Industrial/Business Carbon Footprint

1. Industrial/Business Carbon Footprint AAFA Environmental Committee Meeting Geir Vollsæter - Special Advisor Climate Change and Carbon Management Group Alston & Bird LLP

2. Alston & Bird • A&B has a strong carbon management practice that specializes in CO2 management from source to final product within oil, gas, electricity and consumer products • A&B initiated the North American Carbon Capture and Storage Association (NACCSA) • A&B is retained by Edison Electrical Institute for CCS work • A&B has major global firms as clients for CO2 mitigation, renewables, clean technologies, advocacy and strategy

3. 400 Global Trend 350 EU-15 North America 300 Korea 1970-2000 Malaysia 1970-2000 250 China 1970-2000 Energy Use, GJ per capita 200 150 100 50 0 $0 $5 000 $10 000 $15 000 $20 000 $25 000 $30 000 $35 000 $40 000 GDP per capita, US$ 1995 ppp Energy = Growth = Prosperity WBCSD Source – WBSCD

4. Growth, development and energy demand • Global population divided into income groups; • Poorest (GDP < $1,500) • Developing (GDP < $5,000) • Emerging (GDP < $12,000) • Developed (GDP > $12,000) Primary energy Developed (GDP>$12,000) Emerging (GDP<$12,000) Developing (GDP<$5,000) Poorest (GDP<$1,500) 10000 Population expected to rise to 9 billion by 2050, mainly in poorest and developing countries. 8000 6000 Shifting the development profile to a “low poverty” world means energy needs double by 2050 Population, millions 4000 2000 Shifting the development profile further to a “developed” world means energy needs triple by 2050 0 2000 2050 (Base) 2050 2050 Source – WBSCD Low Poverty Developed World

5. Increased upstream CO2 intensity • CO2 emission per bbl o.e produced on the rise • “Low hanging fruit” light oil in decline • Heavy oil on the rise • CO2 intensive unconventional oil in rapid development • Some say easy oil is over, more likely, easy oil is over for some, mostly international oil companies, driving some oil and gas companies to pursue unconventionals

6. Growth, Environment and Globalization • Globalization drives growth, employment, revenues, cheaper goods but, • Has lead to significant environmental dumping • Has made assurance of product quality and environmental impact difficult due to long value chains • But increasingly, emissions = liability • CO2 intensity in industrial sectors and products is under evaluation by investors and governments

7. CO2 Intensity Benchmarks • CO2 intensity standards – benchmarks • CO2 intensity standard = 1 Gallon fuel, 1 ton steel, cement, fertilizer = X kg CO2 • CO2 measured from well and mine to tank (WTT), Kwh’s etc • California adopted, through AB 32 and LCFS, a WTT regime as a foundation for its CO2 reduction regime that governs both fuel and power. • New categories of consumer products will see similar regulations, benchmarks and liabilities.

8. Carbon Disclosure • Voluntary/mandatory reporting for facilities and products • Third party verification, voluntary and mandatory • Many pension funds, institutional investors and banks now demand/strongly advice their potential prospects to disclose the CO2 intensity of the portfolio • $ 57 trillion (before the credit crisis) stand behind the Carbon Disclosure Project that yearly benchmarks global industries on CO2 intensity and strategies to reduce the carbon footprint for their products

9. CO2 intensity in shoes and costs given 50 $ / ton CO2 200 150 100 50 0 Flip flops Regular shoes Hiking boots 30 90 175 lb CO2 0.75 2.25 4.375 $ additional cost Shoes • “Timberland Co. shoe company with an outdoorsy image, has assessed the carbon footprint of about 40 of the shoe models it currently sells. The results range from about 22 pounds to 220 pounds per pair.” (WSJ) • For shoes, transportation account for about 5 % of the total emissions Source: WSJ Oct 6th

10. Consumer products - Benchmarked • Increasingly, companies now undertake studies of the CO2 intensity of their products, for good reasons.

11. Summary • Global energy consumption and CO2 intensity is increasing • Global benchmarking of industrial production ongoing • Investor community treats CO2 as a risk to portfolio • Lower unit CO2 intensity = increased global competitiveness when CO2 has a price • CO2 intensity will increasingly impact consumer preference and increasingly impact the bottom line

12. Thanks Geir Vollsæter Geir.vollsaeter@alston.com Special Advisor Climate Change and Carbon Management Group Alston & Bird LLP The Atlantic Building 950 F Street, NWWashington, DC 20004-1404USA Phone: 202-756-3300 Fax: 202-756-3333