2021 sustainability report

Climate change
and energy
efficiency

Climate change

Our approach to climate change

Climate change is one of the top items on the UN 2030 Agenda for Sustainable Development. Nornickel recognises the need for a response to the threat of climate change across all areas of society and the economy, for supporting the goals of the Paris Agreement to limit the increase in the global average temperature to below 2°C, and for efforts to limit the increase to 1.5°C.

It is our absolute priority to adapt to climate change by using a comprehensive approach and facilitating large-scale implementation of innovations in technology, organisation and management. We contribute to the global climate change agenda by:

  • implementing our own strategy to increase the output of metals needed for the global energy transition, as well as boost their supply to the domestic and international markets;
  • upgrading production facilities using best available technologies and advanced environmental solutions;
  • keeping CO2 emissions at one of the lowest levels among global diversified metals and mining players;
  • developing renewable energy;
  • ensuring resilience to climate risks, including by providing climate risk monitoring support and investing in housing and social infrastructure across the Company’s footprint.

As its operations are largely concentrated in the Arctic, Nornickel focuses on cooperating with government authorities and the scientific community, supporting and promoting climate studies in the region, creating and expanding the climate monitoring system, and developing and implementing measures to reduce GHG emissions and adapt to climate change.

On top of that, we are actively involved as an expert in creating and promoting federal laws and provide expert and methodological assistance to other industry players in order to share experience and develop the best solutions to achieve the Paris Agreement’s goals.

To that end, Andrey Bougrov, Senior Vice President for Sustainable Development at Nornickel, became an actively involved member of the Climate Policy and Carbon Regulation Committee of the Russian Union of Industrialists and Entrepreneurs. The Committee acts as an intermediary between the business community and federal regulators, articulates recommendations and proposals on the nation’s climate policy, and is deeply involved in GHG emissions and absorption matters, including reporting, guidelines, standardisation, certification, verification, and green finance.

Climate change management

SASB EM-MM-110a.2

Climate change management goals and principles are embedded in a number of Nornickel’s strategic documents and policies approved by the Company’s Board of Directors. For instance, the key principles and responsibilities in this field are set out in PJSC MMC Norilsk Nickel’s Climate Change Policy*. Our climate targets and key initiatives are regulated by the Environmental and Climate Change Strategy*. Other by-laws related to the topic include the Environmental Policy and the Renewable Energy Sources Policy*.

The Company’s key climate change principles, goals and commitments

Goals and commitments
Climate change 2030 targets

Goals and commitments

Provide people with clean products reducing the carbon footprint of the global economy: by 2030, Ni production is planned to grow by 20–30%, Cu — by 20–30%, and Pt+Pd — by 40–50% compared to 2017

Ensure that climate factors are taken into account as part of our risk management system

Keep working to cut long-term GHG emissions across the value chain, from suppliers to customers

Strive to increase the share of low-carbon energy consumption

Promote low-carbon transition by supporting R&D to search for, and scale up, innovative solutions and encouraging intra- and cross-sectoral dialogue on climate change

Comply with globally recognised climate disclosure standards

Climate change 2030 targets

Reduce Scope 1+2 GHG emissions by 25% to 7.7 mtpa by 2028 taking into account the expected production growth and Sulphur Programme 2.0

Reduce carbon intensity from operations by 37%* to 5.0 t of СO2 equivalent per t of Ni equivalent by 2028

Responsibilities

The Board of Directors is responsible for overseeing climate management, including the approval of the climate change policy, strategy*, and risk appetite, as well as monitoring climate risk management. In order to ensure a deeper focus on climate change, in 2021 the Board created the Sustainable Development and Climate Change Committee led by the Chairman of the Board of Directors*.

At the management level, climate change matters are reviewed and overseen by the Risk Management Committee of the Management Board led by the Company’s President. Information on key risks, including those related to climate change, is reviewed on a quarterly basis.

Senior Vice President Sustainable Development is in charge of the Company’s sustainable development policy, including climate change. Dedicated units of the Head Office, branches and Group companies are responsible for certain aspects of the climate change policy and strategy within their scope*.

