Carbon neutrality/climate change action

Idemitsu Kosan aims to realize a carbon-neutral (CN) and recycling-oriented society by utilizing its group's strength of "provide for society capabilities" and fulfilling its "responsibility to support people's lives" and "Responsibility to protect the global environment now and in the future." With regard to efforts to address climate change, while continuing to disclose information in accordance with the TCFD recommendations, which we signed in support of in 2020, we will continue to expand disclosure with the IFRS S2 framework in mind, and accelerate our efforts with the understanding and cooperation of our stakeholders.

The pages on which each item of the TCFD framework is posted on this website are listed in the table below.

(Supplementary item)

An overview of our corporate governance system is provided in the link below, and supplementary information regarding our response to climate change is provided below.

For a company whose main business is selling fossil fuels, responding to climate change is one of the most important management issues, and it is an effort that will require a large-scale transformation of our business portfolio over the medium to long term.
Board of Directors is tasked with determining management policies by examining these issues from multiple angles and in a multifaceted manner, and overseeing the prompt and steady implementation of actions based on those policies.
The 10 members of Board of Directors are individuals with experience, track records, and knowledge in a wide range of fields, including the environment, Resources circulation, domestic and international energy transition trends, related advanced technologies, and sustainability.

Major climate change-related proposals are submitted to Management Committee, the highest deliberative body for business execution, and particularly important matters are reported to Board of Directors. This allows Board of Directors to oversee whether company-wide policy is being steadily implemented.

Climate change response efforts are company-wide and cover a wide range of topics. Therefore, we recognize the need to accelerate the formulation and implementation of company-wide strategies to realize carbon neutrality society, and a specialized department (CNX ^Strategy Department) is taking the lead in promoting these efforts. The CNX Strategy Department leads the formulation of company-wide CN strategies, setting GHG reduction targets, and CNX human resource development in cooperation with related internal departments.

*CNX: Carbon Neutral Transformation

*1 Establishment of management policies based on climate change issues Supervising the implementation of actions based on policies
*2 Deliberation of major climate-related topics
*3 Scenario analysis, company-wide investment and loan policy formulation and management
*4 Company-wide CN strategy planning, GHG reduction target setting, progress monitoring of each department strategy
*5 GHG emissions capture and monitoring
*6 CN strategy planning and execution by business division

The remuneration system for our directors (excluding part-time directors and outside directors) and senior executive officers and above consists of ① fixed compensation, ② performance-linked bonuses, ③ performance-linked stock compensation, and ③ performance-linked stock compensation. It also includes CO₂ _​ reduction indicators that are essential for realizing a carbon-neutral, recycling-oriented society.

Long-term energy business environment scenario towards 2050

In examining specific responses to climate change, we are formulating long-term business environment scenarios covering the period up to 2050, identifying risks and opportunities based on the output of those scenarios, and proceeding with formulating specific strategies.
Since publicly announcing our first business environment scenario in 2019, we have reviewed the scenarios as necessary in response to changes in the social environment. In considering Medium-term Management Plan (FY2023-FY2025), we have envisioned three scenarios, and of these, we have formulated our plan with a strong focus on the "Hekisentei +" scenario, which is similar to the IEA's net zero scenario in which decarbonization will progress the most.
The Hekiten+ scenario assumes a world in which governments will rapidly implement measures to achieve the 1.5°C target, and various decarbonization technologies will be provide for society at a very fast pace, achieving the 2050 CN. In this scenario, in addition to renewable energy, various decarbonization technologies will be introduced, such as nuclear power generation, hydrogen and ammonia combustion power generation, thermal power generation with CCS (Carbon Capture and Storage), synthetic fuel, and negative emissions, and the goals of the Paris Agreement will be achieved through an all-out war. In addition, oil demand in the Asia-Pacific region is expected to peak in 2025, and domestic oil demand is expected to decrease by 30% in 2030, 60% in 2040, and 80% in 2050 compared to 2019.

