SK Innovation implements Internal Carbon Pricing System to strengthen global Net Zero leadership

• Setting its own Carbon Pricing System that reflect changes in future carbon prices, applying to investment agenda deliberation

– Realizing Net Zero target by adding future carbon value after reviewing the economic feasibility of investments

– Completed reports to the Board of Directors in mid-November, expecting the system to come into effect soon

• The prices of global carbon credits will also be used as a key indicator of business profits and losses to bolster its ESG leadership position.

• Kim Tae-jin, Chairman of ESG Committee, SK Innovation Board of Directors: “The board of directors will also strive for strong ESG performance to meet the expectations of external stakeholders.”

SK Innovation announced on the company’s official homepage that it would further boost the global Net Zero leadership by introducing an Internal Carbon Pricing System.

The core of the Internal Carbon Pricing System is to set internal carbon prices to reflect changes in future carbon prices and use them in investment deliberations. This is to evaluate the economic feasibility of investments from a comprehensive perspective, including future carbon values, in addition to the existing investment evaluation factors, and at the same time, to reduce carbon emissions more actively when promoting new businesses. This improvement plan was reported to the board of directors in mid-November and will be implemented in due course.

Under this scheme, reducing carbon emissions raises the “values” of investments. However, on the other hand, increasing emissions raise their “costs,” allowing a comprehensive analysis of the economic feasibility of investment. In other words, since reducing carbon emissions improves the economic feasibility of investment, and the increased potential carbon emissions from the expansion of new plants reduce the economic feasibility, priorities can be determined from an ESG perspective.

SK Innovation announced that it set the internal carbon prices at a reasonable level considering future carbon price scenarios predicted by various global professional organizations, which aimed to drive the net zero emissions roadmap announced last year. SK Innovation announced that it set the internal carbon price at a reasonable level considering future carbon price scenarios predicted by various global professional organizations to enhance the execution power of the net zero roadmaps announced last year. By 2030, prices will be diversified by major regions with global business sites such as the EU, the US, and Korea, which will be set at USD 40 to 95/ton in 2025 and USD 60 to 105/ton in 2027. The mid-to-long-term prices will be USD 120/ton in 2030 and USD 200/ton in 2040.

In the future, SK Innovation plans to manage the prices of global carbon credits as a key indicator that greatly affects business performance along with oil prices and exchange rates. To this end, the relevant departments of SK Innovation and its eight subsidiaries have decided to monitor market trends and continue to seek countermeasures closely.

Meanwhile, SK Innovation is reinforcing its ESG leadership by introducing an internal carbon price system, following the declaration of the All Time Net Zero vision at the company’s 60th anniversary celebrated in October this year. Through its systematic Net Zero strategy implementation, SK Innovation has achieved tangible results as of 2022 by reducing greenhouse gas emissions by more than 15% compared to 2019.

Kim Tae-jin, Chairman of ESG Committee, SK Innovation’s Board of Directors, said, “The implement of the Internal Carbon Pricing is in line with the expectations of external stakeholders. The pricing reflects future carbon prices as costs in corporate management decisions and discloses whether they are appropriately applied.” She further emphasized that “The Board will do its best to improve further the current carbon reduction and overall performance of ESG efforts.”