Nornickel’s roadmap to comply with the TCFD recommendations

In 2021, Nornickel approved, based on an order of the Senior Vice President for Sustainable Development, the Roadmap to Fulfil TCFD Recommendations for 2022 – Q2 2023. The document includes Responsibilities The Board of Directors is responsible for overseeing climate management, including the approval of the climate change policy, strategy4, and risk appetite, as well as monitoring climate risk management. In order to ensure a deeper focus on climate change, in 2021 the Board created the Sustainable Development and Climate Change Committee led by the Chairman of the Board of Directors5. At the management level, climate change matters are reviewed and overseen by the Risk Management Committee of the Management Board led by the Company’s President. Information on key risks, including those related to climate change, is reviewed on a quarterly basis. Senior Vice President Sustainable Development is in charge of the Company’s sustainable development policy, including climate change. Dedicated units of the Head Office, branches and Group companies are responsible for certain aspects of the climate change policy and strategy within their scope6. over 50 measures aimed at bringing the Company’s climate risk management, strategic and operational management of climate change matters, and targets, indicators and reporting in line with the TCFD recommendations and relevant global best practices.

Core elements of the Roadmap to comply with the TCFD recommendations

Dimension
Key measures and projects

Dimension

Corporate governance

Key measures and projects

  • Strengthening the role of the Board of Directors and top management in managing climate change-related issues, regular monitoring of climate risks, and overseeing the implementation of key mitigants
  • Building an organisational structure of climate risk management and improving the Company’s regulations and guidelines

Dimension

Corporate strategy and financial planning

Key measures and projects

  • Analysing the impact of physical and transition risks on the corporate and sales strategies, operations, financial planning, supply chain, revenue, OPEX, CAPEX, etc. Considering these factors as part of strategic planning
  • Analysing the resilience of the Company’s strategy when it comes to climate change scenarios, including the less than 2°C warming by 2100 scenario

Dimension

Risk management

Key measures and projects

  • Integrating physical and transition risks into corporate business processes. Keeping risk owners abreast of climate risk factors
  • Implementing procedures and methods of qualitative and quantitative assessment of physical and transition risks, as well as internal audit processes to manage these risks

Dimension

Goals and targets

Key measures and projects

  • Calculating and disclosing the carbon footprint generated during production
  • Calculating and disclosing Scope 1, 2 & 3 GHG emissions
  • Calculating internal carbon pricing
  • Regularly updating and disclosing goals and target indicators used by the Company to measure progress in implementing the climate strategy

Corporate climate agenda: key results and plans in 2021–2023

2021 — results
2022 — plans
2023 — plans

2021 — results

  • Sustainable Development and Climate Change Committee of the Board of Directors
  • PJSC MMC Norilsk Nickel’s Climate Change Policy developed and approved by the Board of Directors
  • Roadmap to Fulfil TCFD Recommendations developed and approved by the Company’s management
  • Project to implement organisational changes solidifying functions and roles in climate change across the Company (including divisions) launched
  • Relevant methodology developed and assessment conducted to measure the carbon footprint of the Company’s core products
  • First batch of carbon-neutral nickel produced
  • Pilot project to assess physical climate change risks launched in Norilsk Division

2022 — plans

  • Prepare climate scenarios and conduct scenario analysis of climate change risks and opportunities
  • Scale up the project to assess physical risks across all Divisions
  • Develop a permafrost programme
  • Develop a corporate decarbonisation strategy
  • Calculate the internal carbon price
  • Integrate estimates of products’ carbon footprint into strategic planning processes
  • Calculate upstream Scope 3 GHG emissions
  • Enhance public climate change disclosure based on TCFD recommendations

2023 — plans

  • Fully integrate climate change risks into corporate business processes
  • Develop detailed plans to mitigate climate change risks (for individual production assets as well)
  • Factor new standards and business practices into business processes
  • Publish a dedicated public climate change report
  • Cooperate and enter partnerships to promote the climate agenda in the professional community

Climate change impact on Nornickel’s strategy

Resilience of Nornickel’s strategy against climate change risks

GRI 102-15 201-2

Based on TCFD recommendations, the Company defines two main categories of climate change risks:

Physical risks
Their impact may manifest in the form of weather anomalies or irreversible changes of climatic conditions. Physical climate change effects may include permafrost thawing, changes of water levels in water bodies, precipitation volumes, wind loads, and other climate risk factors, which may have a material adverse impact on operations.

Transition risks
Associated with the transition to a low-carbon economy. The Company categorises as transition risks the respective political, regulatory, technological, market, and reputational risks.

Impact of physical risks:
Impact of transition risks:

Impact of physical risks:

In 2020–2021, following the HPP-3 incident, the Company reassessed physical risks related to permafrost thawing in the Norilsk Industrial District and increased their materiality.

Research conducted together with Russia’s leading scientific organisations showed these risks to be significant, and the Company developed a set of management initiatives that include:

  • strategic investment programme to upgrade the energy infrastructure with planned investment of over RUB 600 bn;
  • development and implementation of a system to monitor the foundations of buildings and structures.

