Petrobras: Petrobras : Climate Change Supplement

Climate Change Supplement - CLIMATE CHANGE SUPPLEMENT 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPPLY 2. VISION OF THE FUTURE AND STRATEGIC PLANNING 3. REDUCING EMISSIONS IN OUR OPERATIONS 4. VALUE CHAIN EMISSIONS AND INNOVATION 5. CARBON AND CLIMATE IN MANAGEMENT AND DECISION-MAKING PROCESSES 6. TRANSPARENCY, COLLABORATION 2 AND SOCIAL-ENVIRONMENTAL OUR APPROACH At Petrobras, we monitor the evolution of climate science and its developments over energy, social and economic systems for more than 15 years. Considering climate change in our planning and decision making is an ethical requirement, included in our safety, environment and health and social responsibility policies. It is also a business need for us in order to stay competitive and profitable in an environment of transition to a low carbon economy with high uncertainty. When considering climate change, we are aware that our role transcends emissions from our own operations. We recognize our ability to influence the value chain, and even beyond, through our choices regarding portfolio, product innovation, communication, supplier management, customer relationship, and so on. In this sense, our approach to carbon and climate management goes beyond our operational efficiency and contemplates the various decision-making and management processes. We note the legitimate interest of our stakeholders in knowing how we are prepared to remain competitive in a market in transition. In this supplement you will be able to understand how we see the future of energy, our strategies, how we manage emissions linked to our business, and how we prepare the company's processes to mitigate risk and seize opportunities. SOCIETY'S EVOLUTION Trends and uncertainties PETROBRAS' EVOLUTION Reducing carbon intensity in the value chain Profitable opportunities in synergy with our competitive advantages Carbon in decision-making Governance Strategy Metrics Risk Management Active Portfolio Management Carbon intensity of operations Investment Management Product Quality Management Process CULTURE TRANSPARENCY AND COLLABORATION INNOVATION CLIMATE CHANGE SUPPLEMENT 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPPLY 2. VISION OF THE FUTURE AND STRATEGIC PLANNING 3. REDUCING EMISSIONS IN OUR OPERATIONS 4. VALUE CHAIN EMISSIONS AND INNOVATION 5. CARBON AND CLIMATE IN MANAGEMENT AND DECISION-MAKING PROCESSES 6. TRANSPARENCY, COLLABORATION 3 AND SOCIAL-ENVIRONMENTAL WARNINGS This document contains possible scenarios that reflect only our managers' expectations. The terms "anticipates," "believes," "expects," "forecast," "intends," "plans," "projects," "aims," "shall" and other similar terms are intended to identify such expectations, which evidently involve risks or uncertainties foreseen or not by the company. Therefore, the future results of our operations may differ from the current expectations, and the reader must not rely solely on the information contained herein. The company shall not be liable for updating such forecasts in the light of new information or future developments. The goals, ambitions and perspectives presented throughout this supplement may be re-evaluated due to external and/or internal factors. CLIMATE CHANGE SUPPLEMENT 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPPLY 2. VISION OF THE FUTURE AND STRATEGIC PLANNING 3. REDUCING EMISSIONS IN OUR OPERATIONS 4. VALUE CHAIN EMISSIONS AND INNOVATION 5. CARBON AND CLIMATE IN MANAGEMENT AND DECISION-MAKING PROCESSES 6. TRANSPARENCY, COLLABORATION 4 AND SOCIAL-ENVIRONMENTAL 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPP Access to energy is life transforming and impacts our values and ideals. Energy is in freedom to come and go, experiences, health, comfort, and culture. How much of your daily life, dreams and values depend on energy? Life as we know today is linked to energy systems, and systems shape life. Virtually all of the United Nations Sustainable Development Goals require energy and 10% of the world's population (over 700 million people) still live unacceptably in extreme poverty (IEA, 2017 and World Bank, 2018). CLIMATE CHANGE SUPPLEMENT 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPPLY 2. VISION OF THE FUTURE AND STRATEGIC PLANNING 3. REDUCING EMISSIONS IN OUR OPERATIONS 4. VALUE CHAIN EMISSIONS AND INNOVATION 5. CARBON AND CLIMATE IN MANAGEMENT AND DECISION-MAKING PROCESSES 6. TRANSPARENCY, COLLABORATION 5 AND SOCIAL-ENVIRONMENTAL On the other hand, human activities emit greenhouse gases (GHG) to the atmosphere, mainly CO 2 . Currently the CO 2 concentration in the atmosphere is 408 ppm (parts per million) (NOAA, 2019), which exceeds the natural variation of the last 800 thousand years (from 180 to 300 ppm - IPCC, 2013). This increase in GHG intensifies the Earth's natural greenhouse effect, with changes in climate patterns and prediction of increased frequency and severity of adverse weather events (IPCC, 2014). Global Concentration of CO 2 in the atmosphere 450 