Identifying, Assessing and Managing Climate-related Risks Climate-related risks are integrated into multiple larger risk categories because of the interconnected nature of these risks across multiple categories. We test our assumptions against CO 2 cost-forecasting, energy-efficiency indices and best practices, carbon capture technology and cost, and renewable fuels forecasts, alongside regulatory requirements. Data on our GHG emissions, legal requirements regulating such emissions and the possible physical effects of climate change on our assets are incorporated into our planning, investment and risk management decision making. We account for anticipated GHG emissions when we are designing and developing facilities and projects and implementing energy-efficiency initiatives that also reduce GHG emissions. Regulatory certainty and economic viability are integral considerations. We test a variety of future scenarios that could have a material impact on the company and variables that may be associated with an incident. This system ensures we mitigate risk to the company and conduct regular gap analyses. It also enables us to position the company to benefit from energy efficiency, emissions reductions and other business and policy goals. Processes for Managing Climate-related Risks EFFICIENT ENERGY USE Energy expenditures can account for a significant portion of a refinery's operating expenses. We capitalize on opportunities to reduce these expenses, such as improvements in heat exchange or recovery, furnace controls, and steam optimization. Since our inception in 2012, six of our 11 U.S. refineries have earned U.S. EPA ENERGY STAR® certifications for performing in the top 25% of similar facilities nationwide for energy efficiency and meeting EPA performance levels. Our headquarters building in Houston, Texas, is certified as a Leadership in Energy and Environmental Design Platinum facility. Additionally, seven of our refineries have associated cogeneration units. Cogeneration uses a single fuel source to produce both electricity and heat simultaneously. The process helps us meet our manufacturing needs and converts heat that would otherwise be lost into thermal energy to power our process equipment. Three cogeneration units — at Los Angeles and San Francisco in California and Sweeny in Texas — are owned by Phillips 66. Any excess power not used in our facilities is sold to the local utility market. Four other refineries — in the Texas Panhandle, New Jersey, Washington state and the United Kingdom — purchase some of their heat or electricity from third-party-owned cogeneration units adjacent to our facilities. The Sweeny cogen unit produces power for the refinery and CPChem petrochemical plants. During normal operations, we can export as much as 165 megawatts of electricity to the local power grid. That’s enough to power 100,000 homes. During Winter Storm Uri, in 2021, we increased that output to 370 megawatts, doubling our impact. To accomplish that, we shut down operating units, minimizing our energy usage and maximizing our output to the community. We have an active Energy Best Practices network of representatives from all our refineries and major corporate support groups, including Refining Business Improvement, ERI and IT. Members of the network meet regularly to share information about technology, experiences at their plants and ongoing energy conservation projects. EFFICIENT WATER USE Access to water, maintaining its quality and using it efficiently are critical elements in sustainable energy production. Therefore, our facilities have wastewater systems and oil recovery units. These units separate reusable water from oil streams, reducing freshwater use and improving discharged water quality. For more detail, see the Environmental Stewardship section in this report. 51 51 GOVERNANCE