CO 2 EMISSIONS AND CLIMATE CHANGE

Transcription

1 CO 2 EMISSIONS AND CLIMATE CHANGE DIRECT (SCOPE ) GHG EMISSIONS AND INDIRECT (SCOPE 2) GHG EMISSIONS Measurement baseline year: 2006 Direct and Indirect GHG Emissions from Cement Direct Emissions in Colombia 4,332,254 4,20,889 4,59,98 3,972,698 Caribbean Direct Emissions 9, ,65 486,269 53,984 USA Direct Emissions,303,38,947,632 2,043,059 2,09, Direct GHG tco 2 5,645,39 6,588,686 7,2,30 6,596,339 Indirect Emissions in Colombia (665,32) (704,709) 33,038 29,66 Caribbean Indirect Emissions,276,02,97,969 66,228 63,88 USA Indirect Emissions 360,878 40,8 26, , Indirect GHG Emissions tco , ,07 35,72 320,246 DIRECT AND INDIRECT GHG EMISSIONS FROM CEMENT tco 2 6,66,798 7,222,757 7,437,03 6,96,585 0 Colombia: There was a reduction in direct proportional to the reduction in clinker production. Clinker and cement production declined due to operational transformation of the company, decrease in demand and also public order events (protests and cessation of activities in the freight transport sector) that affected the operations. Colombia Region participates with 59% of production, therefore, what happen in this region significantly affects the performance of the Company in this indicator. Caribbean and Central America (CCA) and USA: There was an increase in direct proportional to the increase in clinker production. 2 From 205, were reported due solely to the purchase of electrical energy from the national grid. Until 204, from a plant s net movement of clinker input and output were reported within the scope 2, as described by the CSI methodology. Negative values of the Colombian operations result from the of the plants that were net exporters of clinker, that is to say that outputs were higher than inputs during the net movement of clinker. Colombia: in 206 the reduction of was not in the same proportion as the reduction in energy purchased since the CO 2 emission factor of the national electricity grid in Colombia CCA: in 206 were mainly reduced by the fact that the emission factor of the national electricity grid for Suriname changed from 708 to 284 kgco 2 / MWh. The change is due to improve accuracy in the data. USA: in 206 there was an increase in proportional to the increase in purchased electricity, which changed in the same proportion of clinker and cement production. Greenhouse gases included in the calculation and approach adopted for the consolidation of : This indicator only includes the CO 2 because the of other greenhouse gases are not significant in the process of cement production. In addition, the majority of the voluntary and compulsory reporting schemes of greenhouse gases for the cement industry reporting are currently limited to CO 2 (see WBCSD - CSI, The Cement CO 2 and Energy Protocol, 20. Available at: org/v3/content/resources/downloads/wbcsd_co2_protocol_en.pdf). Approach for the consolidation of : an operational control approach was taken into account to calculate, including all cement operations involved in the Integrated Report. Standards, methodologies and assumptions used for the calculation, and the source of emission factors used: The methodology used to calculate direct and, is the one determined by the Cement Sustainable Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD): CO 2 and Energy Accounting and Reporting Standard for the Cement Industry - The Cement CO 2 and Energy Protocol version 3.04, 20. Direct (scope ) are considered as those from sources that are owned or controlled by the reporting entity. In cement plants, direct CO 2 result from the following sources:. Calcination of carbonates, and combustion of organic carbon contained in raw materials; 2. Combustion of kiln fuels related to clinker production; 3. Combustion of non kiln fuels; 4. Combustion of fuels for on-site power generation. Indirect (Scope 2) are considered as those caused by the consumption of electric energy from the national grid. Gross direct are reported for the cement operations (total direct from raw materials, kiln fuels and non-kiln fuels; excluding CO 2 from on-site power generation). Biogenic CO 2 are excluded (those from the biomass combustion), since they are considered neutral. Source of CO 2 emission factors for each fuel: WBCSD Cement Sustainability Initiative Cement CO 2 and Energy Protocol, Version Available at: Resources/Downloads/WBCSD_CO2_Protocol_En.pdf Source of CO 2 emission factors caused by electrical energy generation in each country, except for Colombia: CO 2 from fuel combustion highlights. International Energy Agency (IEA), 203 Edition. For Colombia, an average of the factors reported by UPME (Mining and Energy Planning Unit) was used in its monthly report of generation variables and the Colombian electricity market (available at: Generaci%C3%B3n/Estad%C3%ADsticasyvariablesdegeneraci%C3%B3n/ tabid/5/default.aspx). Baseline year selection The measurement baseline year is 2006, since the integration of the different cement companies was completed this year, thus giving rise to Cementos Argos. Therefore, consolidated information about the production and flow of materials and energy to calculate the is available from that year.

