Thank you for joining our climate change briefing today. With me are Johan van Jarseveld and Fiona Wilde. Johan is BHP's Chief Development Officer, accountable for strategy and portfolio. He will be speaking to the relationship between strategy and climate at BHP. Johan holds a PhD in extractive metallurgical engineering and had extensive experience in industry and innovation before joining BHP 4 years ago.
Many of you will know Fiona already. Fiona is an expert in climate change. She holds a PhD in chemistry and has been with BHP now for 10 years. Her leadership has helped to advance climate change action in our industry and beyond, including via her membership of the task force on climate related financial disclosures. Fiona will speak later to the climate actions we are committed to progressing.
I've been close to this topic and the enormous challenges it poses for a number of years. Indeed, back in 2013, Fiona and I worked closely together on designing BHP's present climate change position and strategy. Of course, BHP's focus on climate change didn't start just 7 years ago. We've been active in addressing climate risk for more than 2 decades. In 1997, we were among the 1st large companies to publish a report detailing our operational greenhouse gas emissions.
We first implemented an internal carbon pricing protocol and began trading carbon credits in the European market in 2004. And in 2016, we launched the world's first forced bond with the International Finance Corporation. We have long seen climate as integral to our approach to environmental, social and governance issues. In turn, ESG is deeply embedded into our broader operating model. I am pleased to have the opportunity today to share with you the progress we've made on climate action, the new commitments we're making and how we integrate climate change into our corporate strategy and portfolio decisions.
Our approach to managing climate risk is founded on 3 key elements: accountability, expectations and value. Firstly, we see ourselves as being accountable to take action. We emit greenhouse gases through our own operations, as do our customers when they use our products. We know we have a role to play in addressing climate risk. We acknowledge this and we embrace our responsibility to act.
Secondly, BHP's stakeholders have increasing expectations of us. This includes our investors, our people and the communities and nations who host our operations or buy our products. We must be responsive to these expectations. And in doing so, we can create competitive advantage for BHP. Thirdly, and very importantly, climate change action makes good economic sense.
It creates value. Later today, we will talk about our approach to detailed scenario analysis and the implications for our business. Of the scenarios we've assessed, those that envision stronger global climate action also deliver greater value for BHP. And that's because we are major providers of the commodities that will enable a green transition. So again, accountability, expectations and value, we are driven by all three.
Our approach to climate change is defined by a number of key requirements. Firstly, we are a company of substance and our actions must also be of substance, real tangible actions to drive emissions down. Secondly, we must focus on what we can control inside our business and work with others to help them reduce emissions from the things that they control. This includes sharing our insights and expertise to amplify impact. And finally, portfolio.
We are a long term company that creates value and returns over generations. We do this by striving to be exceptionally good operators, by maintaining financial discipline and by ensuring exposure to commodities that benefit from the megatrends playing out in the world around us. We exercise judgment about how to stage the shaping of our portfolio over time. We assess individual commodities for attractiveness over multiple time horizons. And we grow value in the near term, including by continuing to invest in commodities that have strong fundamentals in the short to medium term, like oil, all while building up a richer set of options in commodities that will remain attractive into the longer term, like copper, nickel and potash.
This is why we have been clear that we intend to create and secure more options in future facing commodities. We already have very significant exposure to these, but we want to ensure stakeholders benefit further from the growth in demand we expect as decarbonization and electrification play out. For more than 130 years, BHP has been producing the resources that have supported economic growth and made countless lives better around the world. Everything we produce, including iron ore, coal, petroleum, copper and nickel help to deliver these outcomes. But the production of the resources is not an end in itself.
It's what these resources enable that makes the real difference, driving growth and development, underpinning materials for sanitation and health care, sustainable food production, developing industry, building vital infrastructure and allowing broad based wealth creation. As our purpose says, we exist to bring people and resources together to build a better world. Our approach to climate change is entirely consistent with this purpose because a world that decarbonizes while sharing the benefits of economic growth is a better world. Our portfolio is already well positioned to support the transition to a lower carbon world aligned with the Paris Agreement, while creating value for our shareholders and our broader stakeholders. As Johan will explain further shortly, our scenario analysis indicates that BHP will do best in a transition to a world where warming is limited to no more than 1.5 degrees Celsius above pre industrial levels.
