Survey of Climate Change Disclosurein SEC Filings of

Automobile, Insurance, Oil & Gas,Petrochemical, and UtilitiesCompanies

Michelle Chan-FishelFriends of the Earth — USSeptember 2002

Copyright 2002Friends of the Earth

This report can be found on the web at www.foe.org

Friends of the Earth — USFriends of the Earth is a national environmental organization dedicated to preserving thehealth and diversity of the planet for future generations. As the largest internationalenvironmental network in the world with affiliates in 63 countries, Friends of the Earthempowers citizens to have an influential voice in decisions affecting their environment.

AcknowledgementsThe author gratefully acknowledges Jeff Mittlestadt for his research assistance, as well asDuncan Austin and Colleen Freeman for reviewing the paper. FoE is grateful to the FordFoundation and others for its support of FoE s Green Investments program.

Survey of Climate Change Disclosure in SEC Filings ofAutomobile, Insurance, Oil & Gas, Petrochemical, and Utilities Companies

Table of Contents

Executive Summary 1

Context for Disclosure 2

Review of Company Disclosure 5

Analysis & Conclusions 12

Appendix I: Methodology 18

Appendix II: Companies Surveyed 19

Appendix III: Summary of Climate Change — Related Disclosures for 21Reporting Companies

Appendix IV: Climate Change — Related Disclosures for Reporting Companies 22

Charts

Climate Change Reporting Among the Automobile Sector 5

Climate Change Reporting Among the Insurance Sector 7

Climate Change Reporting Among the Integrated Oil & Gas Sector 8

Climate Change Reporting Among the Petrochemicals Sector 10

Climate Change Reporting Among the Utilities Sector 11

Publicly Traded Companies in the U.S. By Country of Origin 12

Executive Summary

This survey provides compelling and additional evidence that publicly tradedcompanies in the automobile manufacturing, integrated oil & gas, insurance,petrochemicals, and utilities industries are failing to report material environmental issuessuch as climate change in Securities and Exchange Commission (SEC) filings. Despiteseveral recent studies that indicate that climate change can pose significant environmentalrisks to certain industries and sectors, companies recognition, management anddisclosure of climate change issues to shareholders differ widely. Companies from everysector surveyed provided some climate change reporting, suggesting that climate changecan be a material business risk and/or opportunity in each of these industries. Yet only alimited number of U.S. companies are recognizing and disclosing these risks to theirshareholders.

Current SEC disclosure regulations require registrants to disclose trends anduncertainties that are likely to have a reasonable impact on a company s operations.Trends and uncertainties such as market changes and regulations associated with climatechange should be disclosed by companies that are likely to be impacted by theseuncertainties. The findings of this survey illustrate that publicly traded companies in theautomobile, insurance, integrated oil & gas, petrochemicals, and utilities sectors arefailing to adequately disclose climate change-related risks to their shareholders inaccordance with existing SEC rules.

Twenty-six percent (26%) of companies surveyed provided climate changereporting, but most climate reporters were European-based companies. European,Japanese and Canadian firms reported at a rate of 56%, compared to 15% for U.S firms;accordingly, those industries with higher representation from foreign companies tendedto have higher reporting rates. About half of all electric utilities and integrated oil & gascompanies discussed climate change in their most recent annual SEC filings. Amongautomobile and truck manufacturers, less than 20% of companies discussed the impact ofclimate change on their business, although many firms inform investors about mattersinvolving carbon dioxide emissions. The petrochemical and insurance sectors providedthe least disclosure, with only one out of 15 petrochemical companies, and one of the 14largest property and casualty insurance companies discussing global warming in theirannual SEC filings. While the quality of climate change reporting varied, very fewcompanies provided quantitative information on how global warming would affect them.Qualitative data included information about the Kyoto Protocol and other climate changelegislation/regulations, the financial impact of these policies on the company s sector andbusiness, and the firm s response to these policies.

At least one U.S. company from every sector surveyed provided climate-relateddisclosure to their investors in its latest annual SEC filing. This select group of reportershas identified climate change as material business risk and/or opportunity, while many oftheir competitors have failed to recognize and report these matters to their investors.Reporting companies may be relatively well-governed, better managed, strategic andmore transparent to shareholders than those that do not disclose.

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I. CONTEXT FOR DISCLOSURE

Introduction

Global warming, as a climate and regulatory reality, is expected to havewidespread impacts on the economy, particularly for key sectors such as automobilemanufacturers, property and casualty insurers, oil & gas companies, petrochemical firms,and electric utilities. While automobile, oil & gas, petrochemicals and utilitiescompanies are more likely to be impacted by public policies and regulations designed toreduce carbon dioxide emissions, insurers and re-insurers may be financially affected bythe increasing number and severity of weather-related disasters. Despite the fact thatclimate change could materially impact a firm s business, companies recognition,management and disclosure of climate change issues to shareholders differ.

This study reviews the Securities and Exchange Commission (SEC) filings of 87publicly traded automobile, insurance, oil & gas, petrochemicals and utilities companiesin the United States, and provides a survey and analysis of those companies climatechange-related disclosure to shareholders. It also provides information about growinginvestor demand for corporate disclosure on climate change, and current securities rules.

The Financial Impacts of Climate Change

Forward-looking companies have recognized the risks associated with climatechange, and the competitive advantage of managing these risks well. In response to therisks and opportunities posed by global warming, several management consultancies havebeen established in the past several years to serve corporate clients. U.K.-based riskmanagement consultancy Aon Limited offers a Carbon Risk Management practice toassist companies with climate change issues. Similarly, PriceWaterhouseCoopers hascreated a Climate Change Services Group, and reports that one of its clients realized a$650 million in cost savings by implementing a climate change strategy.

Several recent analyses from Wall Street have detailed the financial implicationsof climate change for investors in various companies and sectors. In 2001, the UniversitySuperannuation Scheme, one of the largest occupational pension funds in the UnitedKingdom, commissioned another report that stated:

Climate change is a major emerging risk management challenge for institutionalinvestors. Institutional investors, and pension funds in particular, aim to providepensions and other benefits through long term investment. They can also beenseen as universal investors in that, due to their size, they commonly investacross the whole economy. If climate change threatens economic development,and especially if there are many or significant impacts, it will also therefore belikely to undermine the ability of pension funds and other institutional investors tofulfill their aims, so it is in their interests to see that risks associated with climatechange are minimized.

Climate Change — A Risk Management Challenge for Institutional Investors

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Several months later the investor-environmental group coalition CERES releaseda report authored by Innovest Strategic Value Advisors titled Value at Risk: ClimateChange and the Future of Governance that concluded:

Compelling evidence now exists that the competitive and financial consequencesfor individual companies under business-as-usual scenarios will be immense.Both the impacts of climate change itself and the need to cut greenhouse gasemissions will create new risks. Indeed, even within the same industry sector,corporate exposures to the risks of climate change can vary greatly according to,for example, companies greenhouse gas intensity. i

Corporate responses to climate change can also impact a firm s reputation, asource of shareholder value. In 2002, Robert A.G. Monks, noted corporate governanceexpert and Chairman of LENS Investment Management and Ram Trust Services, filed ashareholder proposal at ExxonMobil which argued that the company s current Chairmanand CEO, Lee Raymond, was taking controversial stances on climate change that weredestroying the company s reputation and shareholder value. The proposal called for theseparation of Chairman and CEO positions because the current structure ofExxonMobil s Board was not in a position to protect the Company from reputationalharm caused by its CEO. According to Risking Shareholder Value? ExxonMobil andClimate Change, a study commissioned by Monks, ExxonMobil s attitude towardsclimate change is fraught with unnecessary risks and missed opportunities that couldput at risk more that $100 billion in long-term shareholder value.ii

Finally, as this survey illustrates, many companies are disclosing the impacts ofglobal warming to investors in their SEC filings, illustrating that fact that climate changeis indeed a recognized and material issue for many corporations.

Investor Demand for Climate Change Related Information

Investors are increasingly demanding climate change information from thecompanies they own. In 2002, investors such as the Connecticut Retirement and TrustFunds filed shareholder resolutions at 17 companies in various sectors requesting that thefirms track and disclose their carbon dioxide emissions. The proposals received averagevotes of 20-30%, indicating significant investor concern over global warming. Climatechange and renewable energy resolutions gained the support of influential shareholdervoices such as the California Public Employees Retirement System and InstitutionalShareholder Services (the largest proxy advisory service in the U.S.), whichrecommended that shareholders vote in favor of climate change shareholder proposals atcompanies including ExxonMobil.

Similarly, in May 2002, a group of 31 large institutional investors, from MerrillLynch Investment Managers to Morley Fund Management (UK), wrote to the largest 500publicly traded companies in the world stating We want better to understand possiblematerial impacts on investment value driven by climate change related taxation andregulation, technology innovations, and shifts in consumer sentiment. The investors

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then requested that the companies complete a questionnaire regarding their carbondioxide emissions.

Financial research and analysis companies are also developing climate-relatedanalytical products in response to investor demand. For example, EcoSecurities, a UK-based consultancy, provides an analytical checklist designed to measure a company sexposure to climate change-related risks. Innovest, a US-based financial advisory firm,operates a Carbon Finance Practice, which identifies how climate change and climatechange policies can affect companies through affecting direct cash flow and earnings,harming a company s brand and reputation, and raising its cost of capital.

Adequate disclosure of climate change-related issues in corporate SEC filings isimportant as a matter of shareholder demand: increasingly investors are integratingclimate change matters into their due diligence, and some view corporate actions tomitigate and disclose climate risks as indicators of good management, sound strategicpositioning and/or investor transparency.

Securities Disclosure Regulations

In the United States, under Rule S-K, Item 303 of the Securities Act of 1933, theSecurities and Exchange Commission requires publicly traded companies to discloseinstances "where a trend, demand, commitment, event or uncertainty is both presentlyknown to management and reasonably likely to have material effects on the registrant’sfinancial condition or results of operation." Such trends must be disclosed in theManagement Discussion and Analysis section of a financial report, and can includeenvironmental issues such as impending regulation on environmental issues such asclimate change.