2 Measurement baseline year 20 Direct and Indirect GHG Emissions from Concrete Direct Emissions in Colombia 38,465 36,239 39,353 35,640 Caribbean Direct Emissions 7,228 6,049 5,438 5,76 USA Direct Emissions 5,240 30,552 03,55 26, Direct GHG tco 2 50,933 72,840 47,946 68,30 Indirect Emissions in Colombia, ,458,626 Caribbean Indirect Emissions , USA Indirect Emissions 6,22 2,20 7,090 8, Indirect GHG Emissions tco 2 2 8,98 22,957 9,794 20,60 DIRECT AND INDIRECT GHG EMISSIONS FROM CONCRETE tco 2 69,3 95,797 67,740 88,74 Colombia: The reduction of direct was proportional to the reduction in the production of concrete. CCA: Although there was a slight decrease of % in concrete production due to the decrease of demand in Panama market (a country that participates with 75% of production in the region), a slight increase in direct occurred. USA: in 206 there was a change in the process of consolidation and report, which affected the coverage in the calculation of indicators. 2 Colombia: increased due to an increase in the CO 2 emission factor of the national electricity grid in Colombia, which went from 78 to 209 kgco 2 / MWh CCA: in 206 were mainly reduced by the fact that the emission factor of the national electricity grid for Suriname changed from 708 to 284 kgco 2 / MWh. The change is due to improve accuracy in the data. USA: There was an increase in proportional to the increase in the purchase of electricity, which varied in coherence with the increase of concrete production. Greenhouse gases included in the calculation and approach adopted for the consolidation of : Only CO 2 were included in this indicator. Approach for the consolidation of : An operational control approach was taken into account to calculate, including all concrete operations involved in the Integrated Report. Standards, methodologies and assumptions used for the calculation, and the source of emission factors used: Direct (scope ) are considered as those from sources that are owned or controlled by the reporting entity. The following equation was taken into account for the calculation of direct in concrete operations: Direct from concrete = Fuel consumption * Lower calorific value of the fuel * Emission factor associated with the fuel Indirect are considered as those caused by the electric energy consumption from the national grid. The following equation was taken into account to calculate in concrete operations: Indirect from concrete = Consumption of electrical energy purchased from the national grid * Emission factor This indicator just includes CO 2. Source of CO 2 emission factors for each fuel: WBCSD Cement Sustainability Initiative Cement CO 2 and Energy Protocol, Version Available at: CO2_Protocol_En.pdf Source of CO 2 emission factors caused by electrical energy generation in each country, except for Colombia: CO 2 from fuel combustion highlights. International Energy Agency (IEA), 203 Edition. For Colombia, an average of the factors reported by UPME (Mining and Energy Planning Unit) was used in its monthly report of generation variables and the Colombian electricity market (available at: Baseline year selection The measurement baseline year is 20, because since that year the information to calculate was available and consolidated. Measurement baseline year: 2006 Direct GHG Emissions from Electricity generation Direct Emissions in Colombia 524,73 62,258 55, ,804 Caribbean Direct Emissions 25,47 2,50 7,275 6,758 USA Direct Emissions N.A. N.A. N.A. N.A Direct GHG tco 2 550, , , ,562 DIRECT GHG EMISSIONS FROM ELECTRICIY GENERATION tco 2 550, , , ,562 Colombia: Two of the plants, which represent 8% of energy production (Cairo and Nare cement plants), are plants of hydroelectric generation. Direct declined mainly because one of the coal-fired thermoelectric generation plants was inactive some months of the year. CCA: The reduction of direct was proportional to the decrease in the energy consumption of fuel oil and diesel for the production of energy (because of operational improvement), which decreased coherently with the production of cement. Greenhouse gases included in the calculation and approach adopted for the consolidation of : Only CO 2 were included in this indicator. Approach for the consolidation of : an operational control approach was taken into account to calculate, including all own on-site power generation operations involved in the Integrated Report. Standards, methodologies and assumptions used for the calculation, and the source of emission factors used: The methodology used to calculate direct, is the one determined by the Cement Sustainable Initiative (CSI) of the World Business Council for Sustainable Development (WBCSD): CO 2 and Energy Accounting and Reporting Standard for the Cement Industry - The Cement CO 2 and Energy Protocol version 3.04, 20. Direct (scope ) are considered as those from sources that are owned or controlled by the reporting entity. The following equation was taken into account for the calculation of direct in own on-site power generation operations : Direct from on-site power generation operations = Fuel consumption * Lower calorific value of the fuel * Emission factor associated with the fuel Source of CO 2 emission factors for each fuel: WBCSD Cement Sustainability Initiative Cement CO 2 and Energy Protocol, Version Available at: WBCSD_CO2_Protocol_En.pdf

