We aim to fulfill our “responsibility to support people and their daily lives” and our “responsibility to protect the global environment now and in the future” by demonstrating our Group’s strength in social implementation to realize a carbon neutral (CN) and circular society. We want to continue strengthening our disclosure of information on initiatives to respond to climate change in a manner in line with the framework of the TCFD recommendations, which we endorsed in 2020, and accelerating our related initiatives with the understanding and cooperation of our stakeholders.
On February 14, 2020, we declared support for recommendations issued by the Task Force on Climate-related Financial Disclosures (TCFD) and became a TCFD signatory.
The pages of each TCFD Framework item in this site are provided in the table below.
Area | TCFD recommendations | Idemitsu’s disclosure |
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Governance | 1. Describe the board’s oversight of climate-related risks and opportunities | |
2. Describe management’s role in assessing and managing climate-related risks and opportunities | ||
Strategy | 1. Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term | |
2. Describe the impact of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning | ||
3. Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario | ||
Risk management |
1. Describe the organization’s processes for identifying and assessing climate-related risks | |
2. Describe the organization’s processes for managing climate-related risks | ||
3. Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management | ||
Metrics and Targets |
1. Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process | |
2. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 GHG (greenhouse gas) emissions, and the related risks | ||
3. Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets |
Area | TCFD recommendations | Idemitsu’s disclosure |
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Amount of greenhouse gases emitted | Absolute emissions and emissions intensity for Scopes1, 2, and 3 | |
Transition risks | Amount and scope of assets or business activities vulnerable to transition risks | |
Physical risk | Amount and scope of assets or business activities vulnerable to physical risks | |
Climate-related opportunities | Ratio of revenues, assets, and business activities that lead to climate-related opportunities | |
Deployment of capital | Capital expenditures, fundraising, and total amount deployed for climate-related risk and opportunities | |
ICP | Price per ton of CO2 emissions used within the organization (Internal carbon pricing) | |
Compensation | Ratio of compensation for executives linked to climate considerations |
An overview of our corporate governance structure is here, with the following supplemental information regarding the Company’s response to climate change.
For the Company, whose main business is fossil fuel sales, responding to climate change is one of the most important management issues. This is an initiative which involves a major business portfolio transition over the medium- to long-term time frame.
The Board of Directors is tasked with the role of establishing management policies based on a multidimensional view of this issue from various perspectives, and overseeing the prompt and steady implementation of actions based on these policies.
The 11 Directors who comprise the Board of Directors include those with experience, achievements and knowledge in a variety of fields including the environment, resource circulation, Japanese and overseas energy transition trends, related advanced technologies and sustainability.
Details of the Skill Matrix are here
Major climate change-related proposals are submitted to the Management Committee, the highest deliberative body for business activities, and particularly important proposals are reported to the Board of Directors. This gives us a structure in which the Board of Directors oversees the steady execution of business activities based on the company-wide policy.
Initiatives to respond to climate change are company-wide and cover a wide range of themes. Therefore, we recognize the need to accelerate drafting and executing company-wide strategies toward realizing a carbon neutral (CN) society. In 2021, we launched a specialized department (now: the Carbon Neutral Transformation Department). The Carbon Neutral Transformation Department leads the company-wide CN strategy planning, GHG reduction target setting, and CNX human resources development in cooperation with related in-house departments.
Each business department drafts and implements CN strategies for each department based on company-wide policies. These major responses to climate change initiated by in-house departments are submitted to the Management Committee for deliberation in accordance with company-wide policies. The membership of the Management Committee emphasizes diversity in specialized fields and areas of responsibility. This ensures that the committee is able to engage in comprehensive and effective discussions when addressing cross-sectional issues and risks.
The compensation structure for our Directors (excluding part-time Directors and Outside Directors) and Executive Officers at Senior Executive Officer level or above consists of (1) fixed compensation, (2) performance-linked bonuses and (3) performance-linked stock compensation. The item of (3) performance-linked stock compensation also includes a CO2 reduction indicator essential to realize a carbon neutral and recycling-orientated society.
Specific studies to respond to climate change are conducted by drafting long-term business environment scenarios targeting the period up to 2050, identifying risks and opportunities based on the output of the scenarios, and proceeding to the drafting of specific strategies.