Pursuant to new SEC International Disclosure Standards adopted in 2000, foreigncompanies that are publicly traded in the United States must follow InternationalAccounting Standards (IAS) for their Management Discussion and Analysis section oftheir Form 20-F, the annual SEC filing for foreign private issuers. There is currently nospecific IAS that requires companies to report on the financial impact pending policiesand regulations. However, in the absence of an independent or specific duty to discloseinformation, international accounting protocols dictate that a disclosure should be basedon the materiality of that information. The Association of Chartered CertifiedAccountants (UK) has roughly defined materiality as such: if, in the opinion of thefinancial statement auditor, a failure to correct an error (for example in valuation) —would affect the decision of a user of the financial statements then that non-disclosure/non-correction is likely to be material to a proper understanding of the financialstatements. iii

International accounting protocols heavily rely on this type of principles-basedaccounting, and under IAS s expansive definition of materiality, some companies and/orsectors would be clearly obligated to provide climate reporting. However, even U.S.accounting rules, which are often classified as rules-based, still support an expansive

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definition of materiality under which global warming disclosure would fall. For example,the Financial Accounting Standards Board defined materiality in its Statement ofFinancial Accounting Concepts No. 2 (FAS 2) and maintained that a disclosure should bemade if its omission or correction would probably change or influence the judgment of areasonable person relying upon the report. iv Similarly, in 1976, the U.S. Supreme Courtin TSC Industries Inc. v. Northway, Inc. ruled that disclosure is material if there is asubstantial likelihood that the disclosure of the omitted fact would have been viewed bythe reasonable investor as having significantly altered the total mix of informationavailable, and that a disclosure is material if there is a substantial likelihood that areasonable shareholder would consider it important in deciding how to vote. v Finally,the SEC in 1999 issued a Staff Accounting Bulletin (SAB 99) that reminded registrantsthat materiality is not always defined in numerical terms, and can be non-financial innature.

II. REVIEW OF COMPANY DISCLOSURE

In total, 87 publicly traded companies were reviewed for this survey: 23automobile and truck manufacturers, 14 property and casualty insurance companies, 18integrated oil and gas firms, 15 companies in the plastics and rubber-based chemicalindustry, and 14 electric utilities. (See Appendix 1 for methodology, Appendix 2 for thelist of companies, and Appendix 4 for company disclosures.)

Although not all companies surveyed were based in the United States, they all arepublicly traded in the U.S. capital markets. Companies 2001 SEC 10-K filings (annualfiling for U.S. companies) or SEC 20-F filings (annual filing for foreign companies) weresurveyed; where 20-Fs were not available, annual reports were examined.

The Automobile Industry

The automobile industry will be one of theindustries most impacted by climatechange by regulations limiting carbondioxide emissions. A current example isrecent legislation in California requiringsignificant reductions in greenhouse gasemissions from cars and trucks, includingsport utility vehicles, by 2009. Thelegislation, AB 1493, represents the firstattempt in the U.S. to regulate carbon dioxide exhaust emissions. As this and similarlegislation spurs demand for more fuel efficient and cleaner cars, automobile companiesthat are ready to meet this demand through hybrid and clean high technology vehiclesmay gain a competitive advantage over their competitors.

Although most large automobile companies discussed emissions generally in theirSEC filings, among the 23 automobile manufacturing companies traded in the US, only

Climate Change Reporting Among the Automobile Sector

5

23

ReportingCompanies

Non-ReportingCompanies

6

five companies actually mentioned climate change in their most annual filings. Of thesefive reporting companies, four — Daimler Chrysler, Scania, Aktiebo (Volvo), and Toyota— were based outside of the United States. Scania, Toyota and Volvo provided explicitlyreferenced climate change; however, these mentions were brief, and their SEC filingsresembled many non-reporting companies, which generally discussed regulations ofvarious emissions.

Ford Motor Company, although it was the only U.S. automobile manufacturer todiscuss global warming, provided some the most analytical and detailed discussionamong all reporting companies. Ford noted both domestic fuel economy regulations, andthe Bush Administration s climate change policy that was released in February 2002.Ford asserted that other nations are pressing the United States to ratify the KyotoProtocol, and predicted that the Environmental Protection Agency and individual statesmight increase regulation of carbon dioxide emissions. The company described theseimpacts on its domestic sales, concluding that Ford might find it necessary to takevarious costly actions that could have substantial adverse impacts on its sales volume andprofits. The company further described climate change policies and regulations inEurope, and concluded that taken together such [climate change] proposals could havesubstantial adverse effects on our sales volumes and profits in Europe. Finally, Fordalso offered a strategy to adapt to these policies, which would involve [curtailing]production of larger, family-size and luxury cars and full-size light trucks, [restricting]offerings of engines and popular options, and [increasing] market support programs forits most fuel-efficient cars and light trucks.

Similarly, DaimlerChrysler described regulatory trends in fuel economy standardsand climate change in the United States, and reported that increased demand for light-duty trucks could jeopardize [DaimlerChrysler s] ability to comply with [the fueleconomy] standard, and require it to take additional costly steps. The company reportedthat U.S. governmental actions to reduce fossil fuel use could be costly toDaimlerChrysler. As a way of illustrating to shareholders that it was prepared to complywith pending climate change policies, the company highlighted its alternative fuelvehicles, especially those that operate on compressed natural gas, liquid petroleum gas,and electricity, and flexible fuel vehicles capable of operating on both gasoline andethanol blend fuel.

Notably, although it included a general discussion of emissions issues, GeneralMotors did not mention climate change at all in its 2001 10-K, despite the fact that two ofits major competitors, Ford and DaimlerChrysler, told shareholders of the adverseimpacts that U.S. climate change-related regulations could have on their operations.Other U.S. automakers (14 in all) that failed to report climate impacts were relativelysmall and specialized manufacturers such as Featherlite, Monaco Coach, RushEnterprises, Spartan Motors, and Supreme Industries. Many of these companies focus onthe domestic market. Among the foreign companies, auto majors Nissan, Honda, andFiat also failed to disclose climate risks.

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The Insurance Industry

Perhaps more than any othersector surveyed, the insurance industrywill be impacted by global warming as aclimate event. The increase of severestorms and weather events associatedwith climate change could particularlyimpact small or undiversified propertyinsurers and reinsurers.vi In its 2001annual report, Munich Re (which is nottraded in the United States) estimated thatglobally, insurers claims costs from natural catastrophes — adjusted for inflation — showa clear increase since the 1960s. This is mainly due to weather catastrophes, e.g. stormsand floods, which are today responsible for an average of 85% of the insured catastrophelosses. Today, weather-related disasters occur at over five times the rate as they did 40years ago, resulting in over 13 times more insured losses; this cost U.S. insurers $9.2billion per year in the 1990s. For U.S. insurers, inflation-adjusted catastrophe lossesgrew seven fold over the past 30 years, while the ratio of premiums to catastrophe lossesfell by six fold.vii

Despite these trends and projections, disclosure of climate change related risksamong publicly traded insurance companies in the U.S. is very poor. Thirteen (13) of the14 largest publicly traded insurers in the U.S. did not mention anything at all about theimpact of climate change in their most current SEC annual filings. The exception wasChubb, which indicated that they were aware of climate change, but stopped short fromidentifying global warming as a business risk: In recent years, we have invested inmodeling technologies and concentration management tools that enable us to bettermonitor and control catastrophic exposures. We also continue to explore and analyzecredible scientific evidence, including the impact of global climate change, that mayaffect our potential exposure under insurance policies. The 14 largest insurancecompanies did not mention global warming, although several have significantproperty/casualty businesses, including property coverage for structures.

A study by the Lawrence Berkeley National Laboratories attempted to identify thereason why U.S. insurers are relatively disengaged in climate risk management. Onemajor cause is that the U.S. government has historically had a role in providing disasterprevention and recovery aid ($119 billion from 1977-1993). Other potential explanationsinclude the fact that the topic of climate change creates controversy and anxiety amongU.S. insurers, the job of quantifying vulnerability to climate change is difficult, and thefact that insurers are able to manage and hedge risks with various financial instruments.viii

In contrast, European insurance companies (most of which are not traded in theU.S.) seem to take a different attitude towards climate change. They are attempting toquantify their exposure to climate risks, and the seriousness with which they approach thesubject suggests that the uncertainties associated with climate risk may be either too large

Climate Change Reporting Among the 14 Largest Insurers

1

13

ReportingCompanies

Non-ReportingCompanies

8

or too unpredictable to hedge against. A few European insurers such as Swiss Re andMunich Re have demonstrated particular leadership in understanding the potential effectsof climate change on the insurance and reinsurance business. For example in July 2002,Swiss Re hosted its latest meeting in a series of climate change events. Their Wall Streetsymposium Emissions Reductions: Main Street to Wall Street - The Climate in NorthAmerica, helped investors understand and manage climate risks. Swiss Re s 2001annual report also contained some relatively detailed climate analysis:

Over the past 30 years, both the severity and the impact of natural catastropheshave increased markedly. The trend to higher losses is driven by socio-economicfactors, including concentration of values in exposed areas and increasing use ofinsurance. Global warming adds another layer of uncertainty to this process,since scientific evidence shows it is likely to affect weather patterns, withparticular adverse impact on flooding. Nevertheless, while the underlying trendsare clear, economic and insured losses for both 2000 and 2001 were belowaverage. At the same time, Swiss Re estimates that worldwide prices for naturalcatastrophe excess-of-loss reinsurance increased by 25% in 2001, signaling asignificant turnaround in market conditions. Swiss Re continues to expand itsleadership role in managing and communicating natural resource perils issues.

- Swiss Re 2001 annual report

The quality of Swiss Re and Munich Re s climate disclosures were much higherthan that reported by Chubb. Rather than simply state that the company was studyingclimate change, the two European insurers provided some statistics about the impact ofglobal warming on their businesses. The companies have also been involved in theUnited Nations Environment Programme s Insurance Industry Initiative, which hascreated opportunities for insurers to take steps to mitigate climate change, fromexamining the carbon intensity of their own investments to lobbying in support of theKyoto Protocol.