3 Measurement baseline year: 203 Direct and Indirect GHG Emissions from Aggregates Direct Emissions in Colombia,508,404,548,85 Caribbean Direct Emissions N.A. N.A. N.A Direct GHG tco 2,508,404,548 2,554 Indirect Emissions in Colombia ,089 Caribbean Direct Emissions N.A. N.A. N.A Indirect GHG Emissions tco ,44 DIRECT AND INDIRECT GHG EMISSIONS FROM AGGREGATES tco 2 2,242,950 2,55 3,969 Colombia: Direct increased due to a growing in diesel consumption at the Arroyo de Piedra plant, which ocurred because of the entrance of new machinery to support the operation. CCA: 206 is the first year of reporting these facilities independently to the cement plan. Until 205 this facilities were reported within the numbers of the cement operations. 2 Colombia: increased as there was an increase in the CO 2 emission factor of the national electricity grid in Colombia, which went from 78 to 209 kgco 2 / MWh CCA: 206 is the first year of reporting these facilities independently to the cement plan. Until 205 this facilities were reported within the numbers of the cement operations. Greenhouse gases included in the calculation and approach adopted for the consolidation of : Only CO 2 were included in this indicator. Approach for the consolidation of : an operational control approach was taken into account to calculate, including all aggregates operations involved in the Integrated Report. Standards, methodologies and assumptions used for the calculation, and the source of emission factors used: Direct (scope ) are considered as those from sources that are owned or controlled by the reporting entity. The following equation was taken into account for the calculation of direct in aggregates operations: Direct from Aggregates = Fuel consumption * Lower calorific value of the fuel * Emission factor associated with the fuel. Indirect from Aggregates = Consumption of electrical energy purchased from the national grid * Emission factor. Source of CO 2 emission factors for each fuel: WBCSD Cement Sustainability Initiative Cement CO 2 and Energy Protocol, Version Available at: Downloads/WBCSD_CO2_Protocol_En.pdf Source of CO 2 emission factors caused by electrical energy generation in each country, except for Colombia: CO 2 from fuel combustion highlights. International Energy Agency (IEA), 203 Edition. For Colombia, an average of the factors reported by UPME (Mining and Energy Planning Unit) was used in its monthly report of generation variables and the Colombian electricity market (available at: Estad%C3%ADsticasyvariablesdegeneraci%C3%B3n/tabid/5/Default. aspx). Indirect are considered as those caused by the electric energy consumption from the national grid. The following equation was taken into account to calculate in Aggregates operations: Baseline year selection The measurement baseline year is 203, because since that year the information to calculate was available and consolidated Total direct tco 2 6,247,782 7,305,689 7,839,336 7,72,586 Total Indirect tco 2 990,59 657, , ,27 TOTAL EMISSIONS tco 2 7,238,373 7,963,263 8,75,88 7,54,857

4 305-4 GHG EMISSIONS INTENSITY Carbon intensity Intensity of the GHG in cement production (kg CO 2 /t cementitious products) Intensity of the GHG in the production of concrete (kg CO 2 /m 3 concrete) 2 Intensity of the GHG in the production of aggregates (kgco 2 /t product) 3 Intensity of the GHG in electricity generation (kg CO 2 /kwh) 4 CCA COL USA COMPANY CCA COL USA COMPANY N.D N.D N.A N.A N.A..3 N.D N.A N.A Numerator: Gross direct (corresponding to the 305-) Denominator: Production of cementitious products Scope: Colombia, United States, and Caribbean and Central America Regions. 2 Numerator: 305- Emissions Denominator: Production of concrete Scope: Colombia, United States, and Caribbean and Central America Regions. 3 Numerator: 305- Emissions Denominator: Production of aggregates. Scope: Colombia, United States, and Caribbean and Central America Regions. 4 Numerator: 305- Emissions Denominator: Production of electrical energy. Scope: Colombia and Caribbean and Central America Regions (Regions that have self- generation). (A-EC) SPECIFIC NET CO 2 EMISSIONS (KG CO 2 /T CEMENTITIOUS PRODUCTS) Environmental Policy Indicator Specific Net CO 2 Emissions (kg CO 2 /t cementitious products) Baseline year 2006 Year for which the goal is set 2025 Reduction goal of cement GHG 35% REDUCTION COMPARED TO BASELINE YEAR: 29% There was a reduction of 0.2% in the specific net CO 2 for the cement operations. The direct net of CO 2 decreased in the same proportion of the reduction of cementitious products. Likewise, the reduction in the specific heat consumption on the clinkerization kilns (3.7%) and the slight increase in the use of alternative fuels (0.7 percentage points), favored the small reduction of the net specific of CO 2 Numerator: Net CO 2 Emissions in cement operations (Gross direct excluding CO 2 from on-site power generation and asociated to alternative fuels) Denominator: Production of cementitious products The indicator is calculated according to the methodology determined by Cement Sustainability Initiative (CSI) of the World Business Council for Sustainable Development: CO 2 and Energy Accounting and Reporting Standard for the Cement Industry - The Cement CO 2 and Energy Protocol version 3.04, 20 (see variable 74) Scope: Operations of cement from Colombia, United States and Caribbean and Central America Regions.