Since the external disclosure of our first business environment scenarios in 2019, we have been continually updating scenarios in response to environmental changes in society, and in reviewing this Medium-term Management Plan (FY2023 to FY2025), three scenarios were assumed, with a strong awareness on the “Azure+”scenario, similar to the IEA’s net zero scenario, which is the most advanced in terms of decarbonization.
In the “Azure+” scenario, national governments are rapidly pushing to achieve the 1.5°C target, and the social implementation of various decarbonization technologies is being carried out at a very rapid pace, envisioning a world in which the 2050 CN is achieved. In this scenario, various decarbonization technologies are introduced in addition to renewable energy in order to achieve the goals of the Paris Agreement in an all-out effort. These technologies include nuclear power, hydrogen and ammonia-fired power generation, thermal power with Carbon Capture and Storage (CCS), synthetic fuel, and negative emissions. Regarding the demand for oil within the Asian Pacific region, it is expected to peak out in 2025 and Japan’s domestic oil demand, compared to 2019, can be expected to decrease 30% by 2030, 60% by 2040, and 80% by 2050.
Based on the long-term business environment scenario toward 2050 (p. 52), we have identified risks and opportunities related to climate change. We have compiled the following table showing the anticipated time frame, level of financial impact, and the Company’s response to climate change in each area, and in accordance with the contents, we are promoting specific initiatives.
In response to risks and opportunities, we will work on promoting revenue and capital efficiency in existing businesses, creating new businesses through investments in business structure reforms, and business portfolio transition. Through such efforts, we are aiming to achieve 270 billion yen on an operating income + equity income basis as of 2030.
Details of risk management are provided here.
Category | Matters to be evaluated | Time frame | Financial impact*1 | Our responses | ||||
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by 2025 | by 2030 | by 2050 | Level 1 |
Level 2 |
Level 3 |
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Transition risks |
Reduced domestic demand for fossil fuel | ● | ● | ● | ✓ |
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Decline in energy and resource prices in line with technological innovation | ● | ● | ✓ |
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Full-scale implementation of carbon pricing by the government | ● | ● |
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Regulation of fossil resources extraction projects, careful investment and financing stance of financial institutions | ● | ● | ✓ |
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Deterioration in the brand image of corporations handling carbon intensive businesses | ● | ● |
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Physical risks |
Damage incurred by business sites located in coastal areas due to natural disasters and sea-level rise, and the resulting impact on their operations | ● | ● | ✓ |
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Impact on land and marine transportation due to abnormal precipitation and frequent typhoons, etc. | ● | ● |
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Opportunities | Expanding demand for alternative fossil fuels (solid fuels) | ● | ● | ✓ |
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Expanding demand for alternative fossil fuels (Gaseous fuels) | ● |
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Expanding demand for alternative fossil fuels (Liquid fuels) | ● | ● |
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Expanding importance of low-carbon fuel/feedstock supply base | ● | ● |
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Expanding demand for products and materials supporting CN society realization | ● | ● | ✓ |
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Expanding demand for next-generation storage batteries | ● | ● |
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Full-scale expansion of recycling toward the realization of a circular society | ● | ● |
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Stable energy supply to regional communities | ● | ● | ● | ✓ |
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Expanding popularity of electric vehicles | ● | ● | ● |
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Expanding demand for renewable energy | ● | ● | ● |
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Promotion of distributed energy resource systems and increase in demand | ● | ● | ● |
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We have selected major themes we will address for social implementation by 2030 in “Our response” given in the list of Risks and opportunities on the left of the page. We will promote related initiatives as a part of our transition strategy toward 2050.
We plan to invest a cumulative amount of 1 trillion yen by 2030 to expand new businesses that contribute to CN.
The social implementation status of each proposal that contributes to CN may change significantly depending on trends in technological progress and trends in the policies of each country and region going forward. Therefore, we will run various options concurrently and rigorously select investment projects through screening based on the social value and investment efficiency of each project during the period of the Medium-term Management Plan (FY2023 to FY2025) under the structure given in the figure below.
Furthermore, for investments in new projects, we perform a sensitivity analysis using internal carbon pricing ($100/t-CO2) after confirming the changes in the amount emitted for Scopes 1, 2, and 3 and the avoided emissions of others before and after the project, and these are used as a reference when evaluating investments.
