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Nornickel’s Climate Change Report: risks and opportunities, results and plans

Governance World Report
Nornickel has released its new Climate Change Report for the first time. This contains detailed information about Nornickel’s climate change activities previously found in the Sustainability Report. The report was drawn up in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and was audited.
Nornickel disclosed climate change impacts on its operations under the TCFD guidelines. CAPEX and OPEX associated with climate change-related activities stood at RUB8.9 billion. The Climate Change Report is included in the company’s non-financial reporting bundle, which has been prepared since 2005.

Nornickel CEO

“Notwithstanding that it is the first report entirely devoted to climate change aspects, the company has been working in this area for quite a while already and has been publicly communicating its climate activities since 2016.Nornickel is making a significant contribution decarbonization of the global economy, and we expect demand for our products to continue to increase, providing sustainable and balanced growth for the company.”

The key sections of Nornickel’s Climate Change Report are:

  • Key climate action areas .
  • Approaches to climate-related risk assessment.
  • Assessment of GHG emissions and product carbon footprints.
  • Transition risks and opportunities.
  • Climate change risk factors.
  • Adaptation to climate change.

Four Areas of Climate Change Efforts

Supporting global energy transition. Nornickel supplies the global market with four of the nine green metals identified by the International Energy Agency as critical for the global energy transition. In addition, Nornickel is a leader in palladium production. Plans to develop a deposit of a fifth green metal – lithium – are underway.

Decarbonization. The company is implementing measures to integrate energy efficient technologies and upgrade energy infrastructure facilities. On top of that, Nornickel strives to increase the share of electricity generated from renewable sources.
Economy of fuel and energy in 2022, TJ
The company is also leading the creation of a responsible supply chain. Please see the outcomes in our special report.

R&D to support the company’s long run decarbonization. Nornickel is exploring promising low-carbon solutions together with the academic community. In 2022, for example, it examined opportunities to integrate low-carbon technologies when developing its own power generation facilities until 2050.

Climate change adaptation. Nornickel assumes that, despite every effort of the global community, environmental changes in the regions where it has operations are inevitable. This places Nornickel and its people, and the people of their communities, at the very forefront of global climate change. Therefore, Nornickel is developing procedures to identify and assess the risks of adaptation to expected climate change.

Nornickel Chairman of the Board of Directors

“The company seeks to increase its use of renewable energy, improve manufacturing process energy efficiency , and studies, develops, and implements new low-carbon technologies. The carbon footprint of Nornickel’s products is one of the lowest in the industry.”

Approaches to Assessment of Climate-Related Risks.

Three scenarios were selected and localized based on the forecasts of the Intergovernmental Panel on Climate Change.

SSP 1-2.6 Rapid Transition. Society shifts to sustainable practices, the focus shifts from economic growth to overall welfare, and the goals of the Paris Agreement are being achieved. Nornickel has defined this scenario as Rapid Transition. Under this scenario, the average temperature will rise by 1.8°C by 2100.

SSP 2-4.5 Sustainable Palladium. In the second Sustainable Palladium scenario, the current GHG emissions growth rate is maintained, carbon neutrality is not achieved until 2100. In this case, the average temperature is expected to rise by 2.7°C by the end of the century.

SSP 5-8.5 Global Growth. The current GHG emissions double by 2050. Rapid global economic growth is supported by extensive use of fossil fuels and increased power consumption. In this case, the average temperature will rise by 4.4°C by 2100.

Assessment of GHG Emissions and Carbon Footprint of Products

GHG emissions were verified by TÜV AUSTRIA Standards & Compliance, an international company, and the emissions report was submitted to the Ministry of Economic Development of the Russian Federation.

Nornickel’s Scope 1 and 2 assessment. In 2022, direct and indirect GHG emissions of Nornickel’s enterprises (i.e. Scope 1 and 2 emissions) decreased by 0.5 million tonnes of CO2e compared to 2021. Such indicators were achieved by optimizing the in-plant operating modes of CHPs and increasing the share of electricity output sourced from HPPs.
What is Scope 1. For a holistic approach to measuring and managing GHG emissions, they are divided into three scopes. Scope 1 covers all direct GHG emissions. This includes emissions from the combustion of fossil fuels in manufacturing processes, vehicles and other industrial equipment.