5 305-3 OTHER INDIRECT (SCOPE 3) GHG EMISSIONS Other (Scope 3) GHG Transportation of raw materials and products in processes Total Upstream Scope 3 Emissions Transportation of products to end customers 2 Total Downstream Scope 3 TOTAL EMISSIONS OF SCOPE 3 GREENHOUSE GASES tco 2 E Included GHG 65,382 66,565 78,448 78,430 65,382 66,565 78,448 78,430 33,97 33,237 34,468 37,330 33,97 33,237 34,468 37,330 99,299 99,802 2,96 5,76 The company Logitrans (supplier) which contributed 98% of these in 206, had a proportional increase in its with the total distance traveled in the reporting period. Since 205 the reported by Geodis and Panalpina suppliers were included (sea and air transportation of freight). The information reported by Panalpina in 205 corresponds to the second half of The included are: CO 2, CH 4 and N 2 O The included are: CO 2, CH 4 and N 2 O Standards, methodologies and assumptions in the calculation, as well as the source of emission factors and GWP. The following standards were selected to use internationally recognized methodologies for GHG measurement and reporting: a. International standard ISO First edition b. Protocol of greenhouse gases of the WBCSD and WRI. Corporate Accounting and Reporting Standard. Revised edition. 2005; 6p. Available at c. CO 2 and Energy Accounting and Reporting Standard for the Cement Industry - The Cement CO 2 and Energy Protocol (WBCSD - CSI) 2005; 76p. Available at Based on these documents and the availability of information, it was decided that the calculations of would be done through the collection of information from levels of activity, and multiplication by an emission factor. Emission factors for the combustion of fossil fuels come from the Emission Factors table for the Colombian fuels FECOC (ACCEFYN Bogota & UPME, 2003). Emissions of methane (CH 4 ) and nitrous oxide (N 2 O) from the fuel combustion are estimated using the emission factors published by the Department for Environment, Food and Rural Affairs (DEFRA) from the United Kingdom. The corresponding factors are taken from diesel fuel heavy duty truck, from 960 to the present. The yields of fuel are allocated according to two variables: type and model of the vehicle. The following standards were selected to use internationally recognized methodologies for GHG measurement and reporting: a. International standard ISO First edition b. Protocol of greenhouse gases of the WBCSD and WRI. Corporate Accounting and Reporting Standard. Revised edition. 2005; 6p. Available at c. CO 2 and Energy Accounting and Reporting Standard for the Cement Industry - The Cement CO 2 and Energy Protocol (WBCSD - CSI) 2005; 76p. Available at Based on these documents and the availability of information, it was decided that the calculations of would be done through the collection of information from levels of activity, and multiplication by an emission factor. Emission factors for the combustion of fossil fuels come from the Emission Factors table for the Colombian fuels FECOC (ACCEFYN Bogota & UPME, 2003). Emissions of methane (CH 4 ) and nitrous oxide (N 2 O) from the fuel combustion are estimated using the emission factors published by the Department for Environment, Food and Rural Affairs (DEFRA) from the United Kingdom. The corresponding factors are taken from diesel fuel heavy duty truck, from 960 to the present. The yields of fuel are allocated according to two variables: type and model of the vehicle. 205, since it only had operations with Argos during that period. 2 The of Transportempo and Imbocar companies (suppliers), which contributed 97% and 7% of reported in 206 respectivelly, varied proportionally to the total distance traveled by their vehicles in the reporting period.

6 305-5 REDUCTION OF GHG EMISSIONS Initiative Baseline year to calculate the reduction Emission reduction (tco 2 ) to 206 Indication as to whether the reduced belong to the Scope, 2 and/or 3 Included GHG in the calculation Description of the initiative 5 USA - Increase in the percentage of use of alternative fuels in substitution of conventional fuels at the Harleyville cement plant Colombia - Increase in the percentage of use of alternative fuels in substitution of conventional fuels at Rioclaro cement plant USA - Reduction of clinker/ cement factor in Newberry cement plant. USA - Reduction of clinker/ cement factor in Harleyville cement plant. USA - Reduction of clinker/ cement factor in Roberta cement plant. CCA - Reduction of clinker/ cement factor in Honduras cement plant. Colombia - Reduction of clinker/cement factor in Cartagena cement plant (dry line) Colombia - Rioclaro plant thermal efficiency projects Colombia - Rioclaro plant Colombia - Cartagena plant thermal efficiency projects Colombia - Cartagena plant Colombia - Yumbo plant thermal efficiency projects Colombia - Yumbo plant Colombia - Sogamoso plant thermal efficiency projects 205 3,807 Scope CO ,056 Scope CO ,099 Scope CO ,037 Scope CO Scope CO ,457 Scope CO ,356 Scope CO 2 Increase in the percentage of substitution of conventional fuels (coal and natural gas) for alternative fuels, such as tires, RDF and waste oils, from 23.0% to 25.2% in the mix of kiln fuels. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation. Increase in the use of tires in replacement of the coal, going from 0.7% to 3.0% in the mix of fuels of the clinkerización kiln. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation. Reduction of clinker cement factor by 2. percentage points. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation. Reduction of clinker cement factor by 0.2 percentage points. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation. Reduction of clinker cement factor by 0.2 percentage points. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation. Reduction of clinker cement factor by 2.6 percentage points. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation. Reduction of clinker cement factor by 2. percentage points. The Cement CO 2 and Energy Protocol of the cement industry, from the Cement Sustainability Initiative (CSI) was used to make the calculation ,304 Scope CO 2 combustion efficiency and false air Projects included: cooler efficiency, reduction ,829 Scope 2 CO 2 Projects included: vertical mill start up, mill optimisation, new motor variables 205 4,36 Scope CO 2 cooler efficiency improvement and Projects included: false air reduction, operator training Scope 2 CO 2 cooler efficiency improvement, operator Projects included: false air reduction, training and mill additions. 205,934 Scope CO 2 combustion efficiency and false air Projects included: cooler efficiency, reduction. 205,33 Scope 2 CO 2 reduction, cooler optimisation and mill Projects included: false air and leaks optimisation Scope CO 2 reduction, operator training, combustion Projects included: false air and leaks optimisation.

