Valero Energy Corp GHG Goals 2014
|Company||Valero Energy Corporation|
|Filer||Mercy Investment Services, Inc.|
|Sector||Oil and Gas|
|Subject(s)||Energy Efficiency (industrial); Greenhouse Gas Emissions; Renewables|
|Resolved Clause Summary||Quantitative goals for reducing GHG emissions|
Shareholders request that the Board of Directors adopt quantitative company-wide goals, based on current technologies, for reducing total greenhouse gas emissions (GHG) from the company’s products, including those subject to low-carbon fuel standard (LCFS), and operations. At reasonable cost and omitting proprietary information, the company should report by October 2014 on its plans to achieve these goals.
In September 2013 the Intergovernmental Panel on Climate Change (IPCC), the world’s leading scientific authority on climate change, released its fifth assessment report concluding that human-caused "warming of the climate system is unequivocal," with many of the impacts of warming already "unprecedented over decades to millennia."
In order to mitigate the worst impacts of climate change, the IPCC estimates that a 50 percent reduction in GHG emissions globally is needed by 2050 (relative to 1990 levels). Furthermore, in its 2012 Annual Energy Outlook, the International Energy Agency (IEA) states, “No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2°C goal...”
Over 40 national and 20 sub-national government jurisdictions have either implemented or are considering independent carbon pricing mechanisms. In May 2013, President Obama outlined an action plan to address climate change. This comes on the heels of new Corporate Average Fuel Economy (CAFE) Standards which set new targets for automotive fuel efficiency and vehicle GHG emissions standards, as well as the development of LCFS which will prompt development of more economically and environmentally sustainable fuels.
Investors with $87 trillion in assets support CDP’s request to over 6,000 companies for disclosure of carbon emissions, reduction goals, and climate change strategies to address these risks. While over half of S&P 500 companies have set GHG emission reduction targets, which can drive innovation and enhance shareholder value, our company lags behind.
A study of 386 S&P 500 companies by CDP found that 79 percent “earn a higher return on their carbon reduction investments than on their overall corporate capital investments,” and that energy efficiency improvements earned an average return on investment of 196 percent, with an average payback period between two and three years. Furthermore, CDP reports “High emitting companies that set absolute emissions reduction targets achieved reductions double the rate of those without targets with 10 percent higher firm-wide profitability.”
We recommend the company consider renewable energy procurement (and adopting related targets) as a strategy to achieve its emission reduction goals. Using renewable energy can reduce regulatory risk related to GHG emissions, financial risk by decreasing volatility of energy prices, and overall energy expenditure. Diversifying the fuel supply by substituting cleaner fuels (e.g. advanced biofuels and clean electricity) for oil can also mitigate risks from disruptions in electricity supply. Energy efficiency and renewable energy sourcing will also facilitate compliance with LCFS and enhance Valero’s competitiveness.
Creating clear-cut goals will help Valero to significantly reduce its carbon footprint by implementing a disciplined business strategy to cut emissions from operations and products.