Влияние рисков переходного периода:

Nornickel views risks associated with increased regulatory pressure vis-à-vis the carbon footprint of its output as an opportunity to make its products more competitive, given the Company’s strong position in the market in terms of this measure.

The proposed Carbon Border Adjustment Mechanism for the European Union does not apply to metals produced by Nornickel.

Market opportunities presented by physical risks:
Market opportunities presented by transition risks:

Market opportunities presented by physical risks:

A long-term effect of physical risks on the Company’s strategy under the 2°C global warming scenario would be more severe shortages on the global market and higher prices for the Company’s products triggered by a possibly higher sea level and subsequent flooding of a number of production facilities in Southeast Asia.

Market opportunities presented by transition risks:

Risks related to global decarbonisation and energy transition projects generally represent opportunities for the Company to increase production and shareholder value on the back of forecast significant growth in demand for its core products.

These opportunities and related forecasts are described in more detail further in the Report, as well as in the Strategy of Sustainable Growth section.

Project to assess physical climate change risks

In 2021, Nornickel launched a large-scale project to assess physical risks related to climate change.

In 2021, climate change was modelled in the Norilsk Industrial District until 2050, based on three global climate scenarios of the Intergovernmental Panel on Climate Change.

The analysis covered three baseline scenarios: SSP5-8.5, SSP2-4.5, SSP1-2.6 (compliance with the Paris Agreement scenario).

To this end, we engaged climate scientists from the Obukhov Institute of Atmospheric Physics of the Russian Academy of Sciences, who conducted a pilot assessment and formed a register of physical climate change risks for a number of facilities in the Norilsk Division, and drafted a methodology for quantitative risk assessment.To this end, we engaged climate scientists from the Obukhov Institute of Atmospheric Physics of the Russian Academy of Sciences, who conducted a pilot assessment and formed a register of physical climate change risks for a number of facilities in the Norilsk Division, and drafted a methodology for quantitative risk assessment.

In 2022, we plan to carry out a qualitative and quantitative (including the possible impact on the Company’s financial performance) physical risk assessment for other assets of the Norilsk, Kola and Zabaykalsky divisions.

Registers of relevant risks will be compiled to further develop mitigation and adaptation measures.

climate change

Nornickel opportunity: impact of decarbonisation on the growth of demand for the Company’s metals

Nornickel’s strategic development is largely geared towards facilitating global transition to green transport, promoting renewables, and ensuring long-term competitiveness of the Company’s products through keeping GHG emission intensity relatively low, increasing energy efficiency, and mitigating physical risks with due account for climate factors.

According to an International Energy Agency forecast, the total market size of critical minerals will grow almost sevenfold between 2020 and 2030 in the net zero pathway, which creates substantial new opportunities globally for mining companies*. The Agency’s sustainable development scenario projects substantial evolution of the car market structure by 2030: electric vehicles (EVs) — 14%, internal combustion engine vehicles (including hybrids) — 86%, while by 2040, this breakdown may stand at 31% and 69%, respectively. CO2 emission targets for passenger vehicles are forecast to go down from 3.6 bt in 2019 to 2.9 bt in 2030 and 1.4 bt in 2040.

According to Nornickel estimates, which take into account LMC Automotive and Bloomberg projections, the share of EVs and hybrids in car manufacturing may reach 36% as early as 2025.

If the strategic target is achieved, by 2030 Nornickel may supply enough PGMs to the global market to produce 25–40 mln catalysts for cars. Increased production of high-quality nickel may enable the manufacturing of 3.5‒5.5 mln EV battery packs, which could translate into a 50‒100 mt reduction of global СО2 emissions.*

The crucial climate change factors affecting the demand for the Company’s key products*

2040:
Ni
PGM
Cu

Growth of BEVs market share

2040:

Ni

PGM

Cu

Growing hybrid vehicle market

2040:

Ni

PGM

Cu

Growing fuel cell market

2040:

Ni

PGM

Cu

Growth of renewables / low carbon fuel in power generation

2040:

Ni

PGM

Cu

Storage and grid expansion to support growth in EVs

2040:

Ni

PGM

Cu

Net impact

2040:

Ni

PGM

Cu

Market research and sales prospects for Nornickel’s metals in the automotive market until 2025*

Gasoline vehicles
Diesel vehicles
Hybrid vehicles (incl. PHEV)
Electric transport (BEV)
Hydrogen vehicles (FCEV)