Our transition strategy has been adopted as a model case study for Climate Transition Finance, an initiative of the Ministry of Economy, Trade and Industry.
Climate Transition Finance, Ministry of Economy, Trade and Industry website
To realize a carbon neutral society, we believe it is necessary to work on both sides to contribute to a reduction in the direct and indirect emissions (Scopes 1 and 2) which we produce as a result of our business operations and a reduction in the emissions of others by providing new products and services (reduction in Scope 3 emissions and creation of the avoided emissions).
We recognize in proceeding with this initiative that it is important to consider how we can simultaneously contribute to the environment in terms of reducing emissions, contributing to society in terms of supplying energy and contributing to the economy in terms of maintaining and increasing corporate profits. Accordingly, we have set the three indicators listed below and are monitoring the progress on related activities.
Indicator of the extent to which we can reduce the CO2 emissions accompanying business activities
Indicator of the extent to which we, as an energy company, can supply low-carbon energy to society
Indicator of the extent to which we can reduce the ratio of fossil fuel business accounting for company-wide revenue while maintaining and increasing revenue by expanding non-fossil fuel business
The target values (targeted levels) for each indicator are as described below.
2030 : -46% (compared to 2013)
2050 : Carbon neutral
We have promoted energy saving activities at our refineries and complexes. Nevertheless, due in part to the impact of the recovery in the economy from the COVID-19 pandemic in FY2022, the operating rate of our Group’s refineries increased by 6% year on year. That meant Scope 1 + 2 emissions increased slightly compared to the previous fiscal year.
2030 : -10% (compared to 2020)
2040 : -50% (compared to 2020)
We have set a target value using an indicator called “carbon intensity” from the perspective of simultaneously realizing a contribution to the environment (a reduction in CO2) and a contribution to society (the supply of the low-carbon energy needed by society) to reduce emissions across our entire supply chain toward the realization of a carbon neutral society. We are proceeding with initiatives related to this area.
Our company’s future business field of “energy one step ahead” is an initiative which will greatly contribute to a reduction in Scope 3 emissions. We would like to contribute to the realization of a carbon neutral society through social implementation in this field.
Social Implementation Theme | Assumed Business Size | ||
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Unit | 2030 | 2040 | |
Hydrogen and ammonia | million tons | 1 | 4 |
SAF, biofuel and synthetic fuel | million kL | 0.5 | 2.5 |
Mixing non-fossil fuels into gasoline* | % | 10 | 20 |
Idemitsu Green Energy Pellets | million tons | 3 | 3 or more |
Tree planting and CCS, etc. | million tons | 1 | 7 |
2030 : -50% or less
With an increasing frequency of ever more severe natural disasters, it is extremely important to identify possible disaster risks via the development of diverse scenarios. We assume earthquakes, flooding, high tides and other emergencies so that we can minimize damage to our refineries and complexes and ensure that operations at these facilities can be promptly restored. To strengthen our ability to ensure safety, we will therefore direct capital expenditure to upgrade facilities, while enhancing operational procedures and human resource capabilities, to mitigate damage even in the event of a disaster with unprecedented severity. By doing so, we will continue to fulfill our mission as an energy supplier.
In recent years, a growing number of typhoons have passed through a large part of the Japanese archipelago while remaining at full strength. This phenomenon is believed to be due in part to climate change. As these typhoons often induce high tides, our refineries and complexes located in coastal areas are facing a growing risk of flooding. In response, we have conducted risk analysis associated with the impact of flooding due to high tides based on the simulation of typhoons of the largest-possible scale taking courses that directly cross these facilities’ sites. Based on the results of this analysis, we are considering the reinforcement of facility structures via, for example, the installation of flood walls to safeguard seawater pump rooms in addition to the enhancement of disaster response manuals and other procedures designed to provide our staff with guidance on how to mitigate disaster damage.
To realize energy transition, we will first steadily utilize the assets we possess (customers, human resources, stores, systems, infrastructure, facilities, etc.) and, together with new investments for next-generation businesses, create a system capable of stably supplying a diverse range of energy to our customers.