Integrated Oil & Gas Industry

Oil & gas companies will beclearly impacted by climate changepolicies aimed at reducing carbon dioxideemissions. A recent report by the WorldResources Institute, Changing Oil:Emerging Environmental Risks andShareholder Value in the Oil and GasIndustry, studied sixteen major oil and gascompanies and found that climate changeand constrained access to oil and reserves can affect company sales, operating costs, assetvalues and shareholder value, depending on companies respective asset bases. Thereport found that impeding climate change policies — various scenarios from no action tothe extensive adoption of the Kyoto Protocol — could create probable financial impactsthat could range from a 5% loss to a slight increase in shareholder value for each

Climate Change Reporting Among the Integrated Oil & Gas Sector

8

10

ReportingCompanies

Non-ReportingCompanies

9

company surveyed.ix For example, under the likely scenario that Canada, Europe, Japanand Russia sign the Kyoto Protocol while the United States limits greenhouse gasemissions in another manner, WRI found that Occidental Petroleum could lose around4% of shareholder value, while losses at Conoco, BP, CheveronTexaco, Unocal andAmerada Hess could be about 2%.x However, among these six companies, only two —BP and Conoco — mentioned climate change in their latest SEC filings.

Although almost all integrated oil & gas companies traded in the U.S. providedsome general discussion about emissions regulations, only half provided specificreporting on climate change. With the exception of Houston-based Conoco, all reportingcompanies were European or Canadian, reflecting the fact that European countries andCanada have ratified the Kyoto Protocol. None of the companies based in Annex IIcountries (non-OECD and non-Eastern Bloc countries that would have to meet the stricterand more immediate carbon dioxide reduction targets set forth in the Kyoto Protocol)such as Sinopec, PetroChina, and Petrobras reported on climate change in their recentForm 20-Fs.

However, climate change reporting did not solely fall along country lines. Forexample, despite their home country s support of the Protocol, several Europeancompanies, such as ENI (Italy), Repsol (Spain) and TotalFinaElf (France) neglected tomention climate change in their SEC filings. Among U.S. companies, Conoco was theonly U.S.-based integrated oil & gas company that mentioned climate change, despite thefact that several American companies such as ExxonMobil also have significant overseasinterests and would very likely be impacted by climate change policies as well. Conoco s2001 10-K discusses the Kyoto Protocol in both the U.S. and international context, andclearly states to its shareholders that global warming policies could pose material risks:although it is not yet possible to estimate accurately the total actual expenditures thatmay be incurred by Conoco as a result of the Kyoto Protocol, such expenditures could besubstantial.

The quality of the climate disclosure among the other eight reporting companiesvaried greatly. For a few companies, such as Imperial Oil and PetroCanada, climatereporting mostly consisted of descriptions of the company s carbon dioxide emissionsreduction efforts.

Notably, Statoil was the only company other than Conoco that admitted it couldincur significant costs to comply with the 1997 Kyoto Protocol. Rather than reportingon the financial threats of climate change policies, a few companies emphasized theirability to cope with the policy and market implications of global warming. Royal DutchPetroleum and Shell Transport & Trading Company emphasized their hydrogen businessand how the speed and intensity with which the emerging hydrogen industry developswill depend in part on the pace of regulatory and political change. Similarly, Suncor sannual report seemed to treat climate change policies as an opportunity rather than athreat by focusing its entire discussion on the company s efforts to reduce greenhouse gasemissions, create a renewable energy business, pursue energy efficiency, and recovercarbon dioxide from industrial processes.

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Finally, BP — the company that re-branded itself as Beyond Petroleum —discussed climate change but did not report that it would be adversely impacted, nor did ittout its high-profile renewable energy investments. BP s 20-F instead claimed that theKyoto Protocol would not have much effect on its business, because even with the treatyin effect, the impact of the Kyoto agreements on global energy (and fossil fuel) demandis expected to be small and that it is likely that, in the medium term, the global demandfor fossil fuels will increase, with gas taking the largest share of that growth.

Petrochemical Industry

The petrochemicals industry(chemicals — plastics and rubber) may alsobe affected by climate change regulations,particularly as they relate to greenhousegas emissions reductions and cost ofpetroleum-based inputs. Companies thatproduce similar products may bedifferently affected based on theirproduction efficiency and how carbonintensive their energy sources are.xi

DuPont was the only one of the fifteen publicly traded petrochemicals companiesin the United States to discuss climate change with its investors in its 2001 SEC annualfiling. The company provided relatively high quality reporting: not only did it mentionthe Kyoto Protocol, but DuPont also explained the Protocol s probable effect on itsbusiness. The company also described its efforts to manage with climate-related risks,and how successful it has been so far:

While well ahead of the target/timetable contemplated by the Protocol on a globalbasis, the company faces prospects of country-specific restrictions where majorreductions have not yet been achieved. DuPont is working to enable success ofemissions trading mechanisms under the Protocol that could aid in satisfying suchcountry-specific requirements. Emission reduction mandates within the UnitedStates are not expected in the near future, although the Administration hasannounced plans for voluntary programs and incentives.

- E.I. DuPont de Nemours & Co. 2001 10-K

In contrast, DuPont s competitors, such as Dow, Eastman Chemical and Rohm &Haas provided no climate change information in their 10-Ks despite the fact that they alsohave a stake (as DuPont put it) in several greenhouse gases such as CO2, N2O, HFCs,PFCs. DuPont s departure from its competitors is probably attributable to the company sleadership in recognizing and managing climate change risks. In 1990, the companycommitted to reducing greenhouse gas emissions by 65% by 2010, illustrating a forward-looking approach and an ability to strategically identify and manage risks. From 1990-

Climate Change Reporting Among the Petrochemicals Sector

1

14

ReportingCompanies

Non-ReportingCompanies

11

2000, the company reduced greenhouse gas emissions by 272.8 to 82.5 billion pounds, orabout 60%.xii

Utilities Industry

The electric utility industry willalso be one of the sectors most impactedby climate change policy. As noted inValue at Risk: Climate Change and theFuture of Governance, one third of totalcarbon dioxide emissions are produced byfossil fuel based energy production on aglobal basis. The fact that it is relativelyeasier to control and monitor carbonemissions from centralized sources such as power plants will make the utilities sector afocus of carbon reduction efforts. The electric utilities that are -- or are preparing tobecome -- less carbon intensive may gain a competitive advantage.xiii

For example, Innovest Strategic Value Advisors estimates if a $20/ton carbon taxwere introduced, it would impact utilities differently based on the carbon intensity oftheir fuel mix. For a carbon-intense company like American Electric Power, this meansthat the discounted future cost of stabilizing greenhouse gases at 1998 levels would cost$1.2 billion — or 11.5% of its current market capitalization.xiv

Reflecting the materiality of climate change policies, the utilities industry hadamong the best climate disclosure of the five sectors surveyed. About half, or 9 out of17, companies provided climate change-related reporting in their most recent annual SECfiling. Disclosure in this sector also tended to be of relatively high quality. For example,American Electric Power — one of the utilities that is most at risk based on its reliance oncoal — provided some detail about how the company would be financially impacted by theKyoto Protocol as well as the Bush Administration s policy approach on climate change:

Since the AEP System is a significant emitter of carbon dioxide, its results ofoperations, cash flows and financial condition could be materially adverselyaffected by the imposition of limitations on CO2 emissions if compliance costscannot be fully recovered from customers. In addition, any program to reduceCO2 emissions could impose substantial costs on industry and society and erodethe economic base that AEP’s operations serve. However, it is management’sbelief that the Kyoto Protocol is highly unlikely to be ratified or implemented inthe U.S. in its current form On February 14, 2002, President Bush announcednew climate change initiatives for the U.S AEP is unable to predict at this timethe effect that this program will have upon its operations or financial performancein the future.

- American Electric Power 2001 10-K

Climate Change Reporting Among the Utilities Sector

89

ReportingCompanies

Non-ReportingCompanies

12

Among U.S.-based publicly traded utilities, AEP, Duke, Southern Company andTXU all disclosed climate risks and alluded to climate legislation or the Kyoto Protocol.However, none of these four reporting companies were able predict the impact of climatechange policies on their business, nor were they forthcoming about how they were copingor managing climate risks. The American utilities with the best climate disclosure —AEP, Duke and TXU — all have European operations whereas Southern Company, whichsolely serves the U.S. domestic market, only mentioned climate change in a litany ofother potential regulatory and legislative risks.

The publicly traded utilities sector in the U.S. has a relatively high proportion offoreign-based companies, with 6 out of 17 utility companies based abroad. Four of thesenon-U.S. utilities — ENEL (Italy), National Grid Group (UK), Scottish Power, and SUEZ(France) — provided global warming reporting to U.S. shareholders. While most of themspoke of carbon dioxide emissions reductions and shifts to renewable energies and/ordemand-side management, their discussions had a corporate responsibility focus and didnot report that climate change policies posed a risk that could impact their businesses.The one exception was ENEL, which described relevant climate change policies and theirfinancial impact on the company:

On the basis of current forecasts of future fuel prices, we believe that applicationof the carbon tax as currently formulated could have a significant impact on theeconomic viability of our oil-fired plans by the year 2005, should the tax ratesthen reach their maximum levels In 2000 and 2001, our carbon tax liabilityamount to approximately Euro 38.0 million and Euro 42.5 million respectively.

- ENEL 2001 20-F

III. ANALYSIS & CONCLUSIONS

Disclosure Patterns Geographically

Twenty-six percent (26%) ofcompanies surveyed provided climatechange reporting, with the most comingfrom European-based companies. Non-U.S. companies based in Annex 1countries — European, Japanese andCanadian firms — reported at a rate of56%, compared to 15% for U.S.companies. No firms based in Annex IIcountries (developing countries exempt from the Kyoto Protocol s immediate greenhousegas reduction targets) provided climate disclosure. This is not surprising in light of thefact that the carbon reduction policies are less aggressive in Annex II countries as well asthe typically lower levels of investor disclosure generally found among developingcountry-based firms.

Publicly Traded Companies in the U.S. by Country of Origin

5327

9

US

Annex 1

Annex 2

13

These reporting patterns influenced industry-based reporting rates. Sectors withthe highest representation of European, Japanese or Canadian companies, such as theautomotive and oil & gas sectors, had relatively high climate reporting rates:

- Thirty-five percent (35%) of the publicly traded companies in the automobilesector were based outside the U.S., and half of them provided climatedisclosure. Foreign companies accounted for 4 out of 5 of the climatereporters.

- Eight-three percent (83%) of integrated oil & gas companies were basedoutside the U.S., and the majority of them provided climate disclosure.Foreign companies accounted for 9 out of 10 of the climate reporters.