7 Initiative Baseline year to calculate the reduction Emission reduction (tco 2 ) to 206 Indication as to whether the reduced belong to the Scope, 2 and/or 3 Included GHG in the calculation Description of the initiative 6 Colombia - Sogamoso plant CCA - Honduras plant thermal efficiency projects CCA - Honduras plant CCA - Panama plant electrical efficiency projects USA - Newberry plant thermal efficiency projects USA - Newberry plant USA - Harleyville plant thermal efficiency projects USA - Harleyville plant USA - Roberta plant thermal efficiency projects USA - Roberta plant electrical efficiency projects TOTAL 02, Scope 2 CO 2 reduction, operator training and mill Projects included: false air and leaks optimisation 205,772 Scope CO 2 fuel shredder, increase in the use of Projects included: change of fuel burners, cement kiln dust (CKD) in cement mill 205 2,746 Scope 2 CO Scope 2 CO 2 Projects included: air flow reduction through raw mill separator, leakage reduction in raw mill circuit, increase in use of CKD in mill, control of raw material feeding and granulometry, fuel shredder, change of fuel burners, energy management, compressed air upgrades, LED illumination and automization, blockage reduction in raw material storage. Projects included: cement ball mill optimisation, maintenance program improvement, pitch point stabilisation, good energy management practices, illumination replacement with LED illumination ,97 Scope CO 2 Projects included: Cooler optimisation, line 2 CBA and Line 2 pavillion control 205 3,83 Scope 2 CO 2 Projects included: Clinker cooler ESP conversion, cooler vent fan, circuit optimisation, baghouse fan drive, preheater Fan VFD, compressed air upgrades, online PSD, finish mill and kiln control ,752 Scope CO 2 leakage seals and kiln system Projects included: tower feed pipes, optimisation ,635 Scope 2 CO 2 power monitoring refinement, tower leakage reduction, TI optimisation, cooler Projects included: baghouse fan reinstate, dust replacement ,408 Scope CO 2 improvement, kiln pavillion and control, Projects included: raw mix and burnability kiln reliability improvement. 205,200 Scope 2 CO 2 optimisation, classifier upgrade and kiln Projects included: liner upgrade, CKD drive upgrade.

8 20-2 FINANCIAL IMPLICATIONS AND OTHER RISKS AND OPPORTUNITIES DUE TO CLIMATE CHANGE Risks from regulation changes No. Driver Description Probability of Magnitud Estimated finantial implications Management method Management cost Changes in applicable regulations and standards (International agreements) The COP2 conference recorded the commitment of countries to keep the rise in global temperature below 2 Celsius compared to the pre-industrial era. At the local level, this was reflected in the target each country presented and acquired in their NDCs. The implementation of these targets will involve taking measures for the industries with an intensive use of fuels, energy and CO 2, such as the cement industry. In the regions where Argos operates, the US committed to lower its absolute between 26 and 28%, Colombia committed to reduce it by 20% by the year 2030 having a Business As usual (BAU) scenario. Similarly, several Caribbean and Central American countries have committed to lower their CO2, such as Honduras which committed by 5% regarding the BAU by The COP2 commitment is for these targets to become increasingly ambitious every 5 years, because current commitments will not maintain temperature within the expected value. The main implications for Argos operations are political measures, implementation of economic instruments (taxes or CO 2 market) and incentives and mandatory report systems. Loss or decrease of income -3 years Direct Very likely Medium-high It is expected that the agreement reached at the COP2 results in the implementation over the next few years of some kind of economic instrument, whether it is a carbon market or taxes on, in order to lower CO2 in the regions where Argos operates. The signs issued by the government of the countries where Argos operates, indicate that the cost to the company for the implementation of this kind of instruments could be within a wide range between USD 2 and USD 30/ton CO2. The monitoring and mitigation of this risk is integrated into the Company s risk management system. Also, in the framework of the Environmental Policy and Energy Policy, Argos has lines of action that allow to monitor and implement actions to reduce GHG, such as: CO2 inventory (scope, scope 2 and scope 3), CO2 target, energy efficiency, use of alternative fuels and the reduction of the clinker/cement ratio, and the increase in the efficiency of the value chain, among others. In 206 Argos finished and developed new projects and initiatives that involved investments of approximately USD $8.7 million Some of this initiatives and projects are: Continuation of production management system focused on finding the best operating practices, which has allowed efficiency improvements of processes and reduced energy consumption. Process optimization through thermal and electrical efficiency projects, in the framework of the energy roadmap and other initiatives. Increase in the use of alternative raw material in cement and concrete businesses. Reducing clinker content in all types of cement. Increase the substitution of conventional fuels with alternative fuels. Energy Star certification for Newberry Plant in USA region. 