Category: Green News

SEC Issues New Guidance on Disclosure of Climate Change Risk

U.S. Securities and Exchange Commission (SEC) issued new guidance on what publicly traded companies must disclose to investors in terms of material climate change risks.

On January 27, 2010, the U.S. Securities and Exchange Commission (SEC) issued new guidance on what publicly traded companies must disclose to investors in terms of material climate change risks. The SEC’s guidance is an interpretive release and does not create new legal requirements or modify existing ones. Rather, the guidance is intended to help public companies determine what climate change-related disclosures need to be made pursuant to existing disclosure rules relating to a company’s risk factors, business description, legal proceedings, and management’s discussion and analysis (MD&A). The SEC highlighted the following areas as examples of where climate change and its consequences, if material to a company’s business, may trigger disclosure requirements:

– costs of compliance associated with pending laws and regulations;

– impacts on business of climate change-related international accords and treaties;

– physical impacts of changing weather on assets and operations;

– opportunities for trading in new carbon markets;

– changes in demand for products or services resulting from climate change impacts.

Previously, the SEC required that public companies disclose legal and financial risks posed by environmental challenges; climate change was not specifically named. Given the lack of clarity around climate change-specific disclosure, it was difficult for investors to make well-informed decisions because of inconsistent disclosure of climate change-related risks. As a result, stakeholder groups petitioned the SEC to require full corporate disclosure of climate-related business impacts in financial filings. The objective of the new guidance is to facilitate more accurate and consistent reporting of bottom-line risks posed by climate change to shareholders.

For further details, please see the SEC’s press release: www.sec.gov/news/

or refer to the SEC’s guidance document: http://www.sec.gov/rules/interp/2010/33-9106.pdf.

COP15 concluded with the Copenhagen Accord

 

From Dec. 7 to 19th 2009, the much anticipated United Nations fifteenth Conference of the Parties (COP 15) to the United Nations Framework Convention on Climate Change (UNFCCC) took place in Copenhagen, Denmark. Concurrently, the fifth Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol (COP/MOP 5) and Kyoto Protocol ad hoc working groups met in Copenhagen. The goal of the conference was to conclude a fair, ambitious and binding post-2012 international agreement on climate change, including agreement on (i) mid-term emission reductions by developed countries; (ii) clarity on mitigation actions by developed countries; (iii) short- and long-term finance; and (iv) governing structures as laid out in the under the Bali Road Map, which was launched by COP 13 in December 2007.

 

The outcome was the Copenhagen Accord, a non-binding political statement which acknowledges that “climate change is one of the greatest challenges of our time” and emphasizes the parties’ “strong political will to urgently combat climate change”.

 

Key elements of the Copenhagen Accord include:

 

–   a goal of limiting global temperature increase to 2 degrees Celsius;

–  a process for countries to enter their specific mitigation pledges by January 31, 2010;

–  action and cooperation on adaptation, with urgent attention given to the least developed countries, small island developing states and Africa;

–  broad terms for the reporting and verification of developing country actions;

–  an explicit acknowledgment to act on deforestation and forest degradation;

–  establishment of four new bodies: (i) a mechanism to support reducing emissions from deforestation and forest degradation in developing countries (REDD); (ii) a high level panel to study the implementation of financing provisions; (iii) the Copenhagen Green Climate Fund to support the mitigation and adaptation efforts of developing countries as well as capacity building and technology transfer; and (iv) a technology mechanism to accelerate technology development and transfer;

–  a commitment by developed countries to provide $30 billion in “new and additional” funding in the period 2010-2012 to help developing countries reduce emissions, preserve forests, and adapt to climate change; and

–  a commitment by developed countries to mobilize $100 billion a year in public and private finance by 2020 to address the needs of developing countries.

 

By 2015, the Copenhagen Accord calls for an assessment of the implementation of the accord, including strengthening of the long-term target.

 

The Copenhagen Accord was brokered by President Obama and a handful of key developing countries including China, India, Brazil and South Africa. The terms of the Copenhagen Accord were negotiated on the final day of the conference, topping off two weeks of high rhetoric and bitter procedural fights. It then took another day of tense negotiations to arrive at a procedural compromise that would allow the formalization of the accord over the objections of several governments who complained about an “untransparent and “undemocratic” negotiation process.

