BHP flags need for up to 5m offsets and slower decarbonisation technology
BHP has published its Annual Report 2026, disclosing that it expects to require carbon credits to meet compliance obligations under Australia’s Safeguard Mechanism and acknowledging that development of key decarbonisation technologies has slowed since it set out its climate plan.
The report covers the year to 30 June 2026 and updates assumptions and plans set out in the company’s Climate Transition Action Plan 2024, with climate disclosures carried in Operating and Financial Review section 9.10 and the accompanying Sustainability Report. Notably, BHP has not published a standalone greenhouse gas emissions calculation methodology document for FY2026, folding that material into the Sustainability Report instead.
The central admission concerns technology readiness. BHP states that many of the technologies needed for diesel displacement and fugitive methane abatement to reach its long-term net zero goal are not yet ready for deployment, and that a pathway between its medium-term FY2030 target and its CY2050 net zero goal will require a significant step change in the readiness, commercial availability and commercial viability of low to zero emissions technology. It says explicitly that the pace of development of some decarbonisation technology has slowed since publication of the 2024 plan. Neither the medium-term target nor the long-term goal has been changed.
On carbon credits, the company draws a firm distinction between regulatory and voluntary credits. Regulatory credits are those used for compliance in operating jurisdictions, principally the Safeguard Mechanism, under which facilities must keep Scope 1 emissions at or below progressively declining legislated baselines. Voluntary credits are those generated outside regulatory compliance, including Australian Carbon Credit Units not used for compliance. BHP states it will not use regulatory credits to meet its medium-term operational emissions target, though it may use voluntary credits meeting its integrity standards to address any unexpected shortfall. It acknowledges that its need for eligible credits may grow over time to support compliance, given that abatement technologies including electric mining equipment and fugitive methane mitigation are not yet deployable, and notes it is subject to other regulations that may require mandatory credit surrender in future.
Voluntary credits sourced by the company undergo risk-based screening and due diligence against integrity standards designed to align with global best practice, including the International Carbon Reduction and Offsetting Alliance’s Code of Best Practice.
The Safeguard Mechanism applies to roughly 200 facilities each emitting more than 100,000 tonnes of carbon dioxide equivalent annually, including mines, gas facilities, smelters and manufacturers. Facilities must cut emissions intensity by up to 4.9% a year, meeting obligations either through onsite abatement or by surrendering Australian Carbon Credit Units or safeguard mechanism credits, the latter generated when a facility emits below its baseline.
BHP has previously reported a 36% reduction in absolute Scope 1 and 2 emissions in FY2025 against its FY2020 reference year, a reduction driven substantially by renewable power purchase agreements at its Chilean copper operations and in Australia, including agreements with Alinta Energy covering Port Hedland port facilities and a seven-year agreement between BMA and Queensland generator CleanCo commencing in FY2027. The company is also trialling hydrotreated vegetable oil to power mining equipment at its Yandi iron ore operations in Western Australia.
The disclosures land against a contested backdrop. Internal company documents reported in May indicated BHP did not expect material increases in carbon prices until the 2040 financial year, and that delaying climate action into the 2040s risked the 2050 goal. Australia’s Climate and Energy Minister faces pressure to tighten offset use by large miners in the forthcoming review of the Safeguard Mechanism.