2 Changes in applicable regulations and standards (CO2 market) The company s 205 update to the rating of risks inherent to climate change has enabled to Argos to identify the CO2 market schemes, such as the economic instrument that will most likely be implemented over the next few years in the geographic regions where Argos operates. The highest risks has been identified for the USA and Colombia regions, which means exposure for most of the company cement operations. Loss or decrease of income 3-6 years Direct Very likely Medium-high There is currently a high level of uncertainty about the operation of the possible CO2 market schemes that could be implemented in the regions where Argos operates. The most unfavorable scenario based on the information that is currently available involves a CO2 market wherein the US and Colombia governments impose a reduction target on the cement industry that is equal to the country s target, which are 26% and 20% respectively. The analyses we have performed shows that a cap and trade scheme could have an on operational cost between USD 4.3 million and USD 8.8 million The monitoring and mitigation of this risk is integrated into the Company s risk management system. Also, in the framework of the Environmental Policy and Energy Policy, Argos has lines of action that allow to monitor and implement actions to reduce GHG, such as: CO2 inventory (scope, scope 2 and scope 3), CO2 target, energy efficiency, use of alternative fuels and the reduction of the clinker/cement ratio, and the increase in the efficiency of the value chain, among others. In 206 Argos finished and developed new projects and initiatives that involved investments of approximately USD $8.7 million. Some of this initiatives and projects are: Continuation of production management system focused on finding the best operating practices, which has allowed efficiency improvements of processes and reduced energy consumption. Process optimization through thermal and electrical efficiency projects, in the framework of the energy roadmap and other initiatives. Increase in the use of alternative raw material in cement and concrete businesses. Reducing clinker content in all types of cement. Increase the substitution of conventional fuels with alternative fuels. Energy Star certification for Newberry Plant in USA region Changes in applicable regulations and standard (Carbon taxes) Changes in applicable regulations and standards (Mandatory CO2 report) Although it remains as an instrument likely to be implemented in the geographical areas where Argos operates, it is less politically accepted than the CO2 market schemes. In 206 there was in Colombia a fiscal reform that approved a carbon tax over liquid fuels and natural gas. Because this tax does not cover the total amount of CO2, the company did not modified the evaluation of this risk. Nevertheless, this economic instrument is still under study by several governments of countries where Argos operates, so it could become a reality in the medium term. Due to the fact that the Paris agreement entails a revision every 5 years of each country s progress on their NDC commitments; the mandatory report is a near reality. It is the only way each country has to identify their progress towards the proposed target. Loss or decrease of income Damage to the image of the company > 6 years Direct Very likely Medium-high -3 years Direct Very likely Medium-high Assuming a tax on direct of used fuels; the can be between USD 2.6 million and USD 8.6 million. There are not financial implication associated with this risk since Argos currently reports its CO2 voluntarily. A good performance on CO2 prevents negative financial implications for the company. The monitoring and mitigation of this risk is integrated into the Company s risk management system. Also, in the framework of the Environmental Policy and Energy Policy, Argos has lines of action that allow to monitor and implement actions to reduce GHG, such as: CO2 inventory (scope, scope 2 and scope 3), CO2 target, energy efficiency, use of alternative fuels and the reduction of the clinker/cement ratio, and the increase in the efficiency of the value chain, among others. The monitoring and mitigation of this risk is integrated into the Company s risk management system. Also, in the framework of the Environmental Policy and Energy Policy, Argos has lines of action that allow to monitor and implement actions to reduce GHG, such as: CO2 inventory (scope, scope 2 and scope 3), CO2 target, energy efficiency, use of alternative fuels and the reduction of the clinker/cement ratio, and the increase in the efficiency of the value chain, among others. In 206 Argos finished and developed new projects and initiatives that involved investments of approximately USD $8.7 million. Some of this initiatives and projects are: Continuation of production management system focused on finding the best operating practices, which has allowed efficiency improvements of processes and reduced energy consumption. Process optimization through thermal and electrical efficiency projects, in the framework of the energy roadmap and other initiatives. Increase in the use of alternative raw material in cement and concrete businesses. Reducing clinker content in all types of cement. Increase the substitution of conventional fuels with alternative fuels. Energy Star certification for Newberry Plant in USA region. The management cost of this risk is already budgeted and correspond to the environmental team in the actual corporate structure.