In a 1.5 degree scenario, the world is expected to need almost twice as much steel in the next 30 years as it did in the last 30. And so the world will rely on the iron ore and coking coal we produce. If we want to keep pace with the development of renewable technologies such as electric vehicles and solar energy, then copper production will have to double over the next 30 years. And nickel production will have to increase nearly fourfold to power the next generation of battery technology. And while the shift to cleaner energy sources is clear, the world and everyday modern life on the pathway to decarbonization.
Finally, potash will be vital for more efficient agricultural practices and to ease pressure on scarce arable land. Under any scenario, our industry will be critical to ensuring the rise of global living standards. So our conclusion is clear. Whichever way the world evolves, we will create substantial value well into the future, even more so in a lower carbon world. We are, however, realistic about the magnitude of the tasks the world faces in meeting the Paris goals.
Unfortunately, today, the world is not currently on track. Neither the current aggregate commitments of nations nor progress against those commitments is sufficient. The world will need to increase action if it is to achieve the ambitions of Paris. This makes it all the more important that the focus is at all times on actions that result in actual reduction in emissions and not simply the optics of reduction. Sustained action, not symbolism.
We must also acknowledge that we cannot leave large segments of the world's people behind on the road to decarbonization. Not only would that not be just, but it would make the achievability of these aims impractical. A better world requires a fair transition that sees decarbonization while ensuring that people maintain access to the resources that they need for their daily lives and to support improvement in their economic well-being. Our challenge, the world's challenge, is to ensure that we all benefit from natural resource use in a manner that supports the transition to a low carbon future. We come to this challenge with a number of important perspectives on ourselves.
We are good at stepping up to tackle big challenges, and we are ready and willing to face into this one. We have the people and know how to make a difference to improve our own performance and help others improve theirs. We have a portfolio that can help speed the carbon transition, while meeting the essential needs of daily life. We have the strategy and systems that will help us identify and secure value creating opportunities consistent with pursuit of a 1.5 degree world. We are ready to bring these capabilities to bear in helping to lead the solving of this critical global challenge.
I'm therefore pleased today to share how we will accelerate our own actions and help others to do the same by adding detail and delivering on the promises we made in July of last year. Today, I'm announcing a firm well considered commitment to reduce our operational emissions by at least 30% by 2,030 compared to 2020. This is a midterm target on the way to meet our goal of being net 0 in our operational emissions by 2,050. We will adjust our baseline for acquisitions and divestments. There will be no free pass from any material divestments of higher carbon operations.
We are also taking action to help enable reduction in Scope 3 emissions. We'll support the steel industry to identify pathways and develop technologies by 2,030 to reduce emissions intensity by 30%. And we'll work with the maritime industry to support an intensity reduction of 40% in BHP chartered shipping. We expect our actions to catalyze broader emissions reductions throughout the steel and maritime sectors. We're also making a direct connection between these measures and executive remuneration with 10% of the short term incentive part of my remuneration and those of our leaders, contingent on meeting targets and goals associated with these commitments every year.
And of course, given that we are all also BHP shareholders, we are incentivized to take action knowing the long term importance for BHP value. Finally, today, we are delivering on our promise to provide greater insight into how our portfolio will fare in a transition to a 1.5 degree world and how we will allocate capital in the context of climate through the release of our new climate change report. Johan and Fiona will talk through more detail of these elements shortly. While we're announcing these measures today, we've not been waiting around to get started. Last year, we announced that our Chilean copper mines at Escondida and Spence would move to 100% renewable energy, and this is well on track for the mid-2020s.
And just last week, we added to this push renewables by announcing the awarding of significant new renewable energy contracts for our Eastern Australian operations, which will reduce our Scope 2 emissions in our Queensland operations by 50% by 2025. We've also awarded the world's 1st LNG fuel bulk carrier tender, which will reduce greenhouse gas emissions by more than 30% per voyage and help catalyze broader reductions in the global shipping industry. These actions are only but they do show our commitment to responsible operations and to supporting decarbonization in our own right, as well as helping our partners to do the same with their emissions. I said earlier today that our approach to decarbonization is wholly consistent with our purpose. Our strategy then creates the framework through which we identify and capture the economic opportunities that come with financial discipline, operational excellence and constant vigilance towards the way in which the world will evolve.
And taken together, they enable BHP to help build a better world, while generating superior returns, 1st from today's portfolio and then from the way in which we shape our portfolio over time to create new value as we meet the needs of the world in the decades to come. I'd now like to ask Johan to talk through how we will deliver value specifically in a low carbon transition and how we will be ready for what the world demands of us in any scenario. After Johan, Fiona will take you through
the climate commitments I outlined earlier. So with that, Johan, over to you. Mike, thank you. I will run through our scenario analysis process, how we use carbon pricing and our scenarios to shape our strategic decisions and finally, how those decisions are evaluated under our capital allocation framework. Our strategy to have the best capabilities, best commodities and best assets is integrated with the climate challenge and our ambition to grow value and returns in a decarbonizing world.