 

At the end of COP 15, the parties adopted parallel decisions under the UNFCCC and the Kyoto Protocol that “take note” of the accord and open the way for governments to individually sign on. In separate decisions, parties extended the mandate of the ad hoc working groups under both the UNFCCC and the Kyoto Protocol to continue negotiations toward a more comprehensive agreement in Mexico City at the next COP. This unprecedented outcome leaves uncertainty about the formal standing of the Copenhagen Accord under the United Nations climate process and about the nature of any future agreement. The aim of a “legally binding instrument,” which appeared part of the deal when President Obama first announced it, was later taken out.

The text of the Copenhagen Accord can be found in the link section on the right.

Ontario Issues GHG Reporting Regulation

On December 1, Ontario issued O. Reg. 452/09 (the “Regulation”) under the Ontario Environmental Protection Act, which requires large emitters to report their greenhouse gas (GHG) emissions to the Ministry of Environment (MOE). The purpose of the regulation is to provide MOE with better data about the province’s emissions levels, while supporting the implementation of a cap-and-trade program in Ontario that will eventually link to other North American trading systems. The Regulation, which applies to 26 types of facilities, requires the following:

reporting of specified GHG data by all facilities that emit 25,000 tonnes of carbon dioxide equivalent (CO2e) or more per year;

annual reporting of GHG emissions, starting with 2010 emissions;

mandatory use of identified standard quantification methods to quantify emissions starting with 2011 emissions;

flexibility to use the best alternative quantification methods for 2010 emissions;

annual third-party verification of emissions, beginning with 2011 emissions;

emission reports to be submitted on June 1 starting with 2010 emissions in 2011; and

verification to be completed by September 1 starting with 2011 emissions in 2012.

The delay of third party verification until the 2011 reporting year is intended to allow the required professional services capacity to grow in order to meet demand in the province. The flexibility to use best alternative verification methods in 2010 is also intended to smooth the transition to standardized reporting requirements in 2011.

The Regulation was based significantly on the approach set out by the Western Climate Initiative and the September 22, 2009 EPA ruling on GHG reporting. With respect to biomass, the Regulation allows regulated emitters to deduct up to 15,000 tonnes of carbon dioxide generated from a facility through the combustion of biomass based on the theory that the combustion of biomass, which draws CO2 from the atmosphere as it grows, is carbon neutral. In contrast, BC’s new reporting regulation provides that all carbon dioxide from wood biomass, or the wood biomass component of mixed fuels, is not to be included in the calculation of GHG inventories.

The MOE has also issued a technical Guideline for Greenhouse Gas Emissions Reporting, which details standard quantification methods and best alternative quantification methods.

A copy of the Regulation is available in the Links on this site.

B.C.’s GHG Reporting Regulation has come into force on January 1, 2010

The Reporting Regulation (the Regulation) is a new regulation under the Greenhouse Gas Reduction (Cap and Trade) Act that has come into force on January 1, 2010. The Regulation requires facilities in British Columbia that emit over 10,000 tonnes of greenhouse gases (GHGs) annually to report their emissions.

The Regulation has been designed to allow for a single reporting window with Environment Canada, which aims to create administrative simplicity for industry stakeholders. The Regulation sets out requirements for facilities with GHG emissions from a number of activities within B.C. to report GHG emissions to the Ministry of Environment (MOE).

One of the key objectives of the Regulation is to facilitate an accurate and transparent reporting mechanism, which will support properly functioning cap-and-trade system. As such, the Regulation specifies among other criteria:

· GHGs subject to reporting;

· level of emissions requiring reporting;

· facilities required to report;

· quantification methods to be used in reporting;

· requirements and procedures for annual reporting;

· verification mechanisms; and

· compliance obligations.

Below is an overview of the reporting specifics:

· all six main GHGs included;

· 10,000 tonne carbon dioxide equivalent (CO2e) reporting threshold;

· 25,000 tonne CO2e verification threshold;

· upstream oil and gas; (ii) natural gas transmission and distribution; (iii) electricity transmission and distribution; and, (iv) oil pipeline transportation emissions are aggregated into “linear facilities” to determine whether the 10,000 tonne reporting and 25,000 verification thresholds are exceeded;

· carbon dioxide from wood biomass, or the wood biomass component of mixed fuels, is not included in the determination of thresholds;

· first requirements (data collection and management) for reporting operations start on January 1, 2010;

· not applicable to public sector organizations, except for BC Hydro and BC Transmission Corporation electricity generation or electricity transmission;

· not applicable to emissions of landfill gas as defined under the Landfill Gas Management Regulation;

· registration to occur by April 1, 2010;