*The three business environment scenarios are unique to our company, but the following are scenarios from other organizations that are similar to each scenario.
Cloud: IEA Stated Policies Scenario
Rainbow: Between the IEA Stated Policies Scenario and the Sustainable Development Scenario
Hekiten+: IEA Net Zero Emissions by 2050 Scenario

●Long-term energy demand outlook

We are identifying risks and opportunities related to climate change based on long-term business environment scenarios leading up to 2050. For each area, we have compiled the expected timeline, level of financial impact, and our response, and are proceeding with specific initiatives in accordance with the details in the table below.
In response to risks and opportunities, we will work to strengthen the profitability and capital efficiency of existing businesses, create new businesses through investments in business structure reforms, transform our business portfolio, etc. Through these efforts, we aim to achieve an operating profit + equity in earnings of 270 billion yen by 2030.

*1 Financial impact over a long-term timeline Level 1: ~5 billion yen, Level 2: 5 billion yen ~ 50 billion yen, Level 3: ~50 billion yen
*2 Super engineering plastics, oxide semiconductors, high-performance asphalt, environmentally friendly agricultural and livestock materials, etc.

The "Our Responses" for the above risks and opportunities include potential provide for society themes up to 2030. We are working on these as part of our transition strategy towards 2050.

We plan to invest a cumulative total of 800 billion yen by 2030 in new business expansion that will benefit CN.
Recognizing the need to accelerate the formulation and execution of company-wide issues to realize carbon neutrality society, we established the ^CNX Strategy Office (currently the CNX Strategy Department) in July 2021, and further established the ^CNX Strategy Headquarters in December 2023 to share information within the group and make rapid decisions. Under the structure shown in the diagram below, we have allocated personnel to each business division at a level of 250 people, and for each project that contributes to CN, we screened 16 projects set as new business themes from the perspective of market feasibility, the degree of utilization of existing assets, the presence or absence of major business partners and our own technological advantages, etc. As a result, we selected four businesses - blue ammonia, e-methanol, SAF, and lithium solid electrolytes as investments to be made toward CN in 2050 (CN investments) and have already begun concrete efforts.
For investments in new projects, we check changes in Scope 1, 2, and 3 emissions as well as changes in avoided emissions by others before and after the project, and then conduct a sensitivity analysis using an internal carbon price (100$/t-_CO2). We use this information as a reference when evaluating investment projects.

Our transition strategy has been adopted as a model case for climate transition finance led by the Ministry of Economy, Trade and Industry.

To realize carbon neutrality society, we believe it is necessary to address both the reduction of our own direct and indirect emissions associated with business operations (Scope 1 and 2) and the contribution to reducing emissions of others through the provision of new products and services (Scope 3 reductions, creating contributions to avoided emissions).
In proceeding with this initiative, we recognize that it is important to simultaneously contribute to the environment by reducing emissions, contribute to society by supplying energy, and contribute to the economy by maintaining and expanding corporate profits. Based on this recognition, we have set the following three indicators to monitor the progress of related activities.

The target values (target levels) and actual values for fiscal 2023 for each indicator are as follows:

In order to realize carbon neutrality society, we will reduce emissions throughout the supply chain and proceed with related initiatives, using an indicator called "Carbon Intensity" to set targets and achieve both a contribution to the environment (_​CO₂ reduction) and a contribution to society (supply of the low-carbon energy that society needs).
In FY2023, compared to the base year (FY2020), the sales ratio of coal, which has a high Carbon Intensity (CI value), among the fossil fuels sold, decreased, while the sales ratio of natural gas and petroleum products, which have low CI values, increased, resulting in a decrease of ▲1.1%.
The "Energy one step ahead" fields that we have set as our future business areas are all initiatives that will significantly contribute to Scope 3 reductions, and through provide for society of these fields, we hope to contribute to the realization of carbon neutrality society.

*The area graph in the figure shows the low carbon degree of society based on the IEA scenario (our assumption)

The "Energy one step ahead" that we have set as our future business field is an initiative that will greatly contribute to Scope 3 reduction, and we would like to contribute to the realization of carbon neutrality society through provide for society of this field.

* Target in 2030 assumes high-octane gasoline

By scaling back our fossil fuel business in line with demand trends while expanding our new carbon-neutral fuel business, we will reduce CO₂ emissions throughout our entire supply chain while maintaining and expanding our company-wide profit levels.

