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Mining and oil companies, among the world’s largest polluters and emitters of planet-warming carbon dioxide, are cleaning up their acts. A process that started slowly and reluctantly is now moving with the momentum of a freight train.

That’s the good news.

The bad news is that their black-to-green transformations are not necessarily good for the planet and could even result in more carbon output, not less.

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How could that be? Booting carbon-intensive products such as coal, oil, natural gas and iron ore out of the business model of mining and energy companies does not mean these commodities will cease being produced; they will just be produced by someone else.

Mining and oil companies can reduce their emissions in three ways. The first is to make their operations, which use highly polluting machines such as diesel trucks, more energy efficient. The gains are slow and hard won.

The second is to produce less of the grubbiest commodities. But resource companies are hard-wired to produce more and more. Shareholders do not value shrinking production.

The only big resource company to declare it will cut output to bring down emissions is BP. Last year it said oil and gas production would fall 40 per cent by 2030 and refining output by 30 per cent as it tries to reach carbon neutrality by 2050.

BP is going from Big Oil to Big Energy and has been diving into offshore wind power. So far, investors are not thrilled – BP shares have lost 44 per cent in the past year, even though oil prices have climbed in recent months.

The third way is to sell or spin off carbon-intensive assets and keep the commodities that will play crucial roles in the transition to a sustainable economy. They include copper, nickel and cobalt, each of them essential for battery-powered cars. That’s exactly the route Big Mining is set to take, as The Globe and Mail reported Saturday.

The top players – BHP, Vale, Rio Tinto, Anglo American, Glencore and Canada’s Teck Resources – are all mulling plans to shunt their dirtiest assets into separate companies with no overlapping ownership. Anglo plans to spin off its South African thermal coal (for electricity generation) division. Glencore is seeking carbon neutrality by depleting its coal mines over time. Teck is trying to sell its stake in Suncor’s Fort Hills oil sands operation.

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Their goal is to make themselves appealing to investors who follow environmental, social and governance (ESG) guidelines. Those investors want to sink their collective trillions into companies that are part of the climate solution, not the problem. Norway’s US$1.3-trillion sovereign wealth fund, the biggest of its kind, rattled Glencore and Anglo last year when it ejected them from its portfolio for lacking the proper green credentials.

Other mining companies face banishment, too. So the rush is on. Companies that reach net-zero Scope 3 emissions – the direct and indirect carbon output along the entire value chain – will be rewarded the most (more than 90 per cent of the emissions of any mining company are Scope 3).

Here’s the kicker: Out does not mean gone. It’s the same as selling your old gas guzzler: The new owner keeps the pig on the road while you drive a cleaner car. When Anglo spins off its South African coal mine, the new company will continue to produce the world’s dirtiest fuel. The Fort Hills oil sands operation won’t close when Teck pulls out.

Emissions could even go up. The sold or spun-off companies may not pursue sound environmental stewards and are likely to attract investors and commodity buyers who don’t much care about ESG. Even as China rolls out vast solar and wind farms, it is building coal-burning power plants with abandon and will get its coal supplies from the cheapest producers. If BP produces less oil, Saudi Aramco or others will produce more to fill the gap. The transition period to a green economy will take decades, maybe longer.

The new breed of companies holding the dirtiest assets may not get an easy ride, of course. Some will have trouble raising capital because many banks and investors won’t go near them. Then again, companies that don’t need to raise a lot of capital, and can pay a fat dividend, may have no trouble finding investors. And if they create jobs, they will win the support of governments – no matter how grubby their output.

ESG investing is getting bigger by the day but hardly rules the market. Shedding dirty assets is the right strategy. But don’t for a second think a cleaner mining company means a cleaner planet.

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