Every element of our strategic framework, the capabilities we need, the commodities we prefer and the assets we choose, including how we run those assets, is driven by the value we can create by positioning BHP to benefit from a world that is focused on reducing greenhouse gas emissions. Furthermore, they are driven by our accountability to achieve our emissions targets and goals. The time frames for the decisions we make are measured in decades. So we must make choices in light of long term trends and uncertainties. We seek to manage our portfolio for value, risk and returns over multiple horizons.
To help guide our decision making, we have developed a range of long term scenarios or views. They cover multiple trends, but the analysis of the climate challenge is the most important. That is because it has the greatest impact on the outlook for our commodities and society's expectations of us to do our part to address global warming. We have developed 4 climate related scenarios to help guide us. Firstly, a Paris aligned 1.5 degree scenario.
Secondly, a less ambitious low carbon view, still predicated on rapid decarbonization in easier to abate sectors. Thirdly, a central energy view based on the most likely policy mix, which is pointing towards decarbonization in some of the more developed regions. Finally, an extreme climate crisis scenario, which involves an abandonment of existing global decarbonization initiatives for a time, leading to a catastrophic climate crisis, which catalyzes urgent subsequent decarbonization. The power of these scenarios is in the acclimation of the outcomes taken together rather than application of them on a stand alone basis. Together, they help us make judgments about the implications of each, the plausibility and ultimately, what they tell us about the likely direction of travel and over what time horizons.
We are encouraged by what our scenario analysis tells us about the opportunities in front of us, but we are also clear eyed about the challenges. We will continue to evaluate the scenarios, the way they may evolve during the transition and the implications for the management of our portfolio. As Mike said, we believe the world must strive to achieve a well below 2 degree outcome consistent with the Paris Agreement, and we do see some momentum towards that outcome. But the scale of the challenge to transition to a 1.5 degree world is huge. We will need steep annual emissions reductions, sustain them for decades and with every part of the economy needing to decarbonize.
Global energy system emissions will need to decrease by 70% and the fossil fuel share of primary energy declined to 50% by 2,050, an ambitious task. We expect that the calls for action will increase in urgency over the time frames we forecast, lagged by the actions themselves. That is important for our strategic choices. Whether or not we achieve 1.5 degrees, it is the steps that we expect the world to take that drives the commodities we choose, the way we will operate our assets and the capabilities we need to succeed. BHP's portfolio is already well positioned to benefit from a world that seeks to achieve a low carbon future.
The greater the global efforts to decarbonize, the stronger the impact on demand for copper, nickel and potash, as well as the increasing need for more steel to build wind farms, pump hydro and other decarbonization enabling infrastructure. High quality, low impurity iron ore and high quality hard coking coal will both be critical to the steel industry as it seeks to improve efficiency and lower the emissions intensity of production, while moving toward processes that rely on carbon capture or hydrogen injection. As we transition to great electrification, especially in transportation, nickel and copper are favored, while headwinds will emerge in the demand for oil and then for gas. We expect the world will need petroleum products for the foreseeable future. Our oil and gas assets exhibit low emissions intensity, and we expect the supply gap we've spoken about previously to persist.
We will continue to invest in a disciplined and balanced way in order to generate attractive returns for our shareholders. As Micah said, to achieve an equitable transition to a greener future and to maintain and continue to improve the living standards of billions of people during that transition, the world needs oil and gas. Our portfolio may be well positioned today, but we are not resting on our laurels. We are rising to the challenge by reshaping our portfolio to outperform in a low carbon world and to maximize value. We're actively pursuing opportunities to grow our copper and nickel business, and we have already announced an intention to reduce our footprint in coal, focusing only on high quality, hard coking coal.
And to fulfill our ambitions, we must have the capability to innovate, finding ways to increase the efficiency of our decarbonization efforts and to unlock more resource in our portfolio. Our innovation team is prioritizing each of these areas as a critical enabler of our strategy. A key element of our strategy is to have the best assets. In the context of our climate scenarios, best means producing commodities that help our customers transform them into end products in the most efficient, low emission way possible. Having the best assets also mean addressing our Scope 1 and 2 emissions.
