managing climate change risks
Chevron believes that climate change is a global issue. We share the concerns of governments and the public about climate change risks and recognize that the use of fossil fuels to meet the world’s energy needs contributes to the rising concentration of greenhouse gasses (GHGs) in Earth’s atmosphere. GHGs contribute to increases in global temperatures. We take prudent, practical and cost-effective actions to address climate change risks as part of our commitment to running our business the right way.
Reliable and affordable energy is necessary for improving standards of living, expanding the middle class and lifting people out of poverty. Oil and natural gas will continue to fulfill a significant portion of global energy demand for decades to come – even in a carbon-constrained scenario.
Chevron utilizes a number of processes to manage risk, including risks that may be associated with climate change. These include Enterprise Risk Management, Strategic and Business Planning, Portfolio Management, and assessments of commodity pricing.
- Chevron uses an internal outlook of carbon prices in the economic evaluations supporting major capital project appropriation approvals.
- We use a risk-based approach to address possible physical impacts to our critical infrastructure.
- We continually refresh our portfolio taking into account our views of future market and regulatory conditions. Chevron has the ability to adjust investment patterns, and portfolio composition will reflect the evolving nature of possible demand and regulatory changes.
In view of the continuing global demand for oil and gas, the substantial future investment required to meet that demand, and the way investment decisions to explore for and develop resources are phased and made with a market view in mind, the risk exposure to the Company in a GHG-restricted scenario is minimal.
Chevron has analyzed the impacts of supply, demand and resultant pricing levels under a reduced-demand/GHG-constrained scenario, including consideration of the International Energy Agency (IEA) 450 Scenario. This analysis has shown:
- The pricing levels modeled for the IEA 450 Scenario generally align with the low end of the price trajectory range already being used throughout our various planning processes.
- Although certain high-cost assets around the world could be impacted by a hypothetical GHG-constrained case, those high-cost assets for which a final investment decision has yet to be made would not find a place in our investment portfolio given our risk management processes. Lower-cost assets remain competitive, specifically, those assets already producing, which would continue to produce.
We have undertaken a number of steps to manage GHGs, including investments in flare reduction, investments in CO2 injection, improved energy efficiency and activity in biofuels.
We believe that our current risk management and business planning processes are sufficient to mitigate the risks associated with climate change. These processes are appropriate to enable us to continue to monitor and adjust accordingly as climate policy developments unfold.
managing climate change risks:
a perspective for investors