Questions & Answers
Which activities are in the scope of the fossil fuel sector in paragraph 40 of ESRS 2?
(1) Is the petrochemical sector included, like ethylene production? Many industrial sectors are using products derived from oil or Liquid Natural Gas (LNG) as an input in the production of a chemical product. Will they all be part of the fossil fuel sector? What are the limits?
(2) Should an Engineering, Procurement and Construction contractor of an LNG plant include its Engineering, Procurement and Construction revenues under this caption?
- Fossil fuel
Background
The question asked: ‘What are the limits of the fossil fuel sector?
(1) Is the petrochemical sector included, like ethylene production? Many industrial sectors are using products derived from oil or LNG as an input in the production of a chemical product. Will they all be part of the fossil fuel sector? What are the limits?
(2) Should an Engineering, Procurement and Construction contractor of a Liquid Natural Gas plant include its Engineering, Procurement and Construction revenues under this caption?’
was reworded to the above question for clarity.
ESRS 2 paragraph 40 (d) states: ‘where applicable, a statement indicating, together with the related revenues, that the undertaking is active in:
(i) the fossil fuel (coal, oil and gas) sector, (i.e. it derives revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storage and trade, of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council), including a disaggregation of revenues derived from coal, from oil and from gas, as well as the revenues derived from Taxonomy-aligned economic activities related to fossil gas as required under Article 8(7)(a) of Commission Delegated Regulation 2021/2178 …’.
Annex II defines ‘fossil fuel’ as non-renewable carbon-based energy sources such as solid fuels, natural gas and oil. This definition corresponds to Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council.
Commission Delegated Regulation (EU) 2022/1288 defines ‘companies active in the fossil fuel sector’ as companies that derive any revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storge and trade of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council.
Answer
Whether the undertaking is active in the fossil fuel sector is based on ESRS 2 paragraph 40 (d)(i). Fossil fuels are understood as non-renewable carbon-based energy sources such as solid fuels, natural gas and oil.
(1) Is petrochemical sector included, like ethylene production? Many industrial sectors are using products derived from oil or LNG as an input in the production of a chemical product. Will they all be part of the fossil fuel sector? What are the limits?
The petrochemical activities, such as ethylene production, can be understood as a part of the fossil fuel sector provided that they fulfil the definition of (EU) 2022/1288, as for example the ethylene production that occurs in refinery cracker to produce gasoline. Ethylene production in a cracker dedicated to producing ethylene and other petroleum gases as feedstocks for a chemical plant or chemical industrial park, where these serve as intermediates for producing polymers and industrial chemicals rather than being used as an energy source, would not be understood as a part of the fossil fuel sector so long as it does not fulfil the definition of (EU) 2022/1288.
(2) Should an Engineering, Procurement and Construction contractor of an LNG plant include its EPC revenues under this caption?
An EPC (Engineering, Procurement and Construction) contractor of an LNG plant providing services such as the ones described in NACE 71.12 ‘Engineering activities and related technical consultancy’ or NACE division 42 ‘Civil engineering’, which includes construction of industrial facilities, e.g. refineries, is considered active in fossil fuels sector provided that it derives any revenues from the activities described in the definition of (EU) 2022/1288.
Relations
Paragraph | Content |
|---|---|
the fossil fuel (coal, oil and gas) sector , (i.e., it derives revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storage and trade, of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council ), including a disaggregation of revenues derived from coal, from oil and from gas, as well as the revenues derived from Taxonomy-aligned economic activities related to fossil gas as required under Article 8(7)(a) of Commission Delegated Regulation 2021/2178 ; | |
the fossil fuel (coal, oil and gas) sector , (i.e., it derives revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storage and trade, of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council ), including a disaggregation of revenues derived from coal, from oil and from gas, as well as the revenues derived from Taxonomy-aligned economic activities related to fossil gas as required under Article 8(7)(a) of Commission Delegated Regulation 2021/2178 ; | |
the fossil fuel (coal, oil and gas) sector , (i.e., it derives revenues from exploration, mining, extraction, production, processing, storage, refining or distribution, including transportation, storage and trade, of fossil fuels as defined in Article 2, point (62), of Regulation (EU) 2018/1999 of the European Parliament and the Council ), including a disaggregation of revenues derived from coal, from oil and from gas, as well as the revenues derived from Taxonomy-aligned economic activities related to fossil gas as required under Article 8(7)(a) of Commission Delegated Regulation 2021/2178 ; |