Sectors with the lowest percentage of foreign firms, such as insurance (14%foreign-based) and petrochemicals (26% foreign-based), had the lowest reporting rates.In each of those sectors, there was only one company that provided climate reporting.However, both of those companies — Chubb and DuPont, respectively — were bothAmerican.

One notable exception was the utilities sector, the industry that provided the bestclimate reporting among American firms. Thirty-five percent (35%) of utilitiescompanies were foreign-owned; and while their reporting rates were still better than thatin those of their U.S. counterparts, four U.S. utilities companies provided climatedisclosure to their investors. These four — American Electric Power, Duke Energy,Southern Company and TXU — accounted for half of the climate reporting among allAmerican companies surveyed.

Quality of Disclosure

Approximately 26% of companies surveyed reported on climate change, very fewcompanies provided quantitative information. A few companies mentioned monetarycontributions to industry-led climate initiatives, but only Italian utility ENEL providedquantitative disclosures about the financial impact of climate change policies byenumerating their carbon tax liability for 2000 and 2001.

Common types of qualitative information provided in SEC filings includeddiscussion of climate legislation/regulations, the financial impact of these policies on thecompany s sector, the impact of climate change on the company s business, and thefirm s response to these policies. (See Appendix 3 for Summary of Climate Change-Related Disclosures.) Some companies, such as AEP, Statoil, and Ford provideddisclosure on all these issues, while UK-based National Grid Group provided some of theleast helpful climate disclosure, saying that they simply take steps when practicable toreduce emissions and play an important part in helping minimise climate change.

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Most climate reporting companies provided some discussion of the KyotoProtocol and associated legislation or policies. Specific mentions of the Kyoto Protocolwere particularly prevalent among the automobile and utilities sectors.

Several companies such as National Grid Group, SUEZ, PetroCanada, Suncor andShell (both Royal Dutch and Shell Transport & Trading companies) took an optimisticview of climate change, neither describing pending regulatory trends nor potentialdownside risks of these policies. For example, DaimlerChrysler, DuPont, PetroCanada,Suncor, Shell, Scania, Scottish and Volvo all elaborated on their responses to climatechange without mentioning that climate change policies could pose a financial risk totheir business. This suggests that either management is painting an overly optimisticview or sees climate change policies as a business opportunity. Some of the mostoptimistic and seemingly thoughtful analysis came from BP, which essentially concludedthat climate change policies would not create a decrease in global demand for fossil fuel,and therefore would not affect their business in the medium term.

In the United States, Conoco described climate change primarily as a risk, anddiscussed the adverse financial effects of potential climate change policies andregulations, but it did not report on any steps that it was taking to manage this risk. OtherU.S companies, including Duke Energy, Southern Company, TXU all identified climatechange as a risk but refrained from analyzing how it would affect them and failed to tellshareholders how it was managing climate risks. For example, Duke claimed that climatechange policies could have far-reaching implications but that the company could notpredict the regulations effects. Similarly, Southern Company maintained that thefinancial implications would depend while TXU said that it was unable to predict theeffect of climate change policies. Chubb s financial analysis was even more vague anddid not acknowledge the existence of climate change; rather the filing stated that thecompany continues to explore and analyze credible scientific evidence around globalwarming.

Lack of Climate Disclosure in U.S. Corporate SEC Filings

At least one U.S. company from every sector surveyed provided climate-relateddisclosure to their investors in its latest 10-K. This select group of U.S. companies hasidentified climate change as material business risk and/or opportunity, while many oftheir competitors failed to recognize and report these matters to their investors. Suchvariance in climate disclosure can be attributed to a few explanations.

The perfect disclosure theoryUnder the perfect disclosure scenario, the management of all U.S. automobile,

insurance, oil & gas, petrochemicals and utilities companies have duly recognized andanalyzed the effect of climate change policies on their business, and that the globalwarming truly is only material for those companies that have reported it. Under thisscenario, the only U.S. automobile company that will be materially affected by climatechange policies is Ford, the sole climate reporter. Companies like General Motors willnot be affected -- despite the fact their businesses are intrinsically similar Ford s -- so

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therefore they did not provide climate disclosure. However, if climate change policieswere indeed immaterial for General Motors, the company would not have joined itsindustry peers in aggressively lobbying against California s new carbon dioxideemissions law, arguing that the regulation would have adverse impacts on its business.Therefore, the perfect disclosure theory provides an unlikely explanation for thedifferences in climate reporting among industry peers.

The duped companies theoryAnother possible explanation is the duped company theory — that U.S. reporting

companies have a mistaken and exaggerated concern over the potential financial impactof climate change policies. Such a theory would assert that the policy and marketimplications of global warming are in fact immaterial for all U.S. companies, and that afully a third of the U.S. utilities companies (namely AEP, Duke Energy, SouthernCompany and TXU) are mistaken in their reporting of climate change issues to investors.But regardless of a company s view towards the existence of global warming, companiesresponses to climate change are already creating new business realities, as a critical massof climate-savvy companies begin to take actions that put its peers at a competitivedisadvantage. For example, corporate actions to curb carbon dioxide emissions arecreating an international market for greenhouse gases emissions trading even in theabsence of governmental regulation,xv and many companies (including Entergy, IBM,Toyota Motor Manufacturing North America) are voluntarily adopting of greenhouse gasreduction targets as a matter of competitive market positioning and enhancingreputation.xvi

Finally, corporate leaders that refuse to admit the existence of climate change areunder increasingly being called to task by shareholders. In 2002, Robert A.G. Monks,noted corporate governance expert and Director of Ram Trust Services, filed a 2002shareholder resolution at ExxonMobil that claimed the company s Chair and CEO LeeRaymond had so vehemently denied the existence of global warming that he wasthreatening the company s reputation and share value. Therefore, even if non-reportingcompanies believe that their competitors may be duped into believing that climatechange exists, the perceived threat of global warming (as Shell described in its 2001SEC Form 20-F) among competitors and investors can create material market trends andconditions.

The good governance theoryAnother reason for such variance in climate reporting among U.S companies is

the good governance explanation -- that better-governed companies are forward-looking enough to recognize the risks/opportunities associated with climate changepolicies, and/or transparent enough to disclose those risks to investors.

Indeed, many of the companies that provided climate disclosure to investors alsohave taken a public position that they have a role and responsibility to address globalwarming. For example, several reporting companies, including American Electric Powerand Shell are members of the Pew Center on Global Climate Change s BusinessEnvironmental Leadership Council, which believes that businesses can and should take

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concrete steps now in the U.S. and abroad to assess opportunities for emission reductions,establish and meet emission reduction objectives, and invest in new, more efficientproducts, practices and technologies. xvii Certainly, it comes as no surprise thatcompanies such as DuPont, which has taken significant steps to reduce greenhouse gasemissions, provided relatively descriptive climate reporting to its shareholders.

Other companies such as Conoco, Duke Energy, Southern Company, and TXUhave not proactively addressed global warming, but still provided climate disclosure as amatter of transparency. The good governance theory is the most likely explanation forthe disparity in climate reporting because good governance is at the core of sounddisclosure practices as a general matter. Shareholders are increasingly realizing thatwell-governed companies tend to be better managed, strategic and more transparent toinvestors overall.

Conclusion

The findings of this survey suggest that public companies are failing to adequatelydisclose climate change-related risks to their shareholders. The study also corroboratesrecent evidence demonstrating that environmental disclosure among publicly tradedcompanies in the U.S. is weak and poorly enforced. For example, a 1998 study by theEnvironmental Protection Agency found that 74% of companies do not reportenvironmental legal proceedings contemplated and/or initiated by environmental agenciesthat are likely to result in monetary penalties of over $100,000, despite clear SECdisclosure rules requiring this disclosure.xviii Similarly, recent studies of the oil & gas andpaper & pulp sectors show that companies provide poor SEC disclosure of pendingenvironmental regulations that may materially affect company operations orperformance.xix

The SEC clearly requires registrants to disclose material known trends anduncertainties that are reasonably likely to have an impact on a company s operations(SEC Regulation S-K, Item 303). Issues such as significant market changes andregulations associated with climate change should be duly discussed in company SECreports.

Although climate change-related reporting among U.S. companies is relativelypoor, at least one company in each sector surveyed provided climate change reporting,demonstrating that some companies have recognized the risks associated with globalwarming, and have deemed them as materially important and worthy of shareholderdisclosure. The fact that others have not provided similar disclosure is likely due to thefact that these companies have failed to recognize the affect of global warming on theirbusiness, or they are portraying an overly optimistic and misleading picture of how theirfirm is positioned in light of future trends and uncertainties.

Even if companies expect that global warming will not pose a material adverserisk to them, the best practice disclosure among companies surveyed suggests that aglobal warming discussion with investors is warranted. Several companies, including

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BP, maintained that they would be unaffected by climate change policies, but chose toanalyze and discuss global warming with their shareholders anyway despite the fact thatthe company itself deemed climate change as immaterial. Although all companies inthese sectors should provide climate change disclosure as a matter of the shareholdersright to know, savvy investors still may be able to distinguish the strategically-managedand well-governed firm by the company s provision or lack of climate-related disclosure.