●Image of reducing Scope 1, 2, and 3 emissions through business portfolio transformation

In response to increasingly severe natural disasters, we can anticipate various types of damage such as earthquakes, tsunamis, and storm surges, extract risks, and minimize damage to Refineries / Complexes in the event of a disaster and quickly restore their original condition. Extremely important. We will continue to fulfill our mission of supplying energy by strengthening our hardware by investing in equipment to strengthen our security capabilities, and by enhancing our intangible aspects from the perspective of disaster mitigation in the event of unexpected disasters.
In recent years, more and more typhoons are moving across the country while maintaining their strength, and climate change is said to be a contributing factor. Storm surges brought about by typhoons increase the risk of flooding for Refineries / Complexes located in coastal areas. Therefore, we are simulating the route in which the largest typhoon expected in the future will land directly on Refineries / Complexes, and conducting risk analysis on the impact of flooding from storm surges. Based on the results of this analysis, we are considering hardware reinforcement measures such as installing flood walls in the seawater pump room, as well as soft disaster mitigation measures by enhancing the disaster prevention response manual.

● Typhoon path assumptions that serve as the basis for considering storm surge damage Refinery

●Estimated image of storm surge damage

Low carbon Petroleum

To achieve this energy transition, we will first steadily utilize the assets we possess (customers, human resources, stores, systems, infrastructure, facilities, etc.) and, together with new investments in next-generation businesses, create a system that can steadily supply diverse energy sources to our customers.
In the field of biomass fuels, we are constructing an SAF production facility (production capacity 100,000 kL) using cutting-edge technology at Chiba Complex, with plans to start supplying the fuel in 2026, aiming to contribute as a low-carbon solution to the air transportation industry. This initiative has also been adopted by the New Energy and Industrial Technology Development Organization (NEDO) as part of its Green Innovation Fund program ^*1.
Our intermediate goal is to build a system to produce 500,000 kL of SAF ^*2 domestically per year by 2030. As part of this system construction, we will link raw material procurement with the expansion into bio-chemicals, and begin supplying our customers with biodiesel, an internal combustion engine oil.

*2 SAF: Sustainable Aviation Fuel
Jet fuel is produced from sustainable sources with low CO₂ emissions during the process from raw material production and collection to combustion.

※3 ATJ：Alcohol To Jet
It is a technology and process for producing SAF from ethanol, and has been certified as the international standard "ASTM D7566 Annex 5" for SAF.
※4 HEFA：Hydroprocessed Esters and Fatty Acids
SAF production method for hydrotreating used cooking oil, vegetable oil, etc.

Establishment of CNXcenter concept

Our establishment of CNXcenter concept is to take advantage of the characteristics and strengths of Refineries/Complexes, which have been operating for many years as fossil fuel-derived energy manufacturing bases, and transform them into new supply bases for carbon-neutral fuels and products. In doing so, we will build a new supply chain that meets the characteristics and demands of the petrochemical complex in which each base is located, and contribute to the "carbon neutralization" of the entire petrochemical complex.

Establishment of an ammonia supply chain in Tokuyama Complex and Shunan area

Together with Tosoh Co., Ltd., Tokuyama Co., Ltd., and Japan Zeon Co., Ltd., we have started a joint study with the aim of establishing a supply system for more than 1 million tons of carbon-free fuel ammonia per year at the Shunan Complex by 2030.
In addition, in February 2024, with the cooperation of IHI Corporation and IHI Plant Co., Ltd., we installed ammonia combustion equipment at the ethylene naphtha cracking furnace in Tokuyama Complex and conducted the first ammonia co-firing demonstration in Japan, confirming sufficient flammability and operational stability.
Going forward, we will continue to utilize this facility to accumulate data and know-how for the practical application of ammonia fuel, and to build a supply chain from the production and procurement of clean ammonia to the supply, and to conduct studies in cooperation with various stakeholders.

SAF manufacturing using ATJ process technology at Chiba Complex

Implementation of efficiency improvement work on heavy oil direct desulfurization equipment

In May 2020, we carried out a modification work to improve the efficiency of the heavy oil direct desulfurization unit (RH unit) at Chiba Complex. This work is aimed at complying with the low sulfur content regulations for marine fuel set by the IMO (International Maritime Organization).