9 Risks that are driven by changes in physical climate parameters No. Driver Description Effect on operations caused by natural events Monitoring and mitigating risks derived from changes in climate parameters are included in Argos strategic risk management work. These risks include the effect on operations due to severe weather events. In 205 Argos started the process of analyzing risks due to natural disasters, in which hurricanes, floods and landslides among other events were included. This analysis has enabled the company to identify the of these natural events on the efficiency of the supply chain, this one being a strategic risk to the company. Reduction/ disruption in production capacity Probability of < year Direct Likely Medium-high Magnitud Estimated finantial implications Management method Management cost The natural risks analysis developed in 205 has enabled the company to identify the financial implications derived from s on the logistics chain due to the disruption in production capacity of main cement plants in Colombia. Impacts were estimated in periods of time of 6, 2, and 8 months. It has been identified that the decrease in income would range between USD$6 and USD$27 million The monitoring and mitigation of this risk is integrated into the Company s risk management system. s identified allowed Argos to implement actions in order to optimize the logistic chain to reduce the magnitude of the. Tactical Planning area is accountable for the scenarios modeling and propose actions in order to reduce this risk exposition. (*) The cost to manage this risk is given by the adaptation measures needed to be implemented in each operation. 8 Risks from other climate related variables No. Driver Description 2 Serious damage to the company s reputation with the stakeholders Risks associated with the availability, reliability and variability of the cost of energy resources for the operation and their efficient use Argos considers that the negative effect on its image and reputation is a risk that could materialize based on any of the other strategic risks identified. It is clear that under the current global context, industries with intensive CO2 must demonstrate their commitment by adequately managing the risks derived from climate change and by lowering their CO2. It is also evident that public opinion is increasingly less accepting intensive carbon processes, which is why management and performance that fall below expectation are likely to generate events that damage reputations Risks associated with the availability, reliability and variability of energy resources due to new regulations for the energy industry that imply increased energy prices, effects on the offer of fossil fuels or a higher demand and competition for sources of alternative fuels Damage to the image of the company Loss or decrease of income Probability of - 3 years Direct Very likely High > 6 years Direct Virtually certain Medium-high Magnitud Estimated finantial implications Management method Management cost (*) It has been established that reputational risk can generate significant s for the company, including: negative on the perception of shareholders and other stakeholders, financial s, on sales and on the market value of the company. However, the magnitude of the financial due to these effects have not been estimated. Although with the new US administration there is high uncertainty about the future of the Clean Power Plan and other climate change measures taken in the previous years, the evaluation of this risk keeps taking into account the worst case scenario. In this case, long-term projections indicate a probability that as of 209, electricity prices will increase as a consequence of the implementation of the Clean Power Plan in the United States. Electricity prices could increase by over 0%. The monitoring and mitigation of this risk is integrated into the Company s risk management system. Furthermore, the following additional mitigation measures are considered: Crisis Management Manual, which takes into account possible scenarios associated with events in the operations and sustainability dialogues with stakeholders The monitoring and mitigation of this risk is integrated into the Company s risk management system. Strategic Resources area is accountable for tacking actions to mitigate this risk which is included in the Energy Policy. (*) The magnitude of the management cost due to these risk have not been estimated (*) The magnitude of the management cost is represented in the human team dedicated to the management of this variable. Opportunities from changes in the physical parameters of climate No. Opportunity driver Description Changes in extreme precipitation and droughts The consequences of climate change include more intense rainfall events caused by different factors. In this regard, the countries, cities and regions where we operate need to develop resilient structures that enable them to adapt to new weather conditions. Concrete will be a fundamental element of the development of these resilient structures. Increased demand for existing products/ services Probability of 3-6 years Direct Very likely Low-medium Magnitud Estimated finantial implications Management method Management cost (*) Given that national adaptation plans in the regions where we operate are still under construction, the financial implications of this oportunity have not been estimated. Management methods include: market monitoring, benchmark, business intelligence and market forecast in order to identify business opportunities for Argos products. The main focus is to enhance capabilities to foresee new market needs (Products and services) related with climate change and be able to develop them for each region. (*) The management cost are budgeted every year and depend on the initiatives and projects to be developed.

10 Opportunities from changes in regulation No. Opportunity driver Description Probability of Magnitud Estimated finantial implications Management method Management cost Changes in applicable regulations and standards (International agreements) Although there are risks associated to climate change (for example, risks driven by changes in GHG regulations), it is possible to identify that the risks driver are at the same time opportunity driver that allow the Company increase its efficiency in operations, reduce operating costs and offer value-added products to its customers. In order to fulfill the post COP2 agenda, governments of countries were Argos operate seems to be taken measurements to enable the transition to a low carbon economy. For the cement and concrete sector this measurements to reduce CO2 intensity will leverage opportunities like the increase use of alternative materials to replace primary raw materials, low carbon products and services innovation, substitution of fossil by alternative fuels and increase in energy efficiency (heat and electrical), among others. Decrease of operational costs -3 years Direct Very likely Low-medium (*) The financial implications of this opportunity have not been estimated. Argos has identified the opportunities drivers having potential to generate a substantive changes in the business operations, revenues or expenditures. The most significant include: Enhancing energy efficiency of the cement manufacturing process, scaling up the sourcing, availability and usage of good quality alternative fuels and raw materials, further reducing clinker content in cement and development of new low CO2 products, services and applications. Argos corporate structure include areas accountable for the performance regarding each of these main opportunities identified, which include: Strategic Resource, Alternative resource, R&D and Environmental management teams. The opportunities identified have allowed Argos to implement initiatives to make the most out of the opportunities derived from a regulation on climate change related issues, even before regulatory measurements are taken. (*) The management cost are budgeted every year and depend on the initiatives and projects to be developed. 