i Value at Risk: Climate Change and the Future of Governance, CERES Sustainable Governance ProjectReport (prepared by Innovest Strategic Value Advisors), April 2002.ii See Robert A.G. Monks website, www.ragm.com/library/topics/exxon.htmliii Association of Chartered Certified Accountants. Industry as a Partner for Sustainable Development:Accounting, Association of Chartered Certified Accountants and United National Environment Programme,2002.iv FASB, Statement of Financial Accounting Concepts No. 2, Qualitative Characteristics of AccountingInformation, 1980.v TSC Industries Inc. v. Northway, Inc. 426 U.S. 438, 448 (1976)vi Climate Change: A Risk Management Challenge for Institutional Investors, University SuperannuationScheme (prepared by Mark Mansley and Andrew Dlugolecki), 2001.vii Mills, Evan, Eugene Lecomte and Andrew Para. U.S. Insurance Industry Perspectives on GlobalClimate Change, Lawrence Berkeley National Laboratory, February 2001.viii Ibid.ix Austin, Duncan and Amanda Sauer. Changing Oil: Emerging Environmental Risks and ShareholderValue in the Oil and Gas Industry, World Resources Institutue, August 2002.x Ibid.xi Climate Change: A Risk Management Challenge for Institutional Investors, University SuperannuationScheme (prepared by Mark Mansley and Andrew Dlugolecki), 2001xii http://www.dupont.com/corp/social/SHE/usa/us3.htmlxiii Value at Risk: Climate Change and the Future of Governance, CERES Sustainable Governance ProjectReport (prepared by Innovest Strategic Value Advisors), April 2002.xiv Ibid.xv See for example, Rosenweig, Richard et al. The Emerging International Greenhouse Gas Market, PewCenter for Global Climate Change, March 2002.xvi See for example, Margolilck, Michael and Doug Russell Corporate Greenhouse Gas Reduction Targets,Pew Center for Global Climate Change, November 2001, which states that companies are improvingmarket positioning today by reducing production costs and enhancing product sales today, and inanticipation of regulatory and market environments of the future. Other reasons for setting climate-relatedtargets include: to prepare for future regulation by investing in GHG emissions reductions now, tocontribute to the design of efficient and equitable international and domestic GHG policies and programs,and to enhance corporate reputation via environmental leadership.xvii See Pew Center on Global Climate Change, http://www.pewclimate.org.xviii U.S. EPA, Enforcement Alert (Oct. 2001), available at http://es.epa.gov/oeca/ore/sec.pdf (last visitedMar. 30, 2002).xix See for example, Austin, Duncan and Amanda Sauer. Changing Oil: Emerging Environmental Risksand Shareholder Value in the Oil and Gas Industry, World Resources Institutue, August 2002; and RobertRepetto & D. Austin, Pure Profit: The Financial Implications of Environmental Performance (WorldResources Inst. 2000)

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Appendix IMethodology

In total, 87 publicly traded companies were reviewed for this survey: 23 automobile andtruck manufacturers, 14 property and casualty insurance companies, 18 integrated oil and gasfirms, 15 companies in the plastics and rubber-based chemical industry, and 14 electric utilities.(See Appendix 2 for list of companies.) With the exception of the insurance industry, allcompanies in each sector were surveyed, as classified by YahooFinance(http://finance.yahoo.com). In the insurance sector, the top 14 largest companies (as defined bytotal market capitalization as of August 12, 2002) were studied.

Although not all companies surveyed were based in the United States, they all arepublicly traded in the U.S. capital markets. For U.S.-based firms, the study examined thecompanies latest SEC Form 10-K, the annual company filing, which were submitted in 2002 forthe fiscal year ended 2001. For Canada-based companies, the survey studied 2001 annualreports. The study relied on the latest SEC Form 20-F for most other foreign-based firms; wherethe Form 20-F form was unavailable electronically, the survey reviewed the company annualreport.

Firms were classified as reporting companies if they specifically mentioned the wordsclimate change or global warming. Firms — including several automobile manufacturers--that mentioned greenhouse gas or carbon dioxide emissions, but failed to discuss them in thecontext of climate change, were not deemed to be providing climate change disclosure.

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Appendix IICompanies Surveyed for SEC Climate Disclosure

Except where noted, this survey reviewed 2001 SEC Form 10-K or 10-K405 filings for all U.S.companies, annual reports for all Canadian companies, and 2001 SEC Form 20-F filings forforeign private issuers.

Automobile (23)Non-reporting Reporting CompaniesAmerigon (US) DaimlerChrystler (Germany)Brilliance China Automotive Holdings* Ford (US),Collins Industries (US) Scania Aktiebo (Sweden)*Featherlite (US) Toyota (Japan)*Fiat (Italy) Volvo (Sweden)*General Motors (US)Honda (Japan)*Ingersoll Rand (US)Miller Industries (US)Monaco Coach (US)Navistar (US)Nissan (Japan)*Oshkosh Truck (US)Paccar (US)Rush Enterprise (US)Spartan (US)Supreme Industries (US)Wabash National (US)

Insurance (14)Non-reporting Reporting CompanyAce Ltd (US) Chubb (US)American International Group (US)Allianz (Germany)Allstate (US)AMBAC (US)Berkshire Hathaway (US)Loews (US)MBIA (US)MGIC (US)Millea Holdings (Japan)1

Progressive (US)Travelers (US)XL Capital (US)

* 2001 annual report used1 Annual report for ADRs

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Integrated Oil & Gas (18)Non-reporting Reporting CompaniesAmerada Hess (US) BP (UK)ChevronTexaco (US) Conoco (US)ENI SpA (Italy) Imperial Oil (Canada)*ExxonMobil (US) PetroCanada (Canada)*PetroChina (China) RoyalDutch Shell (UK/Netherlands)PetroBras (Brazil) Shell Transport/Trading (UK/Netherlands)Perez Companc SA (Argentina) Statoil (Norway)Repsol (Spain) Suncor (Canada)*Sinopec (China)TotalFinaElf (France)

Petrochemicals (15)Non-reporting Reporting CompanyAlbemarle (US) DuPont (US)Bairnco (US)Celanese (Germany)Dow (US)Eastman (US)Hercules (US)Millennium Chemicals (US)Nova Chemicals (Canada)*PolyOne Corp. (US)Rohm & Haas (US)Royal Group (Canada)*Sinopec (China)*Wellman Inc. (US)Zoltek (US)

Utilities (17)Non-reporting Reporting CompaniesConsolidated Edison (US) American Electric PowerDominion Resources (US) Duke Energy (US)Endesa (Spain) ENEL (Italy)Entergy (US) National Grid Group (UK)Excelon (US) Scottish PowerFirst Energy Corp. (US) Southern Company (US)Florida Power & Light (US) SUEZ (France)*Korea Electric Power Corp TXU (US)Progress Energy (US)

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Appendix IIISummary of Climate Change- Related Disclosures of Reporting Companies

The following table summarizes the quality of climate change-related disclosure of reportingcompanies.

Specific regulations: Company describes specific climate change - related regulationsImpact on Market: Company provides an analysis of the potential impact of climate change

on its marketImpact on Firm: Company provides an analysis on the potential impact of climate change

on its operationsFirm Response: Company reports on its potential or actual responses to climate change

Company SpecificRegulations

Impact onMarket

Impact onFirm

FirmResponse

OtherDisclosure

AutomobileDaimlerChrysler X X X XFord X X X XScania X XToyota XVolvo XInsuranceChubb XOil & GasBP X XConoco X X XImperial CO2 emissionsPetroCanada CO2 emissionsRoyal DutchShell

X X X

Shell Transport& Trading

X X X

Statoil X X X XSuncor X X General regsPetrochemicalsDuPont X X X XUtilitiesAEP X X XDuke Energy X XENEL X X XNational Grid XScottish Power X XSouthern Co. X General regsSUEZ X Mentions KyotoTXU X

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Appendix IVClimate Change — Related Disclosures for Reporting Companies

AUTOMOBILE & TRUCK

DaimlerChrysler — select disclosure from 2001 SEC Form 20-F

VEHICLE FUEL ECONOMYU.S. STANDARDS. Under the federal Motor Vehicle Information and Cost Savings Act,a manufacturer is subject to significant penalties for each model year its vehicles do notmeet Corporate Average Fuel Economy standards, commonly referred to as the CAFEstandards. CAFE standards for passenger cars and light-duty trucks are currently 27.5miles per gallon and 20.7 miles per gallon, respectively. A manufacturer earns credits byexceeding CAFE standards. Credits earned for the three preceding model years andcredits projected to be earned for the next three model years can be used to meet CAFEstandards in the current model year, except that credits earned in respect of cars may notbe used for trucks.

DaimlerChrysler expects to meet current U.S. domestic fleet CAFE standards for bothpassenger cars and light-duty trucks, although it will likely use credits to meet thestandard for light-duty trucks. However, increased demand for larger light-duty truckscould jeopardize its ability to comply with that standard and require it to take additionalcostly steps, including the sale of ethanol flexible fuel vehicles.

More stringent CAFE standards may be adopted as a way of reducing "green house gas"carbon dioxide emissions by increasing fuel economy. These emissions are said tocontribute to global warming, which has become a matter of international concern. In2001, the United States withdrew from the Kyoto Protocol to the United NationsFramework Convention on Climate Change, which called for the United States to reduceits fossil energy use substantially during years 2008-2012. Nevertheless, the UnitedStates is considering ways to achieve reductions in fossil energy use, including morestringent CAFE standards, higher fuel costs and restrictions on fuel usage. These actionscould be costly to DaimlerChrysler and could significantly restrict the products it is ableto offer in the United States.

In addition to conventional gasoline powered vehicles, DaimlerChrysler manufacturesvehicles that operate on compressed natural gas, liquid petroleum gas, and electricity, andflexible fuel vehicles capable of operating on both gasoline and ethanol blend fuels.

EUROPEAN STANDARDS. The European Union signed and announced that it willratify the Kyoto Protocol. The European Union will therefore have to reduce carbondioxide emissions substantially during years 2008-2012. In 1999, the European Unionentered into a voluntary agreement with the European automotive manufacturersassociation which establishes an emission target of 140 grams of carbon dioxide perkilometer for the average new car sold in the European Union in 2008. That targetrepresents an average reduction in passenger vehicle fuel usage of 25 percent, measuredfrom 1995 levels. The European Union has reaffirmed its goal of reducing carbon dioxide

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emissions from new passenger cars to an average of 120 grams per kilometer by 2010.Vehicle manufacturers have agreed to reexamine in 2003 whether further reductions arepossible by 2010. Achievement of these reductions will require European vehiclemanufacturers, including DaimlerChrysler, to improve engine and overall efficiency andreduce vehicle weight. In addition, the European Union and the European automotivemanufacturers association are expected to enter into a voluntary agreement for lightcommercial vehicles in 2002.

Ford Motor Company — select disclosure from 2001 SEC Form 10-K

Motor Vehicle Fuel Economy -- U.S. Requirements.Under federal law, vehicles must meet minimum Corporate Average Fuel Economy("CAFE") standards set by the Safety Administration. A manufacturer is subject topotentially substantial civil penalties if it fails to meet the CAFE standard in any modelyear, after taking into account all available credits for the preceding three model yearsand expected credits for the three succeeding model years.