Construction of a highly efficient naphtha cracking furnace (Tokuyama Complex)

Expanding the use of electricity derived from renewable energy

Starting in fiscal 2020, we have decided to use CO2-free electricity (contract power of 3,732 kW) provided by Idemitsu Green Power Co., Ltd., a member of the Idemitsu Group, at 17 oil terminal and other locations in Japan.

Supplying renewable energy to offshore oil fields

Tokuyama biomass power generation project initiatives

Our group is engaged in the biomass power generation business as an initiative that contributes to CO₂ _​ reduction through the use of renewable energy and local production and consumption of energy. To date, we have invested in Tosa Green Power Co., Ltd. in Kochi Prefecture and Fukui Green Power Co., Ltd. in Fukui Prefecture, and have developed the Keihin Biomass Power Plant, which utilizes a former Refinery refinery site.
In January 2023, we began commercial operation of the Tokuyama Biomass Power Plant, the group's fourth site. This power plant utilizes part of the site of Refinery (currently Tokuyama Complex), which closed in 2014, and existing infrastructure. Approximately 70% of Japan's land area (37.8 million hectares) is forest, and the utilization of thinned wood that remains unused has been a long-standing issue. For the time being, our company ^will use imported wood pellets and palm kernel shells (PKS)*, but in the medium to long term, we will use domestically produced thinned wood and sawn wood scraps to create an environment-friendly solution. We will contribute to sustainable forest creation, forestry promotion, and the cyclical use of domestic forest Resources.
In addition, our company has been participating in the Woody Biomass Utilization Promotion Council, which was launched in January 2021 by Shunan City, Yamaguchi Prefecture, since its inception. Taking advantage of the regional characteristics of both abundant forest Resources and biomass power generation facilities, we will work together with local governments to promote the use of domestically produced woody biomass materials, and build and develop a circular economy through local production and local consumption of energy and promotion of forestry. We will continue to contribute to

*Both wood pellets and PKS have obtained third-party certification at the supplier, ensuring sustainability and traceability in production and manufacturing processes, and consideration for the global environment, biodiversity, working environment, etc. Use approved materials.

● Image of the circular use of forest Resources (created by our company based on the diagram in the Forestry Agency's 2021 Forest and Forestry White Paper)

Construction of a geothermal power plant in Yuzawa City, Akita Prefecture

As part of our geothermal business expansion, we have decided to move to the construction phase of a geothermal power plant (name: Snail Mountain Power Plant, output: 15,000 kW) in Yuzawa City, Akita Prefecture, jointly with INPEX Corporation and TEPCO Renewable Power Co., Inc. The power plant will be built on Mt Snail and operated by Oyasu Geothermal Co., Ltd., which is funded by the three companies, and is scheduled to start operation in March 2027. As a result of the blowout test (demonstration test for evaluating production capacity) conducted in 2021, it is expected that stable production of geothermal fluids (steam and hot water) equivalent to an output of approximately 15,000 kW will be possible in the long term, and the electricity generated will be certified under the renewable energy FIT (Fixed Rate Purchase) system. In addition, we will work on the construction and operation of a power plant that contributes to the local community by designing the Snail Mountain Power Plant with consideration for the environment and scenery. Geothermal power generation, unlike other renewable energies such as solar power generation, is an energy source that can provide a stable supply of electricity without being affected by weather conditions, and expectations have been growing in recent years. We will continue to actively promote the spread and expansion of renewable energy, and hope to contribute to Japan's energy security and the realization of a low-carbon society.

Verification of commercialization of pumped storage hydropower generation at the Musselbrook coal mine site

Idemitsu Green Energy Pellets

Joint study towards CCUS implementation in Tomakomai area, Hokkaido

To achieve CN, we believe that it is necessary not only to reduce our own direct emissions from business operations, but also to create "avoided emissions" that contribute to reducing emissions throughout society through the provision of new products and services. In order to visualize the avoided emissions, we have begun calculating the avoided emissions amount with reference to ^guidelines issued in Japan and overseas. In fiscal 2023, we calculated the avoided emissions amount of renewable energy and the boiler control optimization system (ULTY-V plus).
We will continue to work to expand the scope of our calculations and contribute to the decarbonization of society by creating new contributions to avoided emissions.

● FY2023 CO₂ reduction contribution performance