Carbon strategy

We continue to believe that one of the most pressing environmental threats is climate change caused by increased levels of greenhouse gases (GHGs). We have therefore developed a carbon roadmap to help us achieve our ambitious target of becoming CO2 neutral by 2010. This roadmap consists of our:

• Energy Management Program
• Use of alternative and renewable energy
• PFC Management Program
• Carbon Offset Program and Emission Reduction Trading Program.

Energy Management Program

STEV31; §3.1 of Decalogue

Energy efficiency: In 2005, we continued to improve our energy efficiency, as shown in the table below, and we again reached our Decalogue target of reducing energy consumption by 5% per year in normalized values. The decrease for front-end sites of 1.5% versus 2004 was not in line with our target, while back-end sites significantly exceeded the target by reducing 9.6%. Overall company reduction was 3.3%.

The chart below plots our performance against the Decalogue target since 1994 (reduction by 5% per year) and shows that we are exactly in line with our long-term objective.

STEV31: Consumption of electricity: absolute values
	% of 1997 consumption	Target
1997	100	96.9
1998	96.78	92
1999	80.00	87.4
2000	66.29	83.1
2001	74.26	78.9
2002	58.76	75
2003	51.09	71.2
2004	45.07	67.7
2005	42.47	64.3

STEV33, STEV34

In 2002, we reported on the identification of 350 energy-efficiency measures following our energy conservation self-assessment survey. In 2005, we identified projects for 50 GWh. Implementing these and other projects in 2006 will guarantee a saving of 85 GWh per year.

Gas is used for heating and in site canteens. The average growth of our global electrical energy consumption is well below the average for production growth.

See the Environmental costs versus savings table for details of the cost savings resulting from reduction of electricity consumption.

Alternative and renewable energy

EN17; §3.3 of Decalogue

As mentioned in last year's report, we also plan to source a greater percentage of our energy from:

• Co-generators (combined heat and power), which are more efficient and emit less CO2 per unit of energy (a 40MW co-generator is under construction in Catania)
• Renewable energies (wind and solar, which emit no CO2). ST's 10.5MW wind farm located in the south of France produced the electricity reported in the table below.

STEV37

The percentage of renewable energy used in the whole company is stable at around 2%.

STEV36

Our internal target is to increase this to 15%, and we are exploring the possibility of purchasing green electricity to achieve this, rather than investing in wind farms ourselves. In 2006, we will carry out a review at our different sites to understand the options open to us.

Our total savings in CO2 emissions due to all the above measures will be approximately 15 million tons of CO2 between 2000 and 2010.

Perfluorinated Compounds (PFCs) Management Program

§3.2 of Decalogue

The World Semiconductor Council (WSC) has set an ambitious goal of reducing the aggregate of absolute PFC emissions to 10% below 1995 levels by 2010. At ST, we aim to achieve this target by 2008.

STEV46

In 2005, despite significant increased production (+13%), our net PFC emissions increased by only 4%. This represents continued good progress given the 12.3% increase that had occurred in 2003 and the 5.9% increase in 2004. To enable us to achieve the WSC goal by 2008, US$5m will be spent on abatement systems during 2006, a bit later than originally planned (2005). Looking at the table below, it is clear that overall our eco-efficiency relating to PFCs has dramatically improved, as we have cut our emissions per unit produced by more than 60%.

Overall, we have saved more than one million TCE (tons of carbon equivalent) between 1996 and 2005.

Closing the carbon loop: carbon sequestration and emissions trading

§3.4 of Decalogue

STEV28: Emissions of CO2	KTons

STEV49: CO2 emissions (PFC+energy)			KTons
	2003	2004	2005
Without Carbon Road Map	3,102	3,566	4,142
With Road Map (actual)	1,639	1,744	1,853

STEV28

Carbon sequestration and emissions trading

In 2005, our greenhouse gas (GHG) emissions from energy consumption and PFCs totalled 1.85 million tons of CO2, compared with about 1.74 million tons in 2004. Nevertheless, in terms of normalized figures (TCO2/unit of production), our efficiency is improving, and the absolute figures would be much higher without the action we are taking. Given our economic growth, if no action had been taken, our emissions would have been 3.5 million tons of CO2 in 2004 and 4.1 million tons in 2005.

Our Carbon Offset Program aims to neutralize any remaining carbon emissions (both direct and indirect) by 2010. (We expect to reach this target for direct emissions, but it will probably take us a bit longer than planned to neutralize indirect emissions.) It will allow us to sequester 3 million tons of CO2 between 2001 and 2010 through reforestation projects in different countries around the world.

According to our Carbon Road Map, we will avoid emitting over 7 million tons of CO2 in 2010 due to our Energy and PFC Management Program, and to our Carbon Offset Program.

STEV50

By the end of 2004, our Carbon Offset Program had resulted in approximately 8,800 hectares (4,800ha in Morocco, 2,600ha in South Wales Australia, 1,400ha in Texas and 17ha in Italy) being reforested. In 2005, no additional reforestation projects were implemented.

ST is currently taking part in the Chicago Climate Exchange (CCX) program, a voluntary greenhouse gas trading program in North America involving around 30 companies from different industry sectors. ST is participating through its two manufacturing sites in the United States, at Phoenix, Arizona and Carrollton, Texas.

Regulation has increased since the introduction of the Kyoto Protocol, particularly in Europe: one site (Crolles2 Alliance) has to comply with emission trading regulations because the site's combustion installations have a rated thermal input exceeding 20MW.

Sustainable mobility

§8.1 of Decalogue

Our sustainable mobility program is also helping us to reduce emissions. By the end of 2005, 53% of employees at our Grenoble site were using alternative means of transport. It is hoped that by the end of 2008 this will have increased to 60%.

Meanwhile, at our Agrate site, more than 1,500 employees are now using shared transport. The CO2 reduction is about 5 tons per day. This won the site the prestigious 'Innovazione Amica dell'Ambiente 2004' award from the Regione Lombardia e Legambiente and in 2005, the 'Premio Nazionale Mobility manager' during the Ecomondo 2005 workshop.

Since the promotion of sustainability has been included in the new 2005 Decalogue, we plan to begin tracking data at company level in 2006, for example 'percentage of employees travelling to work by bus, either public or provided by ST, per day'.

See our website for more information on Agrate's sustainable mobility activities.