· annual emissions reports, beginning with the 2010 calendar year, required by March 31 of the following year;

· facilities with emissions greater than 20,000 tonnes of CO2e in any year between 2006 and 2009 must report these emissions along with the 2010 emissions report submitted in 2011;

· a facility may calculate emissions using alternative methodologies for the lower of 3% of the facilities total emissions, or 20,000 tonnes;

· for the 2010 calendar year, a facility may measure a specific parameter using alternative methods inconsistent with those prescribed in the regulation (approval is required for this after March 31, 2010);

· MOE may publish emissions data from major source categories;

· a facility may request that certain data remain confidential; and

· Western Climate Initiative quantification methods are required to be used (where these do not exist, required methods are specified by the MOE).

Below is an overview of verification specifics:

· verification to a reasonable level of assurance;

· 5% materiality threshold applies;

· verification statements to be submitted by September 1 of the following year for 2010 and 2011 reports (thereafter the verification deadline is the same as the reporting deadline, April 1);

· verification to be completed by an independent third party verification body, accredited by the Standards Council of Canada or the American National Standards Institute in accordance with ISO 14065;

· for verifications completed before Dec. 31, 2012, verifiers can be accredited by the California Air Resources Board; and

· conflict of interest requirements for verifiers apply.

Activities covered include:

· General Stationary Combustion

· Mobile Equipment Fuel Combustion (except for linear facilities; generally on-site, off-road equipment)

· Aluminium or Alumina Production

· Ammonia Production

· Carbon Dioxide Transportation (linear facility)

· Cement Production

· Coal Mining from Underground Mines

· Coal Storage at Facilities that Combust Coal

· Copper or Nickel Smelting or Refining

· Electricity Generation

· Electricity Transmission (linear facility)

· Electronics Manufacturing 

· Ferroalloy Production

· Glass Manufacturing

· Hydrogen Production

· Industrial Wastewater Processing

· Lead Production

· Lime Manufacturing

· Magnesium Production

· Natural Gas Transmission, Natural Gas Distribution or Natural Gas Storage (linear facility)

· Nitric Acid Manufacturing

· Oil and Gas Extraction and Processing Activities (linear facility)

· Oil Transmission (linear facility)

· Petrochemical Production

· Petroleum Refining

· Phosphoric Acid Production

· Pulp and Paper Production

· Refinery Fuel Gas Combustion

· Zinc Production

Québec announces greenhouse gas reduction target of 20% by 2020

On November 23, 2009, Premier Jean Charest unveiled Québec’s target to reduce greenhouse gas emissions (GHG) by the year 2020. By targeting a 20% reduction below 1990 levels, Québec has set a goal similar to the target established by the European Union. Québec currently hold the best GHG emissions record in Canada, which is approximately eleven tons per capita, half of the Canadian average. With a -20% target by 2020, Québec will have the smallest level of emissions per capita in North America.

From the government’s perspective, achieving this goal will depend on the introduction of a GHG cap and trade system in 2012. Therefore Québec took an important step in June 2009 when the National Assembly unanimously passed new draft legislation for climate change. Through this legislation, Québec will contribute to implementing the largest planned GHG cap and trade system in North America, which it is currently being developed by partners of the Western Climate Initiative.

With just a few weeks to go before the December 2009 climate conference in Copenhagen, Denmark, Québec is taking a strong leadership stand on this key issue. Perhaps the federal government will take notice and assume a leadership role of its own.

Press release Link:

http://www.mddep.gouv.qc.ca/communiques_en/2009/c20091123-cibleges.htm

U.S. EPA Issues Final Rule on GHG Reporting

On September 22, 2009, the U.S. Environmental Protection Agency (EPA) issued a final rule requiring the reporting of GHG emissions from large emission sources in the U.S. (the EPA Reporting Rule). In particular, the EPA Reporting Rule requires stationary source GHG emitters, suppliers of fossil fuels or industrial gases, manufacturers of vehicles and engines, and facilities that emit 25,000 metric tons or more per year of GHGs to submit annual reports to the EPA. Regulated facilities must begin monitoring on January 1, 2010 and first reports will be due on March 31, 2011.

