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 expand disclosure with an eye toward disclosure within the IFRS S2 framework, 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 our company, whose main business is the sale of fossil fuels, responding to climate change is one of our most important management issues, and it is an initiative that will involve a large-scale transformation of our business portfolio over the medium to long term.
The Board of Directors has the role of determining management policies based on a multifaceted approach to this issue, and supervising that actions based on those policies are carried out quickly and steadily.
The 11 directors who make up the Board of Directors are people with experience, track record, and knowledge in a variety of fields, including the environment, Resources circulation, domestic and international energy transition trends, related advanced technology, and sustainability.

Major climate change-related proposals are submitted to the Management Committee, which is the highest deliberative body for business execution, and particularly important matters are reported to the Board of Directors. This has created a system in which the Board of Directors supervises whether execution is steadily being carried out based on company-wide policies.

For our company, whose main business is the sale of fossil fuels, responding to climate change is one of our most important management issues, and is an initiative that will require a large-scale transformation of our business portfolio over the medium to long term. The Board of Directors is responsible for determining management policies that address this issue from multiple angles and in a multifaceted manner, as well as for overseeing that actions based on those policies are implemented quickly and steadily. Major climate change-related proposals are submitted to the Executive Committee, and particularly important matters are reported to the Board of Directors. This allows the Board of Directors to oversee whether company-wide policies are being steadily implemented.

*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

To specifically consider how to respond to climate change, we have formulated a long-term business environment scenario for the period up to 2050, identified risks and opportunities based on the output of the scenario, and are moving forward with the formulation of specific strategies.
Since the Company's first public announcement of its business environment scenario in 2019, the scenario has been reviewed from time to time in response to changes in the social environment, and three scenarios have been assumed when considering Medium-term Management Plan (FY2023-FY2025). Among these, we have formulated a plan with a strong awareness of the "Hekiten+" scenario, which is similar to the IEA's net zero scenario, which would make the most progress in decarbonization.
In the "Hekiten+" scenario, governments around the world take measures at a rapid pace to achieve the "1.5℃ target," and various decarbonization technologies are provide for society at an extremely rapid pace. We envision a world where this is achieved. In this scenario, in addition to renewable energy, various decarbonization technologies will be introduced, including nuclear power generation, hydrogen/ammonia combustion power generation, thermal power generation with CCS (Carbon Capture and Storage), synthetic fuel, and negative emissions. The goals of the Paris Agreement will be achieved through “total war.” Furthermore, oil demand in the Asia-Pacific region is expected to peak in 2025, and domestic oil demand is expected to decline by 30% in 2030, 60% in 2040, and 80% in 2050 compared to 2019. is.

*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

Based on long-term business environment scenarios for 2050, we are identifying risks and opportunities related to climate change. We have summarized the expected timeline, financial impact level, and our response for each area, and are proceeding with specific initiatives in accordance with the details listed in the table below.
In response to risks and opportunities, we will work to strengthen the profitability of existing businesses and improve capital efficiency, create new businesses through business structure reforms investments, and transform our business portfolio. As a result, as of 2030, we are targeting an operating profit + equity profit/loss base of 270 billion yen.

*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.

"Our response" to the above risks and opportunities includes potential themes for provide for society 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 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.

In order to realize carbon neutrality society, we will reduce our own direct and indirect emissions (Scope 1, 2) through business operations, and contribute to the reduction of others' emissions through the provision of new products and services (Scope 3 reduction, We believe that efforts from both sides (creating reduction contribution amount) are necessary.
In moving forward with this initiative, we need to consider how we can 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. Recognizing that it is important to see how well we can achieve our goals, we have set the three indicators listed below 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 are promoting as a future business field is an initiative that will greatly contribute to Scope 3 reduction, and we hope 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.

●Estimated typhoon path as a prerequisite for studying storm surge damage estimation Refinery

●Estimated image of storm surge damage

Low-carbon Petroleum

In order to realize the energy transition, we will first steadily make use of our assets (customers, human resources, stores, systems, infrastructure, equipment, etc.) and, in conjunction with new investments for next-generation businesses, provide diverse services to our customers. We will create a system that can provide a stable supply of energy.
In the biomass fuel field, we have built a SAF manufacturing facility (production capacity: 100,000 kL) at Chiba Complex using cutting-edge technology, and we plan to start supplying it in 2026, contributing as a low-carbon solution for the air transportation industry. We are aiming for This initiative has been selected as a Green Innovation Fund project ^*1 by NEDO (New Energy and Industrial Technology Development Organization).
Our interim goal is to build a system to produce 500,000 kL of SAF ^*2 annually in Japan by 2030. In building this system, we will link raw material procurement and expansion into biochemistry, and will also begin supplying biodiesel, an internal combustion engine oil, to customers.