In the field of biomass fuels, we have constructed a SAF production facility (production capacity of 100,000 kL) using state-of-the-art technology within our Chiba Complex. We plan to begin the provision of SAF in 2026, aiming to contribute as a low-carbon solution for the air transport industry. Furthermore, these initiatives have been selected by the New Energy and Industrial Technology Development Organization (NEDO) as one of its Green Innovation Fund Projects*1.
We have set an intermediate goal of establishing a system to produce 500,000 kL of SAF*2 per year in Japan by 2030. Within this structure, we will link raw material procurement with the development of biochemicals and begin supplying bio-diesel, an internal combustion engine oil, to our customers.
Construction of an Ammonia Supply Chain at Tokuyama Complex and Shunan District
SAF Production Using ATJ Process Technology at Chiba Complex
In May 2020, the Chiba Complex modified its resid hydrodesulfurization unit to raise its efficiency. This project was intended to secure our responsiveness to regulations enforced by the International Maritime Organization (IMO) with regard to the limitation of sulfur content in marine vessel fuel.
We installed a highly efficient naphtha cracker in the Tokuyama Complex and began commercial operations in February 2021. The highly efficient naphtha cracker enhances heating efficiency and ethylene yield by thermally cracking raw material naphtha in a shorter amount of time. As a result, we achieve about a 30% energy conservation effect compared to ethylene production using conventional crackers, contributing to about a 16,000-ton reduction of CO2 for the year.
Naphtha is a petroleum product also referred to as natural gasoline. Thermally cracking naphtha produces ethylene, propylene, and other basic raw materials for petrochemicals.
At the Tokuyama Complex, we produce around 620,000 tons of ethylene per year that is provided mainly to the Shunan Complex in Shunan City, Yamaguchi Prefecture. The complex’s previous two oldstyle naphtha crackers used to produce ethylene have been replaced with a single new highly efficient naphtha cracker.
At 17 oil depots in Japan, we decided to use CO2-free electric power (contract electric power 3,732kW) provided by
the Group’s Idemitsu Green Power K.K. from fiscal 2020.
Idemitsu equity-method affiliate INPEX Norway Co., Ltd. has received permission from the Norwegian government for its development project to install floating offshore wind power turbines at the Snorre Oilfield, in which it owns a stake, through its local subsidiary INPEX Idemitsu Norge AS. In May 2023, the company began transmitting power to the Snorre Oilfield using floating offshore wind power turbines. The world’s first project of its kind, this development project is aimed at establishing a large-scale offshore wind farm (the Hywind Tampen floating wind farm) approximately 200 kilometers off the coast of Bergen City, the western part of Norway, and directly feeding its output to oil and gas production facilities. The completed wind farm will consist of 11 turbines, each with a rated power output of 8,000 kW, or a combined total of 88,000 kW.
Looking ahead, our company will proactively incorporate advanced technologies to advocate for the reduction of environmental burden in the course of our resource business.
We developed the ULTY-V plus™ coal boiler control optimization system in tandem with the NYK Group. Once introduced, this system enables our customers to reduce coal consumption approximately 1%, thus helping them improve economic efficiency and reduce CO2 emissions. In March 2019, we also established NYK IDEMITSU Green Solutions Co., Ltd., a fifty-fifty joint venture, in tandem with the NYK Group. The new company focuses on solution proposals aimed at marketing the system. In FY2021, Hokuriku Electric Power Company ordered four systems and expects to reduce CO2 emissions by around 100,000 tons per year after their installation. Going forward, we will continue promoting sales in Japan and overseas.
In addition, we developed the BAIOMIX™ system that calculates the optimal co-firing ratio for biomass fuels in coal boilers and launched sales of the system in August 2021. Installing the BAIOMIX™ system in the ULTY-V-plus system enables the optimal and automatic control of biomass co-firing in coal boilers.
The Idemitsu Group is engaged in the biomass power generation business as an initiative to reduce CO2 emissions through the use of renewable energy and to contribute to local production for local consumption of energy. To date, we have invested in Tosa Green Power K.K. in Kochi Prefecture and Fukui Green Power Co., Ltd. in Fukui Prefecture, and developed the Keihin Biomass Power Plant using the site of a former oil refinery.