Under the EPA Reporting Rule, a broad range of facilities will be required to report on the following GHGs: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), sulfur hexafluoride (SF6), and other fluorinated gases including nitrogen trifluoride (NF3) and hydrofluorinated ethers (HFE). The EPA Reporting Rule captures 85% of U.S. GHG emissions and applies to approximately 10,000 facilities. There is a general reporting threshold of 25,000 metric tons of carbon dioxide equivalent (CO2e) per year from facilities with stationary input capacity of 30mm BTU/hr or greater. There are also 15 categories of emission sources – including cement, petrochemical and aluminum production – that are required to report whether or not the 25,000 ton threshold is met or exceeded. In addition, there are 9 categories – including iron, steel, glass, and pulp & paper production – that are also subject to a 25,000 ton threshold, but not limited to fuel combustion sources.

The following industries will be subject to the EPA Reporting Rule:

– Electricity generators

– Suppliers of coal-based liquid fuels, petroleum products, natural gas, natural gas liquids, industrial GHGs

– Petroleum refiners

– Petrochemical producers

– Pulp & paper manufacturers

– Producers and manufacturers of adipic acid, aluminum, ammonia, cement, ferroalloy, glass, iron, steel, lead, lime, nitric acid, phosphoric acid, soda ash, titanium dioxide, and zinc

– Municipal solid waste landfills

– Large-scale farming operations

It should be noted that the following sources are not covered by the EPA Reporting Rule:


– Coal suppliers

– Underground coal mines

– Oil and natural gas systems (i.e. offshore oil and natural gas production facilities, onshore natural gas processing and transmission compression facilities, underground natural gas storage facilities, liquefied natural gas storage and import/export facilities)

– Wastewater treatment facilities

– Producers and manufacturers of ethanol, electronics, fluorinated GHGs and magnesium

– Industrial landfills

– Food processors

In general, GHG reporting is to occur at the “facility” level, except that certain fossil fuel suppliers and manufacturers that use GHGs for industrial purposes, along with vehicle and engine manufacturers, will report at the “corporate” level.

Fossil fuel suppliers must report GHG emissions that would result from complete combustion or oxidation of products they supply. In some cases, this may result in double reporting of emissions (i.e. by a fuel supplier and user). As a result, the EPA will require some entities to report their actual emissions as well as those associated with their products (for example, petroleum refineries). The EPA Reporting Rule also requires that manufacturers of heavy-duty trucks, motorcycles and off-road engines report CO2 emission rates for the 2011 model year and emission rates for other GHGs in subsequent model years. The EPA Reporting Rule does not cover cars and light-duty trucks, but it is anticipated that the EPA will propose a comprehensive light-duty GHG emission control program commencing in 2012, which is likely to contain GHG monitoring and reporting requirements.

A facility may cease reporting if one of the following has occurred: (i) five consecutive years of emissions below 25,000 tons CO2e per year; (ii) three consecutive years of emissions below 15,000 tons CO2e per year; or (iii) its GHG-emitting processes or operations are shut down.

In recognition of the short timeframe for regulated facilities to start complying with data collection and monitoring requirements, the EPA has agreed to allow facilities to use “best available monitoring methods” to track GHG emissions data through March 31, 2010 in lieu of the monitoring methods specified in the EPA Reporting Rule. The monitoring methods required by EPA Reporting Rule vary depending on the type of facility. Certain facilities will be able to calculate their emissions based on fuel source type and other data, while others will be required to install continuous emissions monitoring equipment.

The EPA Reporting Rule does not require third party verification, as the EPA will verify the data submitted by regulated facilities. Regulated facilities will be required to self-certify that the data submitted to the EPA is accurate and emission records will need to be kept for a period of three years.

In August 2009 the EPA Assistant Administrator for Enforcement and Compliance Assurance, Cynthia Giles, underscored the need for an accounting system with real integrity, particularly in the context of a cap-and-trade program. It is clear that enforcement will have a key role in the regulation of GHGs. Failure to report would face enforcement under the U.S. Clean Air Act, which can lead to civil penalties of up to $37,500 per day for each violation. The EPA Reporting Rule represents the first time that industrial emission sources will be required to monitor and report GHG emissions data to the EPA. As such, it is advisable for companies with U.S.-based operations that fall within the categories set out above to review their operations and determine whether they will be caught by the EPA’s new reporting requirements. Finally, it is important to note that the EPA has the power to expand the scope of the EPA Reporting Rule to include additional source categories in the future. As a result, it will be prudent for industrial emitters to monitor regulatory developments on a continuing basis to ensure that they are in compliance with all reporting and other regulatory requirements.

For more information on the EPA Reporting Regulation or if you require assistance with your GHG reporting, please “Contact Us”.