400 Today we are more than seven billion human beings on the planet, occupying mostly built, coastal and densely populated groupings. Our social and economic systems are vulnerable to climatic conditions such as droughts, rains or intense winds. The World Economic Forum points out that extreme weather events and deficiencies in mitigation and adaptation to climate change are among the main risks to global economic development (WEF, 2019). Society recognizes the need to address climate change globally, with attention to measures to mitigate greenhouse gas emissions and adapt to their impacts, according to the consolidation of the science reported by the Intergovernmental Panel on Climate Change (IPCC). Human activity must be conducted in a sustainable way. We are aware of the intrinsic relationship between energy and greenhouse gas emissions. Activities related to the production and use of energy account for about 30% of Brazilian emissions and 70% of global GHG emissions (Sirene/MCTIC, 2018 and CAIT/WRI, 2017). The challenge of reconciling increased access to energy, energy security, and less greenhouse gas emissions, both in required time frame and at acceptable costs, is far from being achieved by a single government or sector. Each society needs to develop its path in the transition to a low carbon future based on its social and economic needs, emission profile and mitigation options. We reaffirm our commitment to provide the energy that drives society to realize its potential, while reducing the carbon intensity of our emissions. 350 Main risks to economic development by the World Economic Forum (ppm) 300 2 CO 250 of Concentration 200 150 100 50 0 -800.000 -600.000 -400.000 -200.000 0 Year The top 10 probability risks Extreme climate events Deficiency in mitigating and adapting to climate changes Natural disasters Data fraud or theft Cyber attacks Human-induced environmental disasters Large-scale involuntary migration Loss of biodiversity and ecosystem collapse Water crisis 10 Assets bubbles in a large economy Top 10 impact risks Weapons of mass destruction Deficiency in mitigating and adapting to climate changes Extreme climate events Water crisis Natural disasters Loss of biodiversity and ecosystem collapse Cyber attacks Collapse of critical information infrastructure Human-induced environmental disasters 10 Spread of infectious diseases Note: Negative values refer to a period before the common era. Source: EPA, 2018 ( https://www.epa.gov/climate-indicators/climate-change-indicators- atmospheric-concentrations-greenhouse-gases) Economic Environmental Geopolitical Social Technologi- Source: WEF, 2019 CLIMATE CHANGE SUPPLEMENT 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPPLY 2. VISION OF THE FUTURE AND STRATEGIC PLANNING 3. REDUCING EMISSIONS IN OUR OPERATIONS 4. VALUE CHAIN EMISSIONS AND INNOVATION 5. CARBON AND CLIMATE IN MANAGEMENT AND DECISION-MAKING PROCESSES 6. TRANSPARENCY, COLLABORATION 6 AND SOCIAL-ENVIRONMENTAL 2. VISION OF THE FUTURE AND STRATEGIC PLANNING Since 2003, we have been incorporating energy transition aspects to a low carbon economy in our visions of the future. As a company in the energy sector, we recognize that the way society's energy needs are met is facing unprecedented transformations. In the first half of the 21st century, we observe a process of energy transition beginning to materialize, which tends to consolidate the necessary decarbonisation of energy systems in order to mitigate climate change. However, the high level of uncertainty about the timing and form of the energy transition in each country requires an approach that considers different future scenarios. Developing scenarios is an instrument that qualifies the strategic analysis and the consequent positioning decisions in the long term. In this sense, we have been improving the use of scenarios as an input of our strategy and planning, through market monitoring, technology and regulation by company's different areas. We have prepared three scenarios that guide our vision for the future and support strategic planning, both for the quantification of assumptions and for our risk assessment. The scenarios are differentiated by the pace and extent of the energy transition: slow energy transition scenario; moderate energy transition scenario; accelerated energy transition scenario. We recommend reading our Scenarios Supplement for more details. CLIMATE CHANGE SUPPLEMENT 1. THE CHALLENGE OF CLIMATE CHANGE AND ENERGY SUPPLY 2. VISION OF THE FUTURE AND STRATEGIC PLANNING 3. REDUCING EMISSIONS IN OUR OPERATIONS 4. VALUE CHAIN EMISSIONS AND INNOVATION 5. CARBON AND CLIMATE IN MANAGEMENT AND DECISION-MAKING PROCESSES 6. TRANSPARENCY, COLLABORATION 7 AND SOCIAL-ENVIRONMENTAL In our scenarios, at least until 2040, the transition takes place in a context of expansion of energy consumption, reflecting economic growth and energy inclusion. In these scenarios, consolidated trends and critical uncertainties combine to shape transition trajectories. Economic gr