We are well placed in that regard. Most of our assets are already at the lower end of their respective emission intensity curves. And as Mike said, we are moving them further to the left, significantly so in the case of our Chilean copper assets. Accepting that the world will continue to need our commodities, we are well placed to provide these with amongst the lowest carbon footprints. In addressing our Scope 1 and 2 emissions, like all of our capital investments, we assess and rank each decarbonization project through the rigor of our capital allocation framework.
Achieving our Scope 1 and 2 reduction commitments ranks alongside maintenance capital in the hierarchy of our decisions. We are disciplined about ranking the projects we evaluate and optimizing those that we execute. In addition to initiatives such as contracting of renewable power, potential capital spend over the next 5 years is expected to be $100,000,000 to $200,000,000 per annum and already included within our existing CapEx guidance. And as you can see in our climate change report, our investment decisions rely on valuations that embed carbon prices. We use between $10 to $40 per tonne in the central energy scenario and $25 to $110 per tonne in the lower carbon scenario.
This reflects our expectations of a regulatory observable third party price on carbon. Importantly, we approach decarbonization projects to meet our commitments in a manner similar to asset integrity spend. Not only do we seek to protect value, but we also work very hard to find ways to grow value and reduce risk as we execute these projects. As we evaluate each project, we are focused on optimizing the significant benefits that would accrue from these investments. The great thing is that in addition to the benefits to our sustainability, management of risk, license to operate and the creation of social value, many of these projects will also bring with them a positive net present value.
We will certainly be working very hard to make that the case. At all times, our ranking process focuses on the most economically efficient and effective decarbonization. Consistent with our approach to all of our investments, we will be rigorous in our focus on value. Finally, let me quickly touch on our climate investment program. In addition to our other efforts to decarbonize our business, this 5 year $400,000,000 program demonstrates our deep commitment to reducing scope 1, 2 and 3 emissions using multiple delivery channels, including projects, partnerships, R and D and venture investments.
Using our disciplined approach to capital allocation, we already have a robust pipeline of projects via our annual corporate planning processes. In closing, I want to emphasize that the climate challenge and the implications arising from our climate scenarios are fundamental to our strategic choices and to the execution of our strategy. Now to tell you more about what we are doing on the ground, let me hand over to Fiona Wall.
Thanks, Johan. As Mike outlined earlier, given the urgency of the climate challenge, we must take tangible, substantive, measurable actions. So I'd like to share more detail about our targets and goals and how they will drive the decarbonization of BHP and support decarbonization in the value chains of which we are a part. We've been setting targets to reduce emissions from our operations for decades and we have consistently delivered against these targets. Our long term goal of net 0 operational emissions by 2,050 is clear.
And today, we're announcing our pathway to achieve it. Setting a target of at least a 30% reduction in emissions by 2,030 from 2020 levels provides a clear expectation for our assets and a clear demonstration to our stakeholders that behind our target is a considered and committed plan for delivery. In developing the target, we applied the same rate of reduction to BHP's emissions that the world's emissions would need to contract by in order to meet the goals of the Paris Agreement. This is known as the absolute contraction method. This is a science based target that reflects not just our commitment to decarbonizing BHP, but the recognition that we must play our part in accelerating the global pathway to decarbonization.
Our execution plan for this target includes 2 key focus areas. The first is to decarbonize our electricity supplies. This is a relatively low risk step that can be achieved in a capital efficient manner by leveraging commercial solutions, primarily in the form of power purchase agreements or PPAs. The second is to decarbonize our truck fleet. This is a more complex task as displacing diesel requires partnership with others test and develop new technologies with significant lead times for implementation.
We will not set a target without a clear plan for delivery. This plan represents a balance between rapid implementation of renewable energy and prudent advancement of diesel displacement in a manner that preserves optionality and sets us up to achieve net 0 emissions by 2,050. We believe the plan is aspirational, but achievable with further optimization to continue over the coming years as new technologies emerge and commercial applications are better understood. So let's now look at a case study on PPAs. Last year, BHP entered into 4 new renewable power agreements for its Escondida and Spence copper operations in Chile.
The contracts will effectively displace over 3,000,000 tons of CO2 equivalent per year compared with the fossil fuel based contracts they're replacing. And our investment has directly triggered the development of new renewable generation capacity. These assets are now on track to have 100% renewable supply by the mid-twenty 20s at lower cost than the supply it replaces. Learning from our experience in Chile, we've just awarded a new renewables contract here in Australia. As Mike mentioned, these will reduce our scope 2 emissions in our Queensland operations by 50% by 2025.