*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 leverage the characteristics and strengths of Refineries/Complexes have operated for many years as fossil-based energy production bases, while reborn as new carbon-neutral fuel and product supply bases. In doing so, we will build a new supply chain according to the characteristics and demands of the industrial complex where each base is located, contributing to the "carbon neutrality" of the industrial complex as a whole.

Building an ammonia supply chain at Tokuyama Complex and Shunan area

The four companies, Toshiba, Tosoh Corporation, Tokuyama Corporation, and Zeon Corporation, have begun a joint study aimed at establishing a carbon-free ammonia supply system of over 1 million tons per year at the Shunan Petrochemical Complex by 2030. The pier and storage facilities at Tokuyama Complex of Toshiba will be developed as a common supply base for ammonia at the Shunan Petrochemical Complex, and ammonia supply infrastructure for each company (demand side) at the Shunan Petrochemical Complex will be considered. In addition, the four companies will use this project as a base to promote the construction of Japan's first ammonia supply chain in the Shunan area through various initiatives, such as ammonia combustion demonstrations at actual equipment.

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 renovation work to improve the efficiency of the heavy oil direct desulfurization equipment (RH equipment) at Chiba Complex. This work is intended to comply with the low sulfur content regulations for marine fuel set by the IMO (International Maritime Organization).

Construction of high-efficiency 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 (3,732kW of contract power) provided by Idemitsu Green Power oil terminal terminals and other locations in Japan.

Supplying renewable energy to offshore oil fields

Sales of coal boiler control optimization system (ULTY-V plus™)

We have jointly developed the boiler control optimization system "ULTY-V plus™" with the Nippon Yusen Group. The introduction of ULTY-V plus™ can reduce coal consumption by approximately 1%, which will result in improved economic efficiency and reduced CO2 emissions for our customers. In March 2019, we established Yusen Idemitsu Green Solutions Co., Ltd. with a 50/50 investment from the Nippon Yusen Group, and are focusing on proposal sales with this company as the core. In fiscal 2021, we received an order for four units from Hokuriku Electric Power Co., Inc., and the introduction of these four units is expected to reduce CO2 emissions by approximately 100,000 tons per year. We will continue to promote sales both domestically and internationally. We have also developed a system (product name: "BAIOMIX™" (Biomix), hereinafter referred to as "this system") that calculates the optimal co-firing ratio of biomass fuel in a coal boiler, and began selling it in August 2021. By installing this system in the ULTY-V plus system, it is possible to optimally and automatically control biomass co-firing in a coal boiler.

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 cyclical use of forest Resources (created by our company based on the figures published in the Forestry Agency's FY2021 Forest and Forestry White Paper)

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

As part of our efforts to expand our geothermal business, we are jointly working with INPEX Corporation and TEPCO Renewable Power Co., Ltd. on a plan to install a geothermal power plant (name: Snail Mountain Power Plant, output: 15,000 kW) in Yuzawa City, Akita Prefecture. We have decided to move on to the construction phase. The power plant will be built on Mt Snail and will be operated by Oyasu Geothermal Co., Ltd., a company invested in by three companies, with operation scheduled to begin in March 2027. As a result of the blowout test (demonstration test to evaluate production capacity) conducted in 2021, it is expected that stable production of geothermal fluid (steam and hot water) equivalent to an output of approximately 15,000 kW will be possible in the long term. Yes, the electricity generated is certified under the renewable energy FIT (Fill-in Tariff) system. In addition, the Snail Mountain Power Plant will work to construct and operate power plants that contribute to the local community by designing them with consideration for the environment and landscape. Unlike renewable energies such as solar power generation, geothermal power generation has been attracting increasing attention in recent years as an energy source that can provide a stable power supply regardless of the weather. 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

Coal-fired power generation emits more CO₂ _​per kWh (amount of electricity generated) than other power sources, so there is a need for solutions to reduce CO₂ _​emissions. One of these is the use of biomass fuel, which is a carbon-neutral raw material. Biomass fuel is an organic material derived from plants, which absorbs CO₂ _​ through photosynthesis during the growth process of living organisms.
By 2030, we are aiming for annual production of 3 million tons of Idemitsu Green Energy Pellets a biomass solid fuel to replace coal. We will complete construction of a factory in Vietnam in fiscal 2023, and will continue to contribute to carbon neutrality by expanding our production base and production volume.

●Production system roadmap (image)

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