Climate Change

Performance

Energy consumption
HELLENiQ ENERGY’s total energy consumption, as shown in the chart below, is reduced by 9% compared to 2021. Regarding energy management, in 2022, EKO SA was certified for the first time according to ISO 50001:2018, while the Group’s refineries were successfully recertified, setting the goal of continuous improvement and achieving even higher energy saving and efficiency performance. Note that the applied energy management system requires, in addition to the systemic specifications (documentation reviews, staff training, monitoring of corrective and preventive actions, inspection and review), the identification of energy needs and energy improvement opportunities, as well as the setting of specific objectives and targets regarding the efficient use of energy, the implementation of which is completed via the implementation of energy saving programs or other relevant actions.

As shown in the chart below, in 2022, self-generated electricity accounted for about 35% of the total electricity consumed. Compared to 2021, there was an increase in the share of self-generated electricity from 30% to 35% due to increased availability of selfgeneration units at the Group’s refineries.

Regarding the monitoring and reporting of CO₂ emissions, the Group systematically monitors not only direct emissions (Scope 1), but also indirect emissions (Scope 2 and 3) in the majority of its activities, in accordance with the GHG Protocol methodology, while for activities within Greece from 2020 onwards, additional certification according to the international standard ISO 14064 is obtained. Specifically, for the 2022 quantitative data, the verified direct emissions (Scope 1) for the three refineries participating in the EU ETS amount to 3,618 million tons of CO₂e, while the Group’s indirect emissions (Scope 2) from electricity consumption reach 305 thousand tons of CO₂e (including subsidiaries), taking into account that part of the indirect emissions were offset for the first time by guarantees of origin.

It is important to mention that the Group’s refineries, since their establishment, have been participating in the European Greenhouse Gas Emissions Trading System (ETS), and follow all the procedures for the monitoring, calculation and verification of emissions in accordance with the 2021-2030 Phase 4 Regulations, which are even stricter in terms of accuracy in the way of monitoring.

Note that due to the increasing emission reduction targets at European level, the reduced percentage of free allowances allocated to all refineries in Europe, but also the significant increase (10-fold) in the price of allowances in recent years (from €8/tn at the beginning of 2018 to €86/tn on average in December 2022) the cost of compliance for Phase 4 ETS has increased significantly.

The chart below shows the final verified CO₂ emissions of the Group’s three refineries for the years 2022 and 2021 and the corresponding free allowances.

Investing in Renewable Energy Sources as a key pillar in implementing the Group’s energy transformation towards a climate-neutral economy, we contribute to the avoidance of a significant percentage of CO₂ emissions (chart below) that would have been emitted if the quantity of electricity had come from a conventional provider in the domestic power generation network.

HELLENiQ ENERGY also monitors other indirect emissions (Scope 3) from its activities. The main ones come from the transport of raw materials and products by ship (imports, intermediate transport and exports) and from office activities, such as air flights, private and other employee transport and consumption of raw materials (carbon footprint project) from all activities in the Group’s office buildings (headquarters and refineries in Aspropyrgos, Elefsina and Thessaloniki). As part of improving the monitoring and reduction of its carbon footprint, the Group has started a detailed recording of its indirect emissions from the entire value chain.

Climate change has now been recognised as one of the greatest challenges facing humanity. Actions to adapt and mitigate its impacts have been legislated and are a priority at global, European and national level.

For HELLENiQ ENERGY, mitigation and adaptation to the effects of climate change are a key part of its sustainable development strategy. In this context, the first step for the effective planning of actions is the identification and management of risks and opportunities. For the short-term and long-term planning of the strategy, the potential risks and the related financial implications are analysed in detail, both from the side of climate change mitigation and from the side of the adaptation strategy to the effects of climate change (e.g. in the case of physical changes, which are estimated to be significant for facilities located close to the coastal front of Greece). These are examined and analysed through different pillars such as existing and forthcoming legislation, new technologies, and also the markets in which the Group operates, while the international forecasts for the energy market and climate change are also analysed in order to draw up the Group’s long-term strategy.

This gives rise to a number of impacts and risks that have been assessed, such as increased costs for fuel and raw materials, reduced demand for energyintensive products such as fossil fuels, as well as the tightening of the regulatory framework for controlling and limiting greenhouse gas (GHG) emissions, such as the EU ETS and the planned carbon border tax mechanism (CBAM), leading to a further increase in carbon costs.

For 2022, the obvious financial implications for HELLENiQ ENERGY were directly related to the cost of covering the emissions allowance deficit, as all three of the Group’s refineries in Greece participate in the EU ETS.

For the period 2021-2025 (first sub-period of the 4th trading phase) and under the new allowance allocation rules, compliance costs have increased significantly as the 2022 data show, due to the significant increase in the price of allowances (over 85€/tn at the end of 2022), but also due to the decreasing amount of emission allowances under the new free allocation rules.

In addition, based on the planned changes to the ETS in the context of the implementation of the European Green Deal and the new Fit for 55 reduction targets, a further increase in compliance costs and an increase in carbon leakage risk is expected (note that the refining sector has been included among those facing carbon leakage risk, i.e., a significant deterioration in its competitiveness compared to similar facilities outside Europe). Because of its geographical location (EU borders), the group is even more at risk than other European countries from the competition of neighbouring countries which are not part of the ETS and which produce the same products without additional operating costs due to the so-called carbon costs.

The above risks (increased CO₂, costs, transition to a carbon neutral economy, changes in consumer demand and preferences) are assessed by the Management of HELLENiQ ENERGY on a continuous basis, within each financial year, investment opportunities are identified (e.g, development of renewable energy sources, increase in energy efficiency, development of low emission products) and the Group’s strategy is drawn up. Its faithful implementation has already contributed to reducing the carbon deficit and operating costs through increased energy efficiency, while lower carbon footprint fuels already represent an increasing share of the Group’s turnover.

Furthermore, HELLENiQ ENERGY also sees an opportunity in new, low-carbon technologies that have been developed to address climate change, such as blue and green hydrogen production technologies, CO₂ capture, storage and utilisation technologies, and other technologies for the substitution of fossil raw materials with more environmentally friendly raw materials. Due to the urgency for action, most new technologies are immediately being evaluated for their potential applications and effectiveness in order to reduce potential risks and maximise benefits.
Finally, the evaluation of potential opportunities for further penetration of natural gas, as a fuel for the transition to a lower emission economy, as well as alternative fuels, continues through the implementation of various Research and Development programs.

Based on the above, the scope of interventions/ projects to adjust facilities and critical energy infrastructure to climate change is under constant consideration.

It is also worth noting that HELLENiQ ENERGY actively participates in the formulation of energy and climate change policies at national and European level, such as the EU ETS, the Energy Efficiency Directive, etc., as well as in international initiatives such as the “eFuel Alliance” for the promotion and development of synthetic fuels, as part of the industry’s energy transition and its vision for the future.