Energy and carbon strategy

We recognize the consequences of climate change as a business reality and as an important management issue for our company. We have expressed our concern by becoming a signatory to the “Caring for climate: The business leaders platform”1.

Akzo Nobel holds a strong track record in improving energy efficiency. We are determined to continue improving energy efficiency and reducing the carbon intensity of our production processes. Carbon emission trading schemes – such as the European Emissions Trading Scheme (ETS) – are likely to accelerate the transition to zero and low carbon energy sources. We are in favor of a performance-based allocation (for example through benchmarks within a cap and trade credit system) which will stimulate efficient plants and penalize the inefficient ones. Akzo Nobel continues to support initiatives for improved schemes that will actually promote the most energy efficient technologies.
For a worldwide level playing field, trading schemes should be implemented globally and not be limited to Europe.

Highlights of Akzo Nobel’s carbon efficiency achievements and next steps

Our most energy intensive facilities are in the Scandinavian countries (Pulp & Paper Chemicals) and in the Netherlands (Base Chemicals). Combined, they account for 82 percent of our energy usage and 73 percent of our carbon emissions. Within Pulp & Paper Chemicals, with dominant sites in Scandinavia and Canada, 58 percent of the consumed power is based on hydro power which is free of carbon emissions. Our Base Chemicals plants (with a focus on the Netherlands and Germany) are equipped with highly energy efficient gas fired cogeneration units that produce steam and power. Investment plans to produce steam from waste and bio fuels are under development.

Today’s prices for fossil fuels and the potential financial burden that goes with carbon emission, have created a strong alignment between economic and environmental objectives.

Akzo Nobel’s focus on energy efficiency and the use of low carbon fuels has paid off. Some of the highlights:

• 73 percent of our worldwide power consumption is based on zero and low carbon sources
• 37 percent of the electricity used in production processes is based on hydropower
• Akzo Nobel ranks in the top ten percent energy efficiency benchmark for the manufacturing process of salt-chlorine-
  PVC loop, one of our most energy intensive processes
• We are replacing fossil fuels with renewable raw materials such as woodchips wherever feasible
• For the manufacturing of the other two most energy intensive chemicals – sodium chlorate and hydrogen peroxide – we use almost exclusively low carbon energy such as hydropower
  and – to a lesser extent – nuclear power
• The eco-efficiency/carbon footprint of key products has been assessed
• Several carbon efficient solutions for customers have been developed
• Energy efficiency and carbon footprint are included in the criteria for investment decisions.

Focus on value chains reduces risks and creates new business opportunities

A revised Akzo Nobel Carbon Strategy will be developed in 2008. The carbon footprint of our own production processes is only one part of the chain. In other parts of our value chains there are interesting carbon reduction opportunities too. Carbon pricing will create business opportunities for our company. We will assess the carbon footprint of our most important value chains and prepare reduction plans.

1. “Caring for Climate” is a voluntary and complementary action platform for those UN Global Compact participants who seek to demonstrate leadership on the issue of climate change (www.unglobalcompact.org).