The law established a passenger car CAFE standard of 27.5 mpg for 1985 and later modelyears, which the Safety Administration believes it has the authority to amend to a level itdetermines to be the maximum feasible level. The Safety Administration has establisheda 20.7 mpg CAFE standard applicable to light trucks.

Ford expects to be able to comply with the foregoing CAFE standards, in some casesusing credits from prior or succeeding model years. In general, a continued increase indemand for larger vehicles, coupled with a decline in demand for small and middle-sizevehicles could jeopardize our long-term ability to maintain compliance with CAFEstandards.

The CAFE standards will likely increase in the near future. Both the House and Senatehave passed separate bills directing the Safety Administration to establish new fueleconomy standards for upcoming model years. It is anticipated that a measure similar tothese bills will be enacted into law during 2002. Even if Congress does not pass such alaw, it is likely that the Safety Administration will use its existing rulemaking authority topromulgate increases in light truck fuel economy standards. The Safety Administrationhas recently requested public comment on the advisability and feasibility of increasinglight truck standards in the 2005-2010 time frame.

Pressure to increase CAFE standards stems in part from concerns over greenhouse gasemissions, which may affect the global climate. With respect to greenhouse gasemissions, the Bush administration released a climate change policy initiative in February2002. The Bush administration plan stresses voluntary measures and a cap-and-tradeprogram to stem the growth of greenhouse gas emissions. The Bush administration alsohas launched the Freedom Car initiative, which supports research for fuel cell-poweredvehicles. Other nations continue to press for United States ratification of the so-called"Kyoto Protocol," which would require the United States to reduce greenhouse gasemissions by 7% below its 1990 levels. The Kyoto Protocol does not currently have thesupport of either the Bush administration or Congress. Separately, a petition has been

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filed with the EPA requesting that it regulate carbon dioxide (CO2, a greenhouse gas)emissions from motor vehicles under the Clean Air Act. EPA has requested publiccomment on this petition but has not taken action to date. Some states, includingCalifornia, are also proposing to regulate CO2 emissions from motor vehicles.

If significant increases in CAFE standards for upcoming model years are imposed, or ifEPA or other agencies regulate CO2 emissions from motor vehicles, Ford might find itnecessary to take various costly actions that could have substantial adverse effects on itssales volume and profits. For example, Ford might have to curtail production of larger,family-size and luxury cars and full-size light trucks, restrict offerings of engines andpopular options, and increase market support programs for its most fuel-efficient cars andlight trucks.

Foreign Requirements.The EU also is a party to the Kyoto Protocol and has agreed to reduce greenhouse gasemissions by 8% below their 1990 levels during the 2008-2012 period. In December1997, the European Council of Environment Ministers (the "Environment Council")reaffirmed its goal to reduce average CO2 emissions from new cars to 120 grams perkilometer by 2010 (at the latest) and invited European motor vehicle manufacturers tonegotiate further with the European Commission on a satisfactory voluntaryenvironmental agreement to help achieve this goal. In October 1998, the EU agreed tosupport an environmental agreement with the European Automotive ManufacturersAssociation (of which Ford is a member) on CO2 emission reductions from newpassenger cars (the "Agreement"). The Agreement establishes an emission target of 140grams of CO2 per kilometer for the average of new cars sold in the EU by theAssociation’s members in 2008. In addition, the Agreement provides that certainAssociation members (including Ford) will introduce models emitting no more than 120grams of CO2 per kilometer in 2000, and establishes an estimated target range of 165-170 grams of CO2 per kilometer for the average of new cars sold in 2003. Also in 2003,the Association will review the potential for additional CO2 reductions, with a view tomoving further toward the EU’s objective. The Agreement assumes (among other things)that no negative measures will be implemented against diesel-fueled cars and the fullavailability of improved fuels with low sulfur content in 2005. Average CO2 emissions of140 grams per kilometer for new passenger cars corresponds to a 25% reduction inaverage CO2 emissions compared to 1995.

The Environment Council requested the European Commission to review in 2003 theEU’s progress toward reaching the 120 gram target by 2010, and to implement annualmonitoring of the average CO2 emissions from new passenger cars and progress towardachievement of the objectives for 2000 and 2003.

In 1995, members of the German Automobile Manufacturers Association (including FordWerke AG) made a voluntary pledge to increase by 2005 the average fuel economy ofnew cars sold in Germany by 25% from 1990 levels, to make regular reports on fuelconsumption, and to increase industry research and development efforts toward this end.

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The German Automobile Manufacturers Association has reported that the industry is ontrack to meet the pledge.

Other European countries are considering other initiatives for reducing CO2 emissionsfrom motor vehicles. Taken together, such proposals could have substantial adverseeffects on our sales volumes and profits in Europe.

Japan has adopted automobile fuel consumption goals that manufacturers must attempt toachieve by the 2000 model year. The consumption levels apply only to gasoline-poweredvehicles, vary by vehicle weight, and range from 5.8 km/l to 19.2 km/l.

Scania Akteibolag — select disclosure from 2001 Annual Report

International climate negotiations resulted in an agreement on the Kyoto Protocol inMarrakech. A sufficient number of countries are prepared to ratify the protocol to allow itto enter into force during 2002. The EU countries have allocated for carbon dioxideemissions allowances among themselves and will work together to cut these emissions by8 percent during the period 2008 to 2012, with 1990 as the base year. In 1998 thetransport sector accounted for 28 percent of EU carbon dioxide emissions, according tothe Commission. The white paper on transport policy discusses measures to decreaseemissions. Among the recommendations are such goals as increasing the use of biofuels,streamlining transport efficiency and improving the competitiveness of the railwaysector. Beginning in Germany, exhaust class-related road fees for heavy traffic areexpected to be introduced from 2003. In conjunction with this, increased customerdemands for better environmental performance can be expected. Scania thus foresees anincreasing total market, with progressively stricter requirements for cleaner exhausts andimproved fuel efficiency.

Toyota Motor Corporation — select disclosure from 2001 Annual Report

Opportunities for Growth in an Evolving IndustrySome people believe that the automobile industry is fully matured. Some feel that theautomobile markets of industrialized nations are saturated, while others point to thedamage that vehicles inflict on society, including urban traffic jams, global warminginduced by CO2, and exhaust emissions such as nitrogen oxides (NOx) and particulatematter (PM). There are also many benefits to automobiles, however, and just a smallportion of the world now enjoys them. In numerical terms, there are only 700 millioncars, compared to a human population of 6 billion. Toyota and many other companies areworking constantly to develop vehicles that are far more friendly, not only to the globalenvironment and society, but to individual lives as well.

One example of these efforts is Toyota s work on fuel-cell vehicles. As many of youknow, the aim is to create a car that can convert hydrogen to fuel and therefore produceno exhaust emissions. Many technological problems remain, but in the midst of fiercecompetition, we are steadily nearing our goal. Just imagine if we succeed, we will makean enormous contribution to the preservation of the global environment withoutsacrificing the valuable method of transportation that is the automobile.

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Aktiebo Laget Volvo — select disclosure from 2001 annual report

Our broadest stakeholder, the society, sets the legal framework and overall trends, andone of the major challenges is the environmental impact of transport, the climate changeand traffic safety issues.

We know that about 25% of the worldwide carbon dioxide (CO2) emissions andapproximately 20% of the nitrogen oxides (NOx) emissions are related to transports.

Diesel engines and the environmentAll business areas except Volvo Aero are wholly dependent on the diesel engine. It is themost fuel-efficient engine that is commercially available. The total CO2 emissions,calculated from well to wheel, are competitive for diesel engines, also when comparedwith bio-based fuels at present technology and infrastructure.

Efficient transport systems — low environmental impactDecreasing emissions from transports is also an issue of optimizing transport flows, byminimizing empty runs and avoiding traffic jams. Volvo contributions in this field arethe Dynafleet information system and an increasing program for driver training in manydifferent market areas. Volvo Trucks as well as Volvo Buses are involved in cooperationprojects with different cities, since large improvements in transport efficiency andthereby CO2 and other emissions can only be achieved if all stakeholders in society worktogether on infrastructure, fuel distribution, and vehicle fleet composition.

INSURANCE

Chubb — select disclosure from 2001 SEC Form 10-K

In recent years, we have invested in modeling technologies and concentrationmanagement tools that enable us to better monitor and control catastrophe exposures. Wealso continue to explore and analyze credible scientific evidence, including the impact ofglobal climate change, that may affect our potential exposure under insurance policies.

INTEGRATED OIL & GAS

BP — select disclosure from 2001 SEC Form 20-F

In December 1997, at the Third Conference of the Parties to the United NationsFramework Convention on Climate Change in Kyoto, Japan, the participants agreed on asystem of differentiated internationally legally binding targets for the first commitmentperiod of 2008-2012. The range of targets in Annex I countries (OECD, former SovietUnion and Eastern Bloc countries) against 1990 levels of emissions is from -8% to +10%for a basket of the six main greenhouse gases. The USA agreed, subject to ratification bythe Senate, on a reduction of 7%, and the European Union on a reduction of 8%. EUmember states have undertaken differentiated commitments on the basis of ’burdensharing’ to meet the overall Community target. If these targets are to be met, somereduction in the use of fossil fuels would be required within countries which have ratified

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the Kyoto treaty, although a portion of the reduction in emissions will be delivered byswitching to lower carbon fuels (for example natural gas). The impact of the Kyotoagreements on global energy (and fossil fuel) demand is expected to be small (seeInternational Energy Agency Global Energy Outlook, 2000 Edition). At the SeventhConference of the Parties to the United Nations Framework Convention on ClimateChange, held in Marrakech in November 2001, broad agreement was reached on many ofthe outstanding issues with the Kyoto Protocol. In order to achieve this, a number ofconcessions were made. The result is that if implemented, the agreement will be likely tolead to approximately a 1.5% reduction in greenhouse gas emissions in total across thosecountries expected to participate. Overall, global emissions will continue to increase, asthe energy demand of the developing nations continues to increase strongly. It istherefore likely that, in the medium term, the global demand for fossil fuels will increase,with gas taking the largest share of that growth.