CAGR*

Gasoline vehicles

0%

Diesel vehicles

0%

Hybrid vehicles (incl. PHEV)

+24%

Electric transport (BEV)

+36%

Hydrogen vehicles (FCEV)

+43%

Market share*

Gasoline vehicles

52%

Diesel vehicles

11%

Hybrid vehicles (incl. PHEV)

22%

Electric transport (BEV)

14%

Hydrogen vehicles (FCEV)

<1%

Nickel

Gasoline vehicles

Stainless steel and other parts

Diesel vehicles

Stainless steel and other parts

Hybrid vehicles (incl. PHEV)

+ batteries

Electric transport (BEV)

+ batteries

Hydrogen vehicles (FCEV)

Weight per vehicle

Gasoline vehicles

2-4 kg

Diesel vehicles

2-4 kg

Hybrid vehicles (incl. PHEV)

5-15 kg

Electric transport (BEV)

30-110 kg

Hydrogen vehicles (FCEV)

2-3 kg

Copper

Gasoline vehicles

Cables and other parts

Diesel vehicles

Cables and other parts

Hybrid vehicles (incl. PHEV)

+ electric motors, generator windings, charging infrastructure

Electric transport (BEV)

+ electric motors, generator windings, charging infrastructure

Hydrogen vehicles (FCEV)

+ electric motors, generator windings, charging infrastructure

Gasoline vehicles

20-25 kg

Diesel vehicles

20-25 kg

Hybrid vehicles (incl. PHEV)

50-60 kg

Electric transport (BEV)

75-85 kg*

Hydrogen vehicles (FCEV)

70-75 kg

PGM

Gasoline vehicles

Catalysts

Diesel vehicles

Catalysts

Hybrid vehicles (incl. PHEV)

Catalysts

Electric transport (BEV)

Hydrogen vehicles (FCEV)

Fuel cells

Weight per vehicle

Gasoline vehicles

2-5 g

Diesel vehicles

3-6 g

Hybrid vehicles (incl. PHEV)

4-10 g

Electric transport (BEV)

Hydrogen vehicles (FCEV)

25-35 g

Price of the metals per vehicle*

Gasoline vehicles

USD 410–1,020

Diesel vehicles

USD 340–610

Hybrid vehicles (incl. PHEV)

USD 770–1,610

Electric transport (BEV)

Up to USD 3,300

Hydrogen vehicles (FCEV)

Up to USD 2,000

Key drivers of the demand for Nornickel’s products. International CO2 reduction agenda

Key drivers of the demand for Nornickel’s products. International CO2 reduction agenda

Potential for entry into new sales sectors

The growing demand for batteries and the increased need of European battery manufacturers to have a supply of feedstocks with a low carbon footprint open up opportunities for Nornickel to integrate deeper into new value chains. To embed itself into the European battery sector, Nornickel plans the following:

  • analysing the demands of potential customers in the context of establishing a foothold in the battery feedstocks market;
  • increasing the output of nickel that is fit for use in Finland’s growing ecosystem that produces battery feedstocks;
  • looking to widen capabilities through research and partnerships to promote integrated solutions for a future battery supply chain.

Strategic emphasis on low-carbon products

Already in the mid-term, the integration of responsible practices into production and the need to decrease the carbon footprint will materially boost the competitiveness of Nornickel’s products in target markets.

The Company already boasts a pole position in terms of absolute and specific GHG emissions, which are some of the lowest among international metals and mining peers.

In 2021, Nornickel conducted its first assessment of the per-unit carbon footprint for the entire metals basket, based on the calculation methodology developed in accordance with life cycle– based international standards (LCA ISO 14040/14044). The methodology had been certified by a recognised international LCA expert in metals and mining — Sphera Solutions GmbH, and 2020 carbon emissions per unit of product were calculated and certified by Ernst & Young (EY).

The carbon footprint of refined nickel produced by the Company amounted to 8.1 t of СО2 equivalent per tonne — far below the industry average.

