Adoption of ongoing internal carbon pricing (shadow price) of USD50/t CO2 and in line with what is required to limit temperature increase to 2°C, to be integrated into analyses of capital projects, current projects, budget cycle and strategic planning in 2020 Chapter “Climate Change and Energy”.CDP items C2.4, C2.5
2.3. Business Resilience to Climate Scenarios Initial exercise prepared in 2018 in relation to EBITDA sensitivity to International Energy Agency scenarios, including 2°C scenario.
Preliminary analysis of physical risks of temperature increase and rainfall regime prepared by Instituto Tecnológico Vale.
Sensitivity analysis to climate scenarios in progress within the current Strategic Planning cycle, based on the scenarios of the International Energy Agency.
Chapter “Climate Change and Energy” CDP item C3.1
3. Risk management - process of identification, evaluation and management of corporate risks
3.1. Process for mapping and assessment of climatic risks Environmental and climate change issues are embedded in the corporate risk management process. Physical risks related to impacts that climate change may have on Vale’s assets and their surroundings, as a result of increased temperature, altered rainfall patterns, increased extreme events and rising sea levels, for example, affecting Vale’s operations [5]. Other risks, such as possible impacts of climate legislation on the company’s activities, through the imposition of limits on the emission of greenhouse gases by sector and increases in direct and/or indirect costs due to carbon pricing, are also among the risks identified by the company. Chapter “Climate Change and Energy” CDP Item 2.2
3.2. Climate risk management process The main climatic risks are part of the company’s risk management process.
In addition, the monitoring of the main risks is also communicated in the framework of the Low Carbon Forum
Chapter “Climate Change and Energy” CDP Item 2.2
3.3. Integration into the corporate risk management process Climate risks mapped by the different areas within the scope of Corporate Risk Management (CRM), and included in the Operational and Business Risk matrices Regulatory and physical risks included in risk factors (20 F) 20 F Chapter “Risks Management”
4. Metrics and goals
4.1. Metrics Reporting used to monitor climate risks and opportunities
  • Absolute emissions and intensity
  • Absolute emissions and intensity Energy consumption, intensity and matrix profile
  • Water and land use
Chapter “Climate Change and Energy: Performance and Energy” “Water Resources and Effluent”
4.2. Transparency regarding scopes 1, 2 and 3 emissions Emissions reporting scopes 1, 2 and 3 in the Sustainability Report, ESG Portal and CDP Questionnaire Chapter “Climate Change and Energy: Performance”
4.3. Setting goals clearly In December 2019, Vale assumed more ambitious goals in its climate agenda, with 2017 as the base year. These are the goals:
  • Achieve carbon neutrality in scopes 1 and 2 by 2050
  • Reduce scopes 1 and 2 emissions by 33% by 2030, a level compatible with a global temperature increase of up to 2 ºC. This target is linked to the variable remuneration of all Vale employees 
  • Produce 100% of the electricity consumed globally from renewable sources by 2025 in Brazil and globally by 2030
  • Establish ambition to reduce scope 3 emissions • Recover and protect 500,000 hectares by 2030
Chapter “Global Sustainability Goals” and “Climate Change and Energy” CDP item C1.3

[1] CEBDS - Brazilian Business Council for Sustainable Development
[2] WBSD- World Business Council for Sustainable Development
[3] IA- International Energy Agency
[4] The greenhouse gases (GHG) considered under this policy are: CO2, CH4, N2O, HFC, PFC, SF6 and NF3. From now on, they will be called "emissions"; "carbon"; or GHG.
[5] The Vale Technological Institute regionalized (downscalling) the global warming models referenced by the Intergovernmental Panel on Climate Change (IPCC) for the Brazilian reality. This allowed Vale to identify rainfall regimes changes and volumes and temperature variation for all operations in Brazil. Models RCP 4.5 and 8.5 were regionalized. Based on changes in rainfall and temperature standards, it was possible to identify the main vulnerable assets and potential changes in the intensity and frequency of operational risks previously identified by the company's risk management process.

Goals and Deadlines

Our next steps to evolve in the theme and in line with our commitments are:

  • Conduct an strategy evaluation to achieve the neutrality, involvin forest assets, carbon credits, compensation, among others, with completion forecast for 2021;
  • Conduct extensive carbon pricing training for capital project leaders, budgeting and planning teams;
  • Update a scenario analysis by the strategic planning team.

CDP

CDP is a British NGO that aims to make companies more transparent regarding climate change theme management and on the business' risks and opportunities related to climate change. We respond to the CDP Worldwide questionnaire annually since 2003.

In 2018, CDP adapted the questionnaire to the TCFD recommendations and, as we understand the complexity of the challenge for all adjustments to this new type of reporting, we maintain our publications and are promoting a series of internal actions that lead us to better management and efficiency.

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)

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:


Policies and Procedures

Vale's strategy on climate change is based on the “Climate Change Policy,” which has the following strategic guidelines: 

The Policy defines principles and commitments on fighting climate change for the Company and its subsidiaries, regarding:

Business Case

Battery Use - Ilha Guaíba Terminal (TIG)

Vale is installing at Ilha Guaíba Terminal (TIG), in Rio de Janeiro, one of the country's largest battery energy storage systems to supply electrical demand. The system, installed in partnership with MicroPower Comerc (MPC), consists of lithium-ion batteries manufactured by Tesla. The initiative is an important step in Vale's strategy to replace fossil fuels.

The BESS (Battery Energy Storage Systems) system, which is being developed in partnership with Siemens and MicroPower Comerc (MPC), will reduce the electric energy cost of the port by almost 20% by substituting the electrical grid supply during peak demand periods when the tariff is more expensive - known as Peak Shaving. The equipment has a storage capacity of 10 megawatt-hours, which is enough energy to power 45,000 homes for one hour.

 With the cost reduction, BESS will bring gains to Micropower, savings to Vale, and free capacity for the local electrical grid. MPC will also be responsible for the operation of the equipment.


100% eletric locomotive

Vale, in partnership with Progress Rail - a company of the American group Caterpillar -, is developing a new 100% electric, battery-powered switchyard locomotive. In addition to significantly reducing greenhouse gas emissions by replacing diesel fuel with sustainable electric energy, the equipment also reduces noise emission, which mitigates its impacts on the communities surrounding Vale operations.

The pilot-phase for EMD® Joule locomotive is expected to be launched in this second half of 2020, at Tubarão Unit (in Vitória, in the state of Espírito Santo). The equipment is under the construction phase at the Progress Rail's industrial plant in Sete Lagoas (Minas Gerais state). EMD® Joule's batteries will provide a 1.9 MWh storage capacity, expandable to 2.4 MWh, which means being able to operate up to 24 hours with no need to recharge.

This 100% electric switchyard locomotive is part of the PowerShift Program to replace Vale's energy sources with clean ones.

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.

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