What is Scope 2. Scope 2 includes indirect emissions that result from the consumption of electricity, heat, or steam.

What is Scope 3. Scope 3 covers all other indirect emissions occurring throughout the company’s value chain. This includes emissions that result from operations beyond the company’s direct control. For example, these are emissions from transportation and distribution of goods, business travel and supply chain activities.

Scope 3 is categorized into Upstream and Downstream, which refer to the assessment of supply chain and distribution emissions, respectively.
Emissions stood at 9.9 million tonnes of CO2e. It is one of the lowest among global mining leaders. Of this, 2.2 million tonnes of CO2e was reserved for implementation of the Sulfur Program. Neutralization of sulfuric acid by limestone with gypsum production and storage will inevitably be accompanied by an increase in GHG emissions.

At the same time, Sulfur Program implementation is of paramount importance both at the regional and federal levels. It is a key project of the federal Clean Air Project, which will considerably improve the quality of life for the local community.
Assessment of Nornickel’s GHG emission
Nornickel’s Scope 3 assessment. Scope 3 Upstream GHG emissions of the company’s operations in 2022 stood at 1.8 million tonnes of CO2e, in addition to Scope 3 Downstream emissions of 3.9 million tonnes of CO2e. The company was the first in Russia to calculate Scope 3 Upstream GHG emissions.

Calculating and managing Scope 3 emissions are no minor tasks, as they require assessing gas emission volumes beyond the company’s control. The core contributor to this amount is the iron ore concentrate produced by GRK Bystrinskoye. Further processing of the concentrate – steelmaking – is highly carbon-intensive.

The carbon footprint of Nornickel’s nickel metal production stood at 8.3 kg of CO2e per kg of product, while that of nickel sulfate stood at 1.8. This is one of the lowest metrics in the global nickel industry and an important competitive advantage in the context of tightening carbon regulation

Transition risks and opportunities

To assess risks and opportunities associated with the global energy transition, Nornickel has developed three proprietary scenarios for the global economy and climate change until 2050 – Rapid Transition, Sustainable Palladium, and Global Growth.

Based on the scenarios, Nornickel has made global consumption forecasts of the four key metals produced by the company: nickel, copper, platinum, and palladium.

To mitigate the risk of curbing palladium demand in the Rapid Transition scenario, Nornickel explores prospective application areas for palladium. An example is the production of palladium-containing catalysts for the growing hydrogen energy market.

A scenario analysis of the consolidated financial and economic model until 2050 was also undertaken. As estimated by Nornickel, the Global Growth scenario is the most favorable.

Climate change risk factors

Nornickel identified the key climate factors. In addition, the company undertook a pilot assessment of their impact on production assets at all operational locations.

With the support of experts from the Obukhov Institute of Atmospheric Physics at the Russian Academy of Sciences, retrospective data on climate change since the 1960s was analyzed to identify regional trends. Analysis of past decades confirmed that temperatures in the Arctic are rising significantly faster than the global average.
Main risk factors in all scenarios

  • Degradation of permafrost soil
  • Higher frequency of heavy precipitation
  • Higher annual precipitation

Adaptation to climate change

In response to the risk of degradation of permafrost soil, the most significant risk factor in northern latitudes, the company is implementing the world’s largest permafrost infrastructure monitoring project. For now, the first stage of the project has been deployed.

By the end of 2023, the system covers 17 enterprises and more than 950 facilities, 218 of which are equipped with automated sensors. In total, more than 1200 such sensors were installed in 2022.Information from them is fed into a single information and diagnostics system.

417 new wells were drilled, in which temperature sensors were installed. Thermohygrometers monitor the temperature and humidity understructures in real time.

Geodetic measurements of structural deformation of buildings and structures was carried out.

December, 2023