Transformation of Nornickel’s product basket

Transformation of Nornickel’s product basket
GHG emissions (Scope 1 and 2),
mt of CO2 equivalent*
GHG emissions (Scope 3),
mt of CO2 equivalent*

GHG emissions (Scope 1 and 2),
mt of CO2 equivalent*

GHG emissions (Scope 1 and 2), mt of CO₂ equivalent

GHG emissions (Scope 3),
mt of CO2 equivalent*

GHG emissions (Scope 3), mt of CO₂ equivalent
Global Warming Potential (100 years) based on ISO 14044,
kg CO2e per kg of metal
Global Warming Potential (100 years) based on ISO 14044,
kg CO2e per kg of product

Global Warming Potential (100 years) based on ISO 14044,
kg CO2e per kg of metal

Global Warming Potential (100 years) based on ISO 14044

Global Warming Potential (100 years) based on ISO 14044,
semi-products

Global Warming Potential (100 years) based on ISO 14044

Global Warming Potential (100 years) based on ISO 14044,
kg CO2e per kg of product

Global Warming Potential (100 years) based on ISO 14044

Figures include the Company’s estimated prospective GHG emissions associated with the implementation of Sulphur Programme 2.0.

Production of carbon-neutral nickel

In 2021, Nornickel started producing carbon-neutral nickel. The first batch of carbon-neutral products was put out by the Group’s Kola Division and totalled 5 kt of nickel cathodes.

Replacement of hydro turbines and thermal power generation units, upgrade of heating systems and power equipment, and improvement of insulation allowed Nornickel to reduce GHG emissions by 48 kt of CO2 equivalent in 2019–2020, which has been independently verified by EY.

Further initiatives to reduce GHG emissions that are slated for 2021–2025 will make it possible to produce over 40 kt of carbon-neutral nickel until 2025.

Energy infrastructure modernisation

To contribute to the climate change agenda, mitigate physical risks related to permafrost thawing, which had been moved to the front burner, and meet the newly set strategic targets to reduce specific GHG emissions, Nornickel included in its updated Strategy 2030 a large-scale RUB 600 bn investment programme focused around a comprehensive upgrade of the Norilsk Industrial District energy infrastructure and renewables development.

The programme provides for, among other things, the replacement of equipment at heat and hydro power stations (including increasing installed hydropower capacity), upgrade of heat transmission, power transmission lines and gas pipeline systems, and modernisation of fuel storage tanks.

Plan for energy infrastructure modernisation

Plan for energy infrastructure modernisation

Climate change risk management

GRI 102-15 201-2

Nornickel recognises the need to maintain resilience to climate change risks by taking measures to adapt, managing GHG emissions in line with the announced targets, and harnessing innovations to brace for future challenges.

Our risk management practices include measures to track climate changes and limit their impact on the Company’s targets indicators. The Company’s governance bodies receive quarterly reports on key risks, including those related to climate change.

Risk of permafrost thawing

Soil thawing is the key climate change risk faced by the Company as it causes loss of bearing capacity, which may subsequently lead to the destruction of buildings and structures.

The 2020 fuel spill at HPP-3 exposed the climate change–induced geocryological factor as one of the two main causes that with a high likelihood led to the incident.

Nornickel is faced with a unique and complex challenge of managing conventional climate risks while also having to study the Arctic Zone’s distinctive climate change processes and their consequences for permafrost soils, as well as project future developments and incorporate these risks into management decision-making.

In 2021, the Company’s risk management initiatives and achievements included:

  • Nornickel is developing a multi-level geotechnical monitoring system that would include, among other things, satellite remote sensing;
  • satellite imaging (optical and interferometry) of the Norilsk Industrial District performed, with the images interpreted and data on vertical and horizontal displacement of structures obtained;
  • the Company retrofitted the Buildings and Structures Monitoring Centre in Norilsk, and increased and reinforced its staff. In 2019, the Centre was responsible for geotechnical monitoring and inspection of 223 foundations and piles of structures, and in 2021 this number almost doubled. The Company introduces new methods of soil study, nondestructive testing and measuring, including georadiolocation, electromagnetic soil surveys, seismoacoustic surveys of buildings and structures, 3D laser scanning of buildings, etc.;
  • the Company made significant progress in the dialogue with the professional and academic communities. As part of its first and second stages in 2020–2021, the Great Norilsk Expedition did a wide range of engineering, geocryological, soil, hydrobiological, and other studies. The expedition’s primary goals were to investigate the causes of the diesel fuel spill and provide an evidence-based picture of the actual contamination and environmental damage. The research yielded new data that will help mitigate the risk of incidents caused by geocryological factors and processes;
  • Nornickel is working to design and build new diesel fuel tanks to replace those at NTEC’s HPP-3 that had been decommissioned and dismantled. Simultaneously, the Company is engaged in a large-scale, in-depth engineering and geological survey of the area’s geocryological properties taking into account climate risks. We are also considering foregoing the use of diesel fuel as HPP backup fuel to fully eliminate the spill risk;
  • the Company is planning to develop a digital twin of Norilsk to create short-, medium-, and long-term models for managing risks under various climate scenarios.