EU emission reduction requirements together with reduced sulphur content in fuels mayrequire significant modifications or capital expenditure at facilities and could make thecontinued operation of particular product lines and facilities uncompetitive. As part of apackage to stabilize carbon dioxide emissions at 1990 levels by the year 2000, theEuropean Commission proposed a combined carbon dioxide energy tax. In March 1997,the Commission proposed instead an energy tax that is intended to be fiscally neutralwhen applied by Member States. Though formally the proposal replaces the carbondioxide energy tax proposal that had been blocked in Council, it has as its main objectiveto provide a harmonized framework by setting minimum levels for national excise taxeson energy products, and to allow Member States greater flexibility to offer tax incentivesbased on environmental criteria, whilst avoiding barriers to trade within the SingleMarket.

Conoco — select disclosure from 2001 SEC Form 10-K

In 2001, Conoco received external recognition for its environmental leadership andinnovation. Conoco was awarded the European Bank for Reconstruction andDevelopment’s Corporate Environmental Award, recognizing the environmentalexcellence of Conoco’s Polar Lights joint venture in Russia. The company was honoredby the Canadian Council of Ministers of the Environment for outstanding efforts showinginnovation and leadership in pollution prevention for significant reductions in greenhousegas emissions. In addition, our Canadian operations again were recognized as a GoldChampion Level Reporter by the Canadian Voluntary Challenge and Registry, a not-for-profit organization commissioned by the Canadian Federal Government to promotevoluntary reduction of greenhouse gas emissions. Conoco’s Indonesian operationsreceived a first place award for Safety, Health and Environment from Pertamina,Indonesia’s national oil company.

Conoco (U.K.) Limited, Conoco’s upstream business unit in the United Kingdom,received full company ISO 14001 certification in 2001. One of our upstream operationsin the Middle East and a downstream lubricants facility in the U.S. also received ISO14001 certification. Our U.S. CG&P division continues its leadership role by

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participating in the United States Environmental Protection Agency (USEPA) NaturalGas Star program to reduce methane emissions in the oil and gas industry.

In 1997, an international conference on global warming concluded an agreement, knownas the Kyoto Protocol, which called for reductions of certain emissions that contribute toincreases in atmospheric greenhouse gas concentrations. The United States has notratified the treaty codifying the Kyoto Protocol but may in the future. In addition, othercountries where Conoco has interests, or may have interests in the future, have madecommitments to the Kyoto Protocol and are in various stages of formulating applicableregulations. Although it is not yet possible to estimate accurately the total actualexpenditures that may be incurred by Conoco as a result of the Kyoto Protocol, suchexpenditures could be substantial.

Imperial Oil — select disclosure from 2001 annual report

The company s 2001 submission to the Climate Change Voluntary Challenge andRegistry (VCR) program reported that emissions of carbon dioxide and other greenhousegases from its operations in 2000 were slightly higher than in 1999, mainly due toincreased steam generation at Cold Lake and increased refinery processing. The VCRreport can be found on the company s Web site at www.imperialoil.ca.

PetroCanada — select disclosure from 2001 annual report

Petro-Canada recognizes and shares the public concern about global climate change. Weare responding to this concern with continued investment to reduce direct emissions andto improve the energy efficiency of our operations. Since 1990, Petro-Canada haseliminated over 1.3 million tonnes of annual ongoing greenhouse gas (GHG) emissions.In 2000, total GHG emission levels were 8.8 per cent below 1990 levels, at 6.298 milliontonnes (CO2 equivalent), despite a 34 per cent growth in overall production. Emissions in2000 were five per cent lower than in 1999. Data for 2001 will be provided in this year sReport to the Community.

Royal Dutch Shell — select disclosure from 2001 SEC Form 20-F

Shell Hydrogen 2001In 2001, research intensified into the technologies that could underpin the futuretransformation away from fossil fuels and towards a hydrogen and fuel cell-basedeconomy. Shell Hydrogen continued to develop its presence in a number of promisingtechnological areas. Four joint ventures were created, two of which are private capitaljoint ventures that will invest in emerging companies concentrating on promisinghydrogen and fuel cell technology. The remaining two focus on existing technology. Onecommercialises hydrogen-producing fuel processors while the other focuses on metalhydride hydrogen storage tanks.

The speed and intensity with which the emerging hydrogen economy develops willdepend in part on the pace of regulatory and political change, especially regarding airemissions and the perceived threat of global warming. Growing concerns about security

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of energy supplies could also lead to heightened government interest in the industry,while electricity and gas market liberalisation has resulted in greater interest in smaller,more localised energy providers.

Shell Transport & Trading — select disclosure from 2001 SEC Form 20-F

Shell Hydrogen 2001In 2001, research intensified into the technologies that could underpin the futuretransformation away from fossil fuels and towards a hydrogen and fuel cell-basedeconomy. Shell Hydrogen continued to develop its presence in a number of promisingtechnological areas. Four joint ventures were created, two of which are private capitaljoint ventures that will invest in emerging companies concentrating on promisinghydrogen and fuel cell technology. The remaining two focus on existing technology. Onecommercialises hydrogen-producing fuel processors while the other focuses on metalhydride hydrogen storage tanks.

The speed and intensity with which the emerging hydrogen economy develops willdepend in part on the pace of regulatory and political change, especially regarding airemissions and the perceived threat of global warming. Growing concerns about securityof energy supplies could also lead to heightened government interest in the industry,while electricity and gas market liberalisation has resulted in greater interest in smaller,more localised energy providers.

Statoil ASA — select disclosure from 2001 SEC Form 20-F

New laws and regulations, the imposition of tougher requirements in licenses,increasingly strict enforcement of or new interpretations of existing laws and regulations,or the discovery of previously unknown contamination may require future expendituresto:¥ modify operations;¥ install pollution control equipment;¥ perform site clean-ups; or¥ curtail or cease certain operations.

In particular, we may be required to incur significant costs to comply with the 1997Kyoto Protocol to the United Nations Framework Convention on Climate Change, knownas the Kyoto Protocol, and other pending EU laws and directives. In addition,increasingly strict environmental requirements, including those relating to gasolinesulphur levels and diesel quality, affect product specifications and operational practices.Future expenditures to meet such specifications could have a material adverse effect onour operations or financial condition.

Sleipner West has large reserves of carbon dioxide-rich gas. We extract the CO2 at thefield and reinject it into a sand layer that lies underneath the seabed, thereby reducing theCO2 emissions into the air, which has environmental benefits and, insofar as it reducesenvironmental taxes, it has financial benefits.

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Our operations are subject to a number of environmental laws and regulations in each ofthe jurisdictions in which we operate, governing, among other things, air emissions

In Statoil, health, safety and the environment, or HSE, comprises health and workingenvironment, safety and emergency preparedness, the environment and security. Ourapproach to HSE is risk-based, which means that risks are identified, appropriate criteriaare established and measures are implemented in order to meet these criteria. We aim tocarry out our operations without harm to the environment and according to the principlesfor sustainable development.

Our corporate indicators for environmental performance include:¥ CO2 emissions, total (tonnes)

Currently, the total emission of greenhouse gases from our operations is increasing andwill continue to increase in line with production growth and due to a greater amount oftail production on the NCS. Our CO2 emissions totaled 9.2 million tonnes in 2001, upfrom the 8.3 million tonnes emitted in 2000. Historically, our NCS emissions of CO2 andNOx, measured in tonnes per produced quantity, have been below the NCS average.During 2001 we were on par with the NCS average due to the increased amount of tailproduction. Compared to other oil regions in the world, however, the NCS is the areawith the lowest relative emissions. Changes in laws regulating greenhouse gas emissionscould require us to incur additional expenditures for pollution control equipment.

Carbon dioxide emissions tax. A special carbon dioxide emissions tax applies topetroleum activities on the NCS. The tax is currently NOK 0.73 per standard cubic meterof gas burned or directly released, and per liter of oil burned.

Suncor — select disclosure from 2001 annual report

Also during 2001 we advanced our plans to reduce greenhouse gas emissions andsupported Canada s national climate change efforts through increased energy efficiency,carbon capture research and emissions trading initiatives.

Suncor plans to further invest in wind power, a renewable energy source that holdscommercial promise. We will also continue to investigate carbon capture technologiesand the purchase of carbon dioxide credits as part of our commitment to manageemissions. During 2002 we expect energy efficiency improvements will reducegreenhouse gas emissions on a per unit of production basis. All of these actions willcontribute to our goal of aligning with relevant national and international commitmentson climate change.

Combating climate change: managing emissions and creating a renewable energybusiness are only two components of Suncor s plan to address global climate change. In2001, a major review of greenhouse gas measurement and reporting practices wascompleted and a technical study to identify additional energy efficiency opportunitieswas also undertaken. Suncor is a member of the Carbon Capture Project, a three-year,

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$45 million joint industry project working to advance the recovery of carbon dioxidefrom industrial processes for geological disposal. The company is also an investor in anemerging technologies fund managed by Sustainable Asset Management that isidentifying leading-edge energy technologies with commercial potential.

In addition to these specific known requirements, Suncor expects changes toenvironmental legislation will likely impose further requirements on companies operatingin the energy industry. Some of the issues include the possible cumulative impacts of oilsands development in the Athabasca region; the need to reduce or stabilize variousemissions; issues relating to global climate change, including the potential impacts ofgovernment regulation; land reclamation and restoration; water quality; and reformulatedgasoline to support lower vehicle emissions.

PETROCHEMICALS

E.I. Du Pont de Nemours — select disclosure from 2001 SEC Form 10-K

(Management s Discussion and Analysis)Global climate change is being addressed by the Framework Convention on ClimateChange adopted in 1992. The Kyoto Protocol, adopted in December 1997, is an effort toestablish short-term actions under the Convention. With completion of technical rules inNovember 2001, it now appears likely that the Protocol will be ratified by enoughcountries to become operational. The United States is unlikely to ratify the Protocol. TheProtocol would establish significant emission reduction targets for six gases considered tohave global warming potential and would drive mandatory reductions in developednations outside the United States. DuPont has a stake in a number of these gases - CO2,N2O, HFCs and PFCs - and has been reducing its emissions of these gases since 1991.While well ahead of the target/timetable contemplated by the Protocol on a global basis,the company faces prospects of country-specific restrictions where major reductions havenot yet been achieved. DuPont is working to enable success of emissions tradingmechanisms under the Protocol that could aid in satisfying such country-specificrequirements. Emission reduction mandates within the United States are not expected inthe near future, although the Administration has announced plans for voluntary programsand incentives.

