In coherence with its raison d’être, “To build a net zero energy future with electricity and innovative solutions and services, to help save the planet and drive well-being and economic development”, in February 2020 the EDF group, along with more than 300 other companies worldwide (as of December 2020), signed up to the “Business Ambition for 1.5 degrees” commitment to achieve carbon neutrality, a target set in line with the Paris Climate Agreement.
Following this commitment, on the fifth anniversary of the Paris Climate Agreement, the Group’s reinforced CO2 emission-cutting trajectory was officially validated by the Science Based Targets initiative as “well below 2°C”, and it set up dedicated governance arrangements aligned with best practices as recommended by the Taskforce on Climate-Related Financial Disclosure (see the press release of 10 December 2020).
The Group’s financial statements reflect issues relating to climate change and sustainable development through the implementation of its investment and divestment strategy and a sustainable financing strategy, through expenditure incurred specifically in response to environmental issues, particularly under applicable laws and regulations, and also through the valuation methods used for the Group’s assets and liabilities.
The regulatory frameworks and accounting principles for greenhouse gas emission rights, renewable energy certificates and energy savings certificates are presented in notes 5.4.3, 10.2 and 17.2.
The European Union’s Emissions Trading System (EU ETS) exists to fight climate change and reduce greenhouse gas emissions.
This system, which has been incorporated into national laws, sets an annual cap on emissions. Businesses (including EDF) receive or buy emission quotas, then the following year surrender to the European Commission a number of greenhouse gas emission rights corresponding to their emissions for the year elapsed. Fines are payable if there is a shortfall (€110 per tonne of CO2 not covered by quotas, and an obligation to cover these amounts by quota the following year).
The cap is being progressively reduced in order to bring down the total emissions in Europe.
One of the main features of the third phase of the ETS (2013 to 2020) is the discontinuation of free allocation of emission rights to electricity producers in all EU countries (except certain Eastern European countries which, subject to approval from the European Commission, were allowed to give away some of their quotas free of charge).
The legislative framework of the EU-ETS for the next trading period (phase 4: 2021-2030) was revised in early 2018 to contribute to achievement of emission reduction targets in line with the 2030 Climate and Energy framework and the EU’s contribution to the Paris Climate Agreement adopted in 2015. Key measures of the revision were increasing the reductions in quotas to 48 million tonnes per year (2.2% lower than the 2010 allocations), continuing free allocation of quotas within certain limits for sectors exposed to risks of carbon leakage and the electricity sector in highly coal-dependent countries, subject to certain criteria. In France, the Energy and Climate law of 8 November 2019 introduced a cap on greenhouse gas emissions, applicable from 1 January 2022.
In the EDF group, the entities concerned by application of this Directive are EDF, EDF Energy, Edison, Dalkia, PEI and Luminus
The Group’s total emission rights allocation in 2020 for Scope 1, i.e. direct greenhouse gas emissions from electricity and heat production, recorded in the EU-ETS Transaction Log, was 0 million tonnes (1 million tonnes for 2019).
The volume of emissions at 31 December 2020 stood at 19 million tonnes (21 million tonnes for 2019).
Over-quota greenhouse gas emissions by the Group amount to €260 million at 31 December 2020 (€414 million at 31 December 2019), and are recorded in balance sheet provisions.
Greenhouse gas emissions are a component of intangible assets related to environmental regulations, and had a net value of €769 million at 31 December 2020.
In compliance with the obligation to surrender a number of greenhouse gas emission rights equivalent to its emissions, in 2020, according to the best estimate, the Group surrendered 21 million tonnes under the EU-ETS scheme in respect of emissions generated in 2019 (in 2019, it surrendered 26 million tonnes of emission rights in respect of emissions generated in 2018).
To encourage use of renewable energy produced from renewable sources, every EU member state has set itself national targets for consumption of electricity from renewable sources. Guarantee of Origin certificates prove the renewable origins of the electricity, which transits through the grid. They are sold by operators of renewable energy plants and bought by customers who want to use renewable-source electricity.
There are two ways for States to meet their targets:
The renewable energy certificate system may apply to:
A provision of €932 million was recognised at 31 December 2020 concerning the obligations for renewable energy certificates to be surrendered at that date, essentially by EDF Energy (United Kingdom) and Luminus (Belgium). A large portion of these obligations are covered by purchased certificates recorded in intangible assets.
In all its subsidiaries, the Group is engaged in a process to control its energy consumption through various measures developed by national legislation in application of European Union Directives.
In the United Kingdom for example, EDF Energy helps companies explore and develop solutions by enabling them to save energy, carbon and costs, particularly through its Powershift flexibility platform.
In France, the Law of 13 July 2005 introduced a system of energy savings certificates, imposing energy savings obligations on suppliers of energy (electricity, gas, heat, cold, domestic fuel oil and fuel for vehicles) with sales above a certain level. At the end of the period concerned, obligated actors are required to present energy savings certificates that correspond to their obligatory energy savings, otherwise sanctions apply. These certificates are obtained in return for energy savings operations conducted directly or indirectly, or purchased from other obligated or “eligible” economic actors.
On 1 January 2018 the energy savings certificates scheme began its fourth period, extended by one year to last 4 years. The EDF group has three sources of action to meet this obligation: supporting consumers in energy efficiency operations, for instance by carrying out renovations (277,000 renovation projects were completed in 2020, 20% more than in 2019), funding State-approved programmes, and purchasing certificates from eligible actors.
At 31 December 2020, the Group is confident that it can fulfil its obligations.