Insufficient water resources is another significant risk related to climate change. For more details on the assessment and management of these risks, please see the Risk Management section.

Assessment of climate change impact on tailing dumps

To minimise the Company’s risks and ensure that the necessary timely measures are taken to respond to possible changes in the condition of the Company’s tailing dumps, the first stage of work was performed seeking to look into the impact of more frequent extreme weather events and degradation of permafrost rocks due to climate change on the Company’s hydraulic engineering facilities (tailing dumps). This resulted in the development of climate change models for the period through 2050 in the Norilsk Industrial District.

The forecast until the middle of the 21st century is based on the ensemble averaging of calculations by using 40 CMIP5 generation climate models for two greenhouse gas emission scenarios, RCP8.5 and RCP4.5. The forecast is for an increase in air temperature, snow cover depth, and summer precipitation by the middle of the 21st century versus the baseline period of 1981–2005. For quantitative prediction of climate-driven changes in factors affecting the safety of tailing dumps, calculations will be carried out by using a non-stationary permafrost soil model.

Geotechnical monitoring of buildings and structures

The project aims
Key results for 2021:

The project aims

To outfit around 1,500 facilities, including tanks, pipelines, production sites and administrative buildings, with real-time alert sensors connected to the IDS.

The monitoring is done using various types of sensors that enable us to monitor the temperature condition of wells or along long linear facilities; pressure sensors to determine the level of groundwater; water level sensors and inclinometers to measure deformation of structural components of buildings; strain gauges to determine strain in steel constructions; satellite monitoring system to track movements of elements using the GLONASS satellite navigation system and other technical means.

Key results for 2021:

  • the Buildings and Structures Monitoring Centre of Norilsk Division, which is responsible for engineering and geological monitoring and technical audits, was upgraded, and its staff was increased;
  • over 1,200 sensors were installed at 39 fuel storage tanks and 115 other buildings and structures in Norilsk, including over 400 temperature sensors, over 700 inclinometers, and over 100 moisture and temperature sensors. All data is collected and analysed in real time within a centralised monitoring system;
  • 417 new wells were drilled to install temperature sensors and monitor the temperature and moisture of foundation soils underneath buildings in real time;
  • a pilot project was completed to monitor 11 tanks at backup diesel fuel facilities of NTEC’s HPP-1, HPP-2 and HPP-3;
  • technical inspections of crawl spaces were carried out (over 800 facilities vs almost 700 in 2020);
  • geodetic measurements identifying deformations of structural parts of buildings and structures were taken (over 11,000 points of measurement vs 6,000 in 2020).

Process flowchart for online monitoring systems

Process flowchart for online monitoring systems

Greenhouse gas emissions and energy efficiency

The Company has established a regular practice of assessing emissions (Scope 1 and 2) in accordance with the GHG Protocol methodology. The calculation of GHG emissions for the Group takes into account the following greenhouse gases: carbon oxide (CO2), nitrous oxide (N2O), methane (CH4), with no or insignificant emissions of other greenhouse gases. The quantitative assessment of Scope 1 GHG emissions also includes the Company’s estimated prospective GHG emissions associated with the implementation of Sulphur Programme 2.0.

Based on the results of 2021, direct and indirect GHG emissions (Scope 1 and 2) increased by 0.6 mt of CO2-eq. y-o-y to total 10.3 mt. At the same time, the Company’s production emissions amounted to 9.1 mt of CO2-eq., with 1.22 mt of CO2-eq. of GHG emissions resulting from providing local communities with heat and electricity. The growth dynamics was caused primarily by weather factors, i.e. the need to provide businesses and households with heat and energy in cold winter conditions. Diesel reserves were used for heat and power generation and are subject to replacement. In addition, data from the non-production sector were added to the calculations in 2021. The intensity of GHG emissions (Scope 1 and 2) was 7.82 t of CO2 equivalent per million roubles of consolidated IFRS revenue.

In 2021, the Company proposed a quantitative assessment of indirect GHG emissions (Scope 3 downstream) to the extent relating to product sales. According to the GHG Protocol, such emissions as regards the Company include emissions associated with product transportation from the Company’s production facilities to the customer and the first stage of product processing.

In 2021, Norilsk Nickel Group’s volume of such emissions amounted to 3.1 mt of CO2-eq., up 18% y-o-y. The main growth driver was an increase in iron ore concentrate sales, with its processing, i.e. steel making, being a highly carbonintensive process. It accounts for 83% of Scope 3 downstream emissions. The further processing of the Company’s finished metal products is much less carbon-intensive. Due to the structure and size of its product portfolio, Nornickel’s Scope 3 downstream emissions are lower than those of its global metals and mining peers.

