12.13 Climate change and risks associated with it

The  Group continuously assesses risks associated with climate and its impact on activities of the Group, including the physical risk of climate change (such as significant weather events and impact of temperature rises), change in the policy and economic consequences of actions undertaken to decarbonise the economy. Detailed disclosure on how the risks associated with climate impact the Group’s activities may be found in the Non-financial report of the Company and the KGHM Polska Miedź S.A. Group (Note 6, Actions aimed at protecting the natural environment, including the climate, and implementation of a circular economy).

Due to the specific nature of operations, KGHM Polska Miedź S.A. is one of the most energy-intensive companies in Poland. Simultaneously, the Company has been for many years successfully striving to reduce its impact on the environment, which is reflected, inter alia, in over 99% reduction of sulfuric compounds and dust emissions. Out of concern for the climate, the Parent Entity incurs expenditures on the implementation of the energy transformation program, under which it intensively develops its own renewable energy sources and researches the possibility of using electric vehicles and mining machines in its mines. Through development and implementation of the climate policy of KGHM Polska Miedź S.A. it will further reduce direct and indirect emissions and improve its energy efficiency. This means not only a further reduction of the Company’s environmental footprint, but also its better adaptation to changes in the market environment resulting from the increase in energy prices and CO₂ emissions rights.

From year to year, European Union’s and national legislation imposes on industrial companies more and more requirements related to minimising the negative impact on the climate and the environment. The growing cost of CO₂ emission rights resulted in higher purchases of these rights in 2021, which was reflected in the increase in assets and provisions associated with them in the Parent Entity. The increase of these costs, together with the increase in costs of among others electricity (historically and in forecasts) was one of the factors contributing to the identification of indications to perform impairment testing of the investment and assets of the energy and heat companies (WPEC w Legnicy S.A. and Energetyka sp. z o.o.). Results of the conducted tests may be found in part 3 of these statements.  Despite the significant increase in the prices of CO₂ emission rights, there are currently no significant uncertainties related to the impact of this fact on the operations of KGHM Polska Miedź S.A.

Besides the aforementioned ones, no other areas were identified where changes in the climate policy would have an impact on the measurement of assets and liabilities as at 31 December 2021.