In January 2023, the Tokuyama Biomass Power Plant, the Group’s fourth site, started commercial operation. The power plant utilizes part of the former site of the Tokuyama Refinery (currently Tokuyama Complex), which closed in 2014, as well as our existing infrastructure.
Approximately 70% of Japan’s land area (37.8 million hectares) is forest, and the utilization of thinned wood and othermaterials left unused there has been a longstanding issue. For thetime being, we will use* imported wood pellets and Palm Kernel Shell (PKS)*, but in the medium to long term, by using domestically produced thinned wood and lumber scraps, we willcontribute to sustainable forestation and forestry promotion in consideration of environmental conservation, and recycling of domestic forest resources.
We also participated as a member in the Wood Biomass Use Promotion Council since its establishment in January 2021 by Shunan City in Yamaguchi Prefecture. Taking advantage of the region’s wealth of forestry resources and biomass power generation facilities, we will work together with local governments to promote the use of domestic woody biomass materials and contribute to the construction and development of a circular economy through local production for local consumption of energy and promotion of the forestry industry.
As part of the expansion of our geothermal business, we have decided to advance to the construction phase of a geothermal power plant (name: Katatsumuri Yama Power Plant, output:15,000 kW) in Yuzawa City, Akita Prefecture, in collaboration with INPEX Corporation and TEPCO Renewable Power, Inc. The power plant will be built on Katatsumuri Yama. Three companies will invest in the project, it will be operated by Oyasu Geothermal Co., Ltd., and is scheduled to begin operations in March 2027.
The results of the blowout test (testing to evaluate production capacity) conducted in 2021 have shown that stable production of geothermal fluid (steam and hot water) equivalentto an output of approximately 15,000 kW is expected to be possible on a long-term basis, and the electricity generated will becertified under the FIT (Feed-in Tariff) system for renewable energy. Katatsumuri Yama Power Plant will also be designedwith environmental and landscape considerations in mind, and the construction and operation of the power plant will contribute to the local community.
Geothermal power generation, in contrast to solar energy and other renewable energies, has become increasingly attractive in recent years as a source of energy that can offer a consistent supply of electricity regardless of weather conditions. We will continue to actively encourage the use and expansion of renewable energy sources and make a positive impact on the development of a low-carbon society and energy security in Japan.
By utilizing our business foundation in Australia, we are examining the potential for using post-mining sites as a base for various renewable energy sources. Together with AGL Energy Ltd., an Australian energy corporation, we have begun feasibility studies for a pumped-storage electricity project using the post-mining Muswellbrook Coal Mine Ltd. site in Australia, which is nearing the end of its lifespan in 2022.
Given Australia’s favorable wind, sunlight, and other meteorological conditions, as well as its vast landmass and considerable renewable energy potential, the Australian government is also promoting an energy transition toward decarbonization. In particular,it is anticipated that energy storage via pumped-storage electricity will contribute to the stabilization of the power system and act as a crucial regulator for switching to renewable energy sources. In addition to helping Australian transition to a low-carbon economy, we will continue to proactively develop low-carbon and decarbon businesses.
Compared to other power sources, coal-fired power generation produces more CO2 emissions per kWh (amount of electric power generated), so there is a need to find solutions to reduce CO2 emissions. One of these solutions is to use biomass fuels, which are carbon-neutral raw materials. Biomass fuels are organic materials derived from plants, which absorb CO2 through photosynthesis during biological growth.
Idemitsu aims to produce 3 million tons per year of Idemitsu Green Energy Pellets, a biomass solid fuel to replace coal, by 2030. In FY2023, we completed the construction of a plant in Vietnam and continue to contribute to carbon neutrality by expanding our production bases and production volume.
Idemitsu and Solar Frontier are working with Nissan Motors Co., Ltd. on a pilot test project for electric vehicle (EV) charging services using unique dynamic pricing.*1
The three companies are undertaking this project with the purpose of reducing and leveling off the electric power burden in the lead up to a future in which EVs and plug-in hybrid vehicles (PHVs) are more widely adopted. We aim to help achieve carbon neutrality and realize a sustainable electric power infrastructure by effectively using renewable energy for EV charging in this project and verifying a mechanism that enables charging outside of times with increased electric power demand.