UTILITIES

American Electric Power — select disclosure from 2001 SEC Form 10-K

Global Climate Change: In December 1997, delegates from 167 nations, including theU.S., agreed to a treaty, known as the "Kyoto Protocol," establishing legally-bindingemission reductions for gases suspected of causing climate change. The Protocol requiresratification by at least 55 nations that account for at least 55% of developed countries’1990 emissions of CO2 to enter into force.

Although the U.S. signed the treaty on November 12, 1998, it was not sent to the Senatefor its advice and consent to ratification. In a letter dated March 13, 2001 from President

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Bush to four U. S. senators, he indicated his opposition to the Kyoto Protocol and said hedoes not believe that the government should impose mandatory emissions reductions forCO2 on the electric utility sector.

Despite U.S. opposition to the treaty, at the Seventh Conference of the Parties to theUnited Nations Framework Convention on Climate Change, held in Marrakech, Moroccoin November 2001, the parties finalized the rules, procedures and guidelines required tofacilitate ratification of the treaty by most nations, and entry into force is expected by2003.

Since the AEP System is a significant emitter of carbon dioxide, its results of operations,cash flows and financial condition could be materially adversely affected by theimposition of limitations on CO2 emissions if compliance costs cannot be fully recoveredfrom customers. In addition, any program to reduce CO2 emissions could imposesubstantial costs on industry and society and erode the economic base that AEP’soperations serve. However, it is management’s belief that the Kyoto Protocol is highlyunlikely to be ratified or implemented in the U.S. in its current form. AEP’s 4,000 MW ofcoal-fired generation in the United Kingdom acquired in 2001 may be exposed topotential carbon dioxide emission control obligations since the U.K. is expected to be aparty to the Kyoto Protocol. AEP is developing an emissions mitigation plan for theseplants to ensure compliance as necessary.

On February 14, 2002, President Bush announced new climate change initiatives for theU.S. Among the policies to be pursued is a voluntary commitment to reduce the"greenhouse gas intensity" of the economy by 18% within the next ten years. It isanticipated that the Administration will seek to partner with various industrial sectors,including the electric utility industry, to reach this goal. AEP is unable to predict at thistime the effect that this program will have upon its operations or financial performance inthe future.

Duke Energy — select disclosure from 2001 SEC Form 10-K

Global Climate Change. In 1997, the United Nations held negotiations in Kyoto, Japan,to determine how to minimize global warming. The resulting Kyoto Protocol prescribed,among other greenhouse gas emission reduction tactics, carbon dioxide emissionreductions from fossil-fueled electric generating facilities in the U.S. and other developednations, as well as methane emission reductions from natural gas operations. The high-level operational framework for implementing the Kyoto Protocol was agreed to inNovember 2001. If the Kyoto Protocol were to be implemented in developed countrieswhere Duke Energy operates, it could have far-reaching implications for Duke Energyand the entire energy industry. However, the outcome and timing of these implicationsare highly uncertain, and Duke Energy cannot estimate the effects on future consolidatedresults of operations, cash flows or financial position. Duke Energy remains engaged indiscussions with those developing public policy initiatives and continuously assesses thecommercial implications for its markets around the world.

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ENEL — select disclosure from 2001 SEC Form 20-F

Both the European union and Italy are signatories to the Kyoto Protocol, which wassigned under the United Nations Framework Convention on Climate Change. Inaccordance with a burden-sharing agreement among EU member states, Italy has set atarget to reduce emissions of CO2 and other greenhouse gases, or GHGs, listed in theKyoto Protocol over the 2008-2012 period by 6.5% from their 1990 levels.

In implementing the Kyoto Protocol, on November 19, 1998, the Italian interministerialcommittee for economic planning issued the guidelines for Italian policies and measuresfor the reduction of GHG emissions in order to implement the Kyoto Protocol. Theseguidelines set targets for CO2 and other GHG emissions to be achieved through measuresconcerning various sectors of the Italian economy, including reduction of carbonproduced in thermal electricity generation, increased use of electricity generation fromrenewable resources and demand side management to increase the efficiency of energyuse. As of 1999, we produced approximately 22/5% of total GHG emissions in Italy.

In July 200, we signed a voluntary undertaking with the Environment Ministry and theIndustry Ministry. Under this agreement, we undertook to reduce the annual level ofCO2 emissions produced by our plants during the period between 2002 and 2006 fromour level of emissions in 1990. The undertaking anticipates a number of measured toreduce GHGs emissions, including employing high-efficiency technologies, such ascombined cycle conversions, promoting the use of renewable resources and developinginnovative generation technologies using biomass and other wastes. We also expect totake advantage of the flexibility provided under the Kyoto Protocol for reducing GHGsemissions through joint projects in industrialized and developing countries and throughthe national or international trading of carbon or emission credits.

In January 1999, the Italian government introduced a carbon tax in accordance withapplicable European Union directives. Under the current Italian implementinglegislation, the amount of the tax, which is based on fossil fuel consumption, was initiallyscheduled to increase on an annual basis from 1999 through 2005, but has been frozen forthe years 200, 2001 and 2002 at the level for 1999. The legislation also establishes thepossibility of review or cancellation of the tax if other EU member states have notadopted similar measures by 2001. On the basis of current forecasts of future fuel prices,we believe that application of the carbon tax as currently formulated could have asignificant impact on the economic viability of our oil-fired plans by the year 2005,should the tax rates then reach their maximum levels. As part of an initiative to addressthe impact of the carbon tax, we have proposed that the Italian government adopt adifferent method for calculating the tax which would apply an equal amount of tax perunit of CO2 output, without regard for the type of fuel used to produce the energy inquestion. We believe that such a policy would produce the targeted reductions in CO2emissions without creating unequal burdens on certain types of generation facilities,particularly oil fired and baseload plants. In 2000 and 2001, our carbon tax liabilityamount to approximately Euro 38.0 million and Euro 42.5 million respectively.

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National Grid Group — select disclosure from 2001 SEC Form 20-F

To protect the future of our business we take a proactive approach to the management ofboth existing and future environmental risks. We aim to clean-up contaminated land toenable it to be put back into productive use. We seek to be efficient in our use of naturalresources and to keep our waste to a minimum, thus increasing our productivity as well asbenefiting the environment. Wherever practicable, we also take steps to reduce emissionsof greenhouse gases, again making us more productive whilst also playing an importantpart in helping to minimise climate change.

Scottish Power — select disclosure from 2001 SEC Form 20-F

Nonetheless, climate change has merged as a dominant sustainability challenge for allbusinesses, and is particularly acute for the energy sector. In the UK, policies to combatglobal climate change are paramount, with fiscal and regulatory incentives deployed withthe aim of achieving a UK target of a 200% reduction in carbon dioxide (CO2) emissionsby 2010. The US remains concerned about global climate change and has proposedmeasures to bring CO2 emissions under control ScottishPower has responded to thesepolicy drivers and market forces by developing an international vision which focuses oninvesting heavily in renewables (in particular, wind generation), reducing both the CO2output and clean air impact of its generation plants and working with customers toimplement energy efficiency programmes.

ScottishPower s vision and framework for action involve achieving lower levels ofCox/GHh across the generation portfolio to combat global climate change, backed up bya range of measures to achieve this goal .

The EU has, under the terms of the Kyoto Protocol, signed up to the United NationsFramework Convention on Climate Change, under which Member States are committedto reducing greenhouse gases by 8% below 1990 emission levels between the years2008 and 1012. The UK Government has announced its goal of a 20% reduction in CO2emissions by 2010, largely driven by its Climate Change Programme which sets inplace a range of policy instruments aimed at delivery of the 20% reduction target. Theseinclude targets for renewable energy, targets of combined heat and power, a ClimateChange Levy charged on industrial and commercial energy usage and residential energyefficiency measures. Obligations put in place under the Utilities Act play and importantpart in the Programme

The United States Environmental kProtection Agency ( EPA ) has implementedregulations addressing regional haze. Carbon dioxide ( CO2 ) emissions are the subjectof growing worldwide discussion and action in the context of global warming but suchemissions are not currently regulated.

Southern Company — select disclosure from 2001 SEC Form 10-K

Compliance with possible additional legislation related to global climate change,electromagnetic fields, and other environmental and health concerns could significantly

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affect SOUTHERN. The impact of new legislation - if any - will depend on thesubsequent development and implementation of applicable regulations. In addition, thepotential exists for liability as a result of lawsuits alleging damages caused byelectromagnetic fields.

SUEZ — select disclosure from 2001 annual report

In the Energy division, Tractbel subsidiaries environmental policies focus mainly oncombating climate change, promoting the use of renewable energy resources, highlyefficient processes, substitute fuels and waste to energy conversion. Electrabel is activein the development of the Seanergy project off the Belgian coast. The project is expectedto result in the construction by 2004 of 50 offshore windmills generating 2 MW of powereach. The Group also participates in the Prototype Carbon Fund (PCF) to promote theclean development mechanism call for by the Kyoto Protocol. The Group contributed 5million euros to this program which was initiated by the World Bank in 1999.

TXU — select disclosure from 2001 SEC Form 10-K

In December 1997, the Conference of the Parties of the United Nations FrameworkConvention on Climate Change adopted the Kyoto Protocol, which specifies targets andtimetables for certain countries to reduce greenhouse gas emissions. The BushAdministration has indicated that the US will not support adoption of the Kyoto Protocolbut will address greenhouse gas emissions through a recently announced greenhouse gasemissions policy. TXU Energy is unable to predict the impact, if any, of theAdministration proposal or related legislation.

The UK is a signatory to the Kyoto Protocol. The EU is committed to an 8% reduction incarbon dioxide emissions by 2012 with separate targets for individual member stateswhich together meet the overall EU target. Member states are therefore introducingseparate climate change programs consistent with a general EU framework that includesupport for renewable sources and energy efficiency initiatives, among other measures.TXU Europe is unable to predict what impact any implementation of the Kyoto Protocolwould have.

TXU Europe believes that it is currently in compliance with, has taken, and intends tocontinue to take, measures to comply, in all material respects, with the applicable law andgovernment regulations for the protection of the environment. There are no material legalor administrative proceedings pending against TXU Europe with respect to anyenvironmental matter.