2 Changes in applicable regulations and standards (CO2 market) This type of economic instruments favor companies with the best performance in terms of CO2 emission, and those that can lower this at a lower cost. Argos has identified the opportunities drivers having potential to generate a substantive changes in the business operations, revenues or expenditures. The most significant include: Enhancing energy efficiency of the cement manufacturing process, scaling up the sourcing, availability and usage of good quality alternative fuels and raw materials, further reducing clinker content in cement and development of new low CO2 products, services and applications Decrease of operational costs 3-6 years Direct Very likely Low-medium (*) The initiatives and projects to increase the use of alternative materials in cement and concrete, to substitute fossil fuels for alternative fuels, optimize the consumption of electricity and reduce caloric consumption have a positive on the costs of operation. Argos has identified the opportunities drivers having potential to generate a substantive changes in the business operations, revenues or expenditures. The most significant include: Enhancing energy efficiency of the cement manufacturing process, scaling up the sourcing, availability and usage of good quality alternative fuels and raw materials, further reducing clinker content in cement and development of new low CO2 products, services and applications. Argos corporate structure include areas accountable for the performance regarding each of these main opportunities identified, which include: Strategic Resource, Alternative resource, R&D and Environmental management teams. Argos, through the Energy Policy has stablished specific goals to reduce caloric and electric energy consumption, in order to bolster the company s competitiveness and to minimize risks (by 2025 are to decrease our caloric consumption by 0 percent and our electricity consumption by 5 percent, with the year 202 as the baseline). The Environmental Policy has set goals to increase the use of alternative fuels and raw material (by 2025 achieve 8% alternative fuel substitution and 7% and 3% raw material substitution in cement and concrete businesses respectively). Besides, innovation strategy seeks to translate innovation into revenues and savings and has set the goal to reach 20 percent of revenue as a result of innovation. (*) The management cost are budgeted every year and depend on the initiatives and projects to be developed 3 Changes in applicable regulations and standards (Carbon taxes) This type of economic instruments favor companies with the best performance in terms of CO2 emission, and those that can lower this at a lower cost. Argos has identified the opportunities drivers having potential to generate a substantive changes in the business operations, revenues or expenditures. The most significant include: Enhancing energy efficiency of the cement manufacturing process, scaling up the sourcing, availability and usage of good quality alternative fuels and raw materials, further reducing clinker content in cement and development of new low CO2 products, services and applications. Decrease of operational costs -3 years Direct Very likely Low-medium (*) The initiatives and projects to increase the use of alternative materials in cement and concrete, substitute fossil fuels for alternative fuels, optimize the consumption of electricity and reduce caloric consumption have a positive on the costs of operation. Argos has identified the opportunities drivers having potential to generate a substantive changes in the business operations, revenues or expenditures. The most significant include: Enhancing energy efficiency of the cement manufacturing process, scaling up the sourcing, availability and usage of good quality alternative fuels and raw materials, further reducing clinker content in cement and development of new low CO2 products, services and applications. Argos corporate structure include areas accountable for the performance regarding each of these main opportunities identified, which include: Strategic Resource, Alternative resource, R&D and Environmental management teams. Argos, through the Energy Policy has stablished specific goals to reduce caloric and electric energy consumption, in order to bolster the company s competitiveness and to minimize risks (by 2025 are to decrease our caloric consumption by 0 percent and our electricity consumption by 5 percent, with the year 202 as the baseline). The Environmental Policy has set goals to increase the use of alternative fuels and raw material (by 2025 achieve 8% alternative fuel substitution and 7% and 3% raw material substitution in cement and concrete businesses respectively). Besides, innovation strategy seeks to translate innovation into revenues and savings and has set the goal to reach 20 percent of revenue as a result of innovation. (*) The management cost are budgeted every year and depend on the initiatives and projects to be developed. 9 Opportunities from other climate related variables No. Opportunity driver Description Changes in consumer behavior Reputation Other opportunities associated with climate change are related to changes in consumer Increased behavior, which implies that customers and demand potential customers will be increasingly demanding for existing products with better environmental performances products/ and environmental product declarations that services enable sustainable construction certifications Climate Change issues have become an important point of the public, investors and corporate agenda. Regarding Climate change, transparency in management and world class practices alignment become an opportunity to avoid any negative in the reputation and image of the company Improved reputation and image of the company Probability of - 3 years Direct Very likely Medium < year Direct Virtually certain Medium-high Magnitud Estimated finantial implications Management method Management cost (*) The financial implications of changes in consumer behavior due to the climate change variable have not been estimated. (*) The financial implications of an improved reputation due to a positive perception of the company s climate management work have not been estimated. Management methods include: market monitoring, benchmark, business intelligence and market forecast in order to identify business opportunities for Argos products. The main focus is to enhance capabilities to foresee new market needs (Products and services) related with climate change and be able to develop them for each region. Reputation management model that considers management based on the identification of those responsible for the relationship with the company s stakeholders. Media management. Sustainability dialogues. Reputation measurements - MERCO (*) The management cost are budgeted every year and depend on the initiatives and projects to be developed (*) The management cost are budgeted every year and depend on the initiatives and projects to be developed (*) Financial implications of the risks and opportunities and costs of actions taken to manage them, will be part of the Argos s 207 working Plan.