Greening our electricity supply will also facilitate the 2nd phase of our pathway to net 0, decarbonizing our truck fleet. The path to electrification of mining equipment will include solutions such as trolley assist, overland conveyors and battery solutions. Taking a scalable approach provides flexibility for the rapid development of emerging technologies and resolves the complexities of integrating these into existing operations. But just like our PPAs, transitioning our trucks from diesel to renewables can unlock value, given the higher efficiency of electric motors compared with internal combustion engines and the low cost fuel source that will underpin supply. Partnership with industry and equipment manufacturers will be key to this transition.
We are already leading a collaboration between International Council on Mining and Metals Members and Equipment Manufacturers to progress research, development and deployment of electrified mining equipment. We also recently launched a cross sectoral consortium on green hydrogen technologies and their application in mining and resources. Partnerships like this are pivotal to accelerate the decarbonization of BHP and drive decarbonization in our value chains. We know that we also have a role to play to help support emissions reductions in our value chain. By definition, value chain or Scope 3 emissions occur outside of our operated assets and we have no direct control over their production.
We must therefore seek opportunities to partner with others across our value chain to enable reductions. Over the last year, we've investigated additional ways to do this in consultation with suppliers, customers, investors and other stakeholders. Our approach is to focus on where we can make the biggest difference through both scale and influence. And it includes 3 elements: annual actions, goals for 2,030, and a long term vision of steel sector and maritime sector decarbonization in line with the goals of the Paris Agreement. So let's take a look at how we're partnering with others to deliver this.
Over the last 5 years, we've supported the development of carbon capture and storage technology, which can be applied to a range of sectors and is critical to achieving a 1.5 degree outcome. For example, we established the International CCS Knowledge Center, which has provided key insights into cost savings for the next generation of facilities. CCS can also play a key role in decarbonization of the steel sector and we are actively progressing partnerships that will demonstrate how it and other technologies can support this outcome. In line with our goal to support decarbonization of BHP chartered shipping, we've awarded the world's 1st LNG fueled bulk carrier tender. The tender will apply to the hire of 5 bulk carriers to carry iron ore between Western Australia and China and will reduce emissions by more than 30% per voyage.
By developing and delivering these types of partnerships, we increase the chance that collectively we can achieve the goals of the Paris Agreement to which we all aspire. Now with targets in place, we must close the loop by making sure delivery is incentivized and rewarded across BHP. We've been setting emissions reduction targets and linking performance against them to executive remuneration for many years. Last year, we committed to clarify and strengthen this link. And the Board has now determined that performance against climate change measures will represent 10% of the outcome under the cash and deferred plan or CDP for all executive leadership team members.
The 10% component will include the key measures we have outlined today, Actual reductions in operational emissions, actions on the pathway to net 0 operational emissions and actions to address value chain emissions. These measures will directly cascade to other senior leaders and the broader workforce. And as Mike said, this is on top of the incentive that our ELT already has associated with the share based component of their remuneration. To ensure we continue to respond to the expectations of our stakeholders, we must engage widely, actively and consistently. We have prioritized transparency and disclosure for many years.
For example, our 2015 portfolio analysis set a new standard within the resources sector. We were one of the first companies to report in line with the recommendations of the TCFD. Our industry association reviews have led the sector and we continue to progress recent reforms. And we continue to score well in climate related investor benchmarks such as CDP and TPI. Today, we take our next step in transparency and disclosure by launching our climate change report.
Following the recommendations of the TCFD, the report outlines how climate change is considered in our governance, strategy, risk management and metrics and targets. It is the culmination of extensive consultation, deep reflection and decades of leadership. We are committed to action supported by costed and practical plans, the progress of which will be subject to ongoing transparent disclosure. I'm really proud of the work we have done and will continue to do. And as always, I welcome your input as it helps us to evolve our approach.
And now back to Mike to conclude.
Thank you, Fiona. We've covered a lot of ground in today's presentation and given the scale and complexity of the climate challenge that's necessary and appropriate. The world needs economic growth and Paris aligned climate action. I hope you will take away how we plan to contribute to a low carbon world, provide the commodities the world needs and create substantial value in the process. We stand ready to work with our communities, customers and partners to deliver the high growth, low carbon world to which we all aspire.
We approach this task guided by the elements of accountability, expectations and value. We're a company of substance and we will continue to step up to