GHG emissions (Scope 1 and 2),
mt of CO2 equivalent*

GRI 305-1 305-2 305-4/ SASB EM-MM-110a.1

GHG emissions (Scope 1 and 2)

GHG emissions (Scope 3 downstream),
mt of CO2 equivalent

GRI 305-3

GHG emissions (Scope 3 downstream)

Energy efficiency improvement and use of renewable energy sources

SASB EM-MM-130a.1

Nornickel Group’s key production facilities operate in the Far North, which is why the Company’s fuel and energy services are tasked with an important mission of ensuring a reliable and continuous power supply to production facilities and households across the footprint.

Nornickel takes a comprehensive approach to the development of energy infrastructure facilities, combining reliability improvement tasks with those of the reduction of GHG emissions. We make continuous efforts to reduce the consumption of such energy sources as diesel fuel and coal and to develop hydropower in order to provide our production operations with reliable and efficient energy sources in the long term.

Electrical power from renewable sources is generated at the Ust-Khantayskaya and Kureyskaya HPPs (part of NTEC). The use of other renewables such as solar, geothermal, and wind energy, is constrained by the length of the polar night and severe climatic conditions that cause wind power generation facilities to go out of service.

In 2021, the Company launched the Ust-Khantayskaya HPP after upgrading. Starting in 2012, seven hydroelectric units at the Ust-Khantayskaya HPP were replaced step by step. This refurbishment also included the following operations:

  • revamping the main generator hall and the electrical shop;
  • construction of a new compressor station;
  • implementation of a new automated dispatch system.

Following the upgrade, the installed capacity of the plant increased from 441 MW to 511 MW. The new equipment has an efficiency factor of almost 95%.

In 2022‒2030, the Company is also planning to carry out a comprehensive upgrading project at the Kureyskaya HPP with a scheduled increase in installed capacity.

In 2021, the total share of electricity consumed by Nornickel’s production operations from renewable energy sources reached 47%, up 1 p.p. y-o-y.

In 2021, Bystrinsky GOK purchased 20,000 IREC certificates from Azov Wind Farm owned by Enel Russia, for the first time in the company’s history. The use of the certificates allowed the company to include 20,000 MWh of electricity from renewable sources in its energy consumption balance, which is equivalent to 5.8% of Bystrinsky GOK’s annual consumption.

“Trans-Baikal Division is progressing in accordance with the approved environmental strategy covering all major areas of environmental impact, in particular climate change. For instance, about 40 initiatives will be implemented under the strategy through 2031. Some of them deal with improving energy efficiency and reducing our carbon footprint. Buying certificates is the first, tentative step. Also, to reduce our carbon footprint and GHG emissions, we are considering the construction of a solar power plant that could cover up to 20% of Bystrinsky GOK’s energy consumption by 2031.”

Alexander Popov,
Nornickel Vice President, Trans-Baikal Division CEO

Share of renewable energy in total electricity consumption by Nornickel Group, %

Share of renewable energy in total electricity consumption
by Nornickel Group

Total energy consumption by Nornickel Group, TJ

GRI 302-1 GRI 302-3

Indicator
2017
2018
2019
2020
2021

Indicator

Fuel consumption

2017

156,568

2018

148,910

2019

144,772

2020

141,237

2021

151,235

Indicator

Energy from renewable sources (HPPs)

2017

12,414

2018

14,877

2019

15,058

2020

15,310

2021

14,586

Indicator

Electricity and heat procurement from third parties

2017

10,483

2018

10,931

2019

11,331

2020

11,200

2021

10,891

Indicator

Electricity and heat sales to third parties

2017

19,503

2018

18,926

2019

18,766

2020

17,254

2021

19,974

Indicator

Group’s total energy consumption
(1 + 2 + 3 – 4)

2017

159,962

2018

155,792

2019

152,395

2020

150,493

2021

156,738

Indicator

Energy intensity, GJ / RUB mln*

2017

298

2018

214

2019

174

2020

135

2021

117

Fuel consumption by Group companies by type of fuel, TJ

Indicator
2017
2018
2019
2020
2021

Indicator

Fuel consumption

2017

156,568

2018

148,910

2019

144,772

2020

141,237

2021

151,235

Indicator

Natural gas

2017

134,709

2018

129,335

2019

125,329

2020

122,216

2021

130,867

Indicator

Coal

2017

1,460

2018

1,660

2019

2,087

2020

2,180

2021

1,557

Indicator

Diesel fuel and fuel oil

2017

15,221

2018

13,788

2019

13,535

2020

13,939*

2021

15,097

Indicator

Gasoline and jet fuel

2017

5,178

2018

4,127

2019

3,820

2020

2,902

2021

3,715

Electric power and heat consumption by the Group companies, TJ

Including in 2021
Indicator
2019
2020
2021
Electricity
Heat (hot water and steam)

Indicator

Electric power and heat consumption by the Group companies

2019

62,994

2020

59,996

2021

60,771

Including in 2021
Electricity

30,486

Including in 2021
Heat (hot water and steam)

30,285

including

Indicator

Polar Division

2019

32,012

2020

30,869

2021

30,727

Including in 2021
Electricity

14,049

Including in 2021
Heat (hot water and steam)

16,678

Indicator

JSC NTEC

2019

6,214

2020

6,185

2021

6,439

Including in 2021
Electricity

4,295

Including in 2021
Heat (hot water and steam)

2,144

Indicator

JSC Kola MMC

2019

12,126

2020

11,542

2021

9,393

Including in 2021
Electricity

6,309

Including in 2021
Heat (hot water and steam)

3,084

Indicator

HPP share in total electric power consumption in the Norilsk Industrial District

2019

53.5%

2020

55%

2021

52%

Including in 2021
Electricity

Including in 2021
Heat (hot water and steam)

Indicator

HPP share in total electric power consumption by the Company

2019

44.5%

2020

46%

2021

47%

Including in 2021
Electricity

Including in 2021
Heat (hot water and steam)

Indicator

HPP share in total electric power and heat consumption by the Company

2019

23.9%

2020

25.5%

2021

24%

Including in 2021
Electricity

Including in 2021
Heat (hot water and steam)

Fuel and energy savings resulting from energy consumption reduction and energy efficiency improvement initiatives in 2021

GRI 302-4

Including
Indicator
Nornickel Group average
Polar Division
JSC NTEC
JSC Kola MMC
Medvezhy Ruchey LLC

Indicator

Total savings, TJ

Nornickel Group average

546.8

Including Polar Division

341.6

Including JSC NTEC

127.4

Including JSC Kola MMC

5.6

Including Medvezhy Ruchey LLC

72.2

including

Indicator

Electricity

Nornickel Group average

35.8

Including Polar Division

13.7

Including JSC NTEC

7.3

Including JSC Kola MMC

2.6

Including Medvezhy Ruchey LLC

12.2

Indicator

Heat in water and steam

Nornickel Group average

454.7

Including Polar Division

327.9

Including JSC NTEC

63.8

Including JSC Kola MMC

3.0

Including Medvezhy Ruchey LLC

60.0

Indicator

Fuel

Nornickel Group average

56.3

Including Polar Division

0

Including JSC NTEC

56.3

Including JSC Kola MMC

0

Including Medvezhy Ruchey LLC

0

2021 saw a 7% increase in total fuel consumption y-o-y, driven by higher gas and diesel fuel consumption at NTEC’s facilities due to the flaring of separated fuel collected as part of HPP-3 clean-up efforts.

Fuel oil consumption of the Murmansk Transport Division also increased in 2021 as four additional ice-class vessels were engaged to cover the spike in cargo deliveries to the Norilsk Industrial District from December to May.

The decrease in the overall energy intensity of Nornickel Group is explained by revenue growth leapfrogging the increase in energy consumption.

The 7% decrease in electricity consumption y-o-y was associated with the closure of Kola MMC’s metallurgical shop in Monchegorsk and temporary operational restrictions at the Oktyabrsky and Taimyrsky mines and the Norilsk Concentrator.

The overall increase in the consumption of heat and steam (by 12% y-o-y) as well as natural gas consumption at NTEC’s facilities was due to lower outdoor temperatures in 2021 vs 2020

The Company’s divisions annually develop and implement initiatives to save fuel, energy, and water.

In 2021, the implementation of operational and technical energy efficiency measures to reduce energy consumption and improve energy efficiency resulted in actual savings of 546.8 TJ, with the operating and capital costs for those purposes totalling RUB 242.9 mln. The key measures were to install frequency-controlled drives, implement an automatic control system for energy-intensive heating equipment and an automated energy accounting system, switch from mercury and gasdischarge lamps to LED lighting, and restore thermal insulation in outdoor heating networks.