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Apr 22 2013

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What’s unique about Mandatory Carbon Reporting?

The UK’s Mandatory Greenhouse Gas (GHG) Reporting regulations, which will come into force on 30th September this year, will not be the first time UK companies have been mandated to measure their GHG emissions. Over 60% cialis dosage of the UK’s greenhouse gas emissions are already regulated by the EU Emission Trading Scheme and the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. Both of these schemes require companies to report their carbon, albeit using different criteria from the new mandatory GHG reporting regulations.

In fact, whilst the UK and the EU may be leaders in terms of carbon regulation, company carbon reporting has now been mandated by several regulators both in developed and developing countries around the world. Countries including the US, Australia, India, South Korea, China, Canada and France have all introduced some form of mandatory carbon reporting for companies with Mexico anticipated to follow shortly.

So what is unique about the UK’s Mandatory GHG Reporting regulations? In this blog I have picked out four features that distinguish it.

1. All listed companies, not just large emitters.

Mandatory carbon reporting schemes generally focus on energy-intensive industries or large energy users, usually defined by an energy or emissions threshold per facility or per company. For example, Australia’s National Greenhouse and Energy Reporting (NGER) Scheme only affects companies with annual emissions over 25,000 tonnes CO2e and energy consumption over 25,000 MWh whilst the CRC only applies to organisations using over 6000 MWh of electricity a year in buildings owned by the organisation.

By contrast, the new Mandatory Carbon Reporting regulations will affect all cialiscoupon-cheapstore UK incorporated companies listed on the main London Stock Exchange, regardless of their energy consumption or the quantity of their emissions. This means the regulations may affect companies with relatively low emissions, such as investment trusts occupying a small rented office with a handful of staff members. These companies are likely fiat and viagra commercial to be completely new to carbon accounting and will need to set aside sufficient resources to meet the new regulations. In 2016, the UK Government will consider extending the regulations to all large companies as defined by the UK Companies Act, which could mean between 17,000 and 33,000 companies would be required to report. This would make the scheme one of the largest carbon reporting schemes (by number of companies) in the world.

2. A national regulation with a global outlook.

The new mandatory GHG regulations require companies to report their global greenhouse gas (GHG) emissions. This means, in effect, that the UK government is regulating GHG emissions that occur beyond its national boundaries. As far as I am aware, it is the only mandatory scheme in existence that requires global GHG reporting – other schemes limit emissions reporting within the geographical boundary of the country (or countries in the case of EU ETS) implementing the scheme.

From a carbon point of view, measuring global emissions makes perfect sense – as climate change is a global problem companies should be required to measure and manage what they emit globally. From a company point of view, there is also a clear logic to reporting GHG emissions against the same global boundary as a company’s financial reporting. It should also be noted that a large number of multinationals have already been voluntarily reporting their global GHG emissions in this way through reporting initiatives such as the CDP, so the new regulations may not affect them greatly (a total of 81% of the Global 500 voluntarily report to CDP).

However, global carbon reporting is likely to pose some challenges to multinationals who have not been viagra cost reporting this information previously. Setting up a comprehensive carbon accounting system that measures the required emissions sources for every country, every premises and every relevant activity can be a complex and time-intensive process. There may be fundamental challenges with data collection, particularly for companies that operate multiple premises scattered throughout different regions. The information required on energy consumption, transport emissions, process emissions and fugitive emissions may not be readily available and there could be language barriers in collating this data. Emissions factors also vary from country to country, for example due to the different grid mix for electricity or the different composition of fuels used in vehicles. Time and resources will be required to identify the appropriate emissions factors for different emissions sources within each country.

Having carbon accounting software, such as Carbon Guru for Organisations, often makes the viagra slogan process of collecting and analysing data from multiple countries more straightforward. The Carbon Guru platform has an intuitive interface, which can be used even by those with limited carbon knowledge. The software works in multiple languages and automatically applies geographically relevant emissions factors.

3. A flexible approach to carbon footprinting.

Most of the mandatory carbon reporting schemes in existence today are either aimed at underpinning carbon pricing mechanisms (Australia, China, EU ETS, CRC) or are designed to create a national framework for reporting carbon (Australia, US, Canada). For reporting schemes to successfully meet these two aims they must be fairly prescriptive about their approach to carbon footprinting. For example, for the CRC to operate successfully as a carbon pricing

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mechanism, companies must report the same emissions sources against the same organisational boundary, using the same methodology and the same emissions factors. Without this rigid approach, there would be issues with the comparability of carbon data and therefore the fairness of the corresponding carbon allowance purchases. Whilst being prescriptive in approach arguably makes data more directly comparable, it also means that the scope of emissions reporting is likely to be more limited. So, the CRC only captures CO2 emissions from electricity and gas consumption in owned buildings and the US Mandatory Reporting Rule only focuses on specific emissions sources emitted by specific industries. In other words, to have a clearly defined reporting methodology you often need to limit what is reported.

By contrast, the new Mandatory GHG Reporting regulations are far more flexible in approach. Whilst the scheme does specify which emissions sources should be included (energy emissions, transport emissions, fugitive emissions and process emissions), it does not specify which calculation methodology or set of emissions factors to use. Companies are therefore given the flexibility to choose. Whilst this does mean the data from company to company may not be directly comparable, it also means the new requirements should slot more easily into existing reporting practices. Therefore companies that have been voluntarily reporting their emissions for years can continue to use their preferred methodology and will not face new burdens under the regulations.

4. Carbon performance tied to financial performance.

In the majority of carbon reporting schemes around the world, companies are required to submit their carbon reports to a regulatory body. For example, the CRC requires an annual submission to the UK Environmental Agency whilst Canada’s GHG Reporting Programme requires submission to Statistics Canada via an online reporting platform.

The Mandatory GHG Reporting scheme in the UK and Grenelle II differ from other schemes in that they require companies to report the information publicly through existing reporting mechanisms, rather than reporting to a regulator. Grenelle II requires companies to report their emissions every three years in their Annual Reports, whilst the UK Mandatory GHG regulations require companies to submit the information in their Directors’ Reports.

The UK scheme is arguably designed in

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part to make an explicit link between the carbon performance of a company and its financial performance and for many companies this will be the first time these two elements have been compared in this way. In order to give investors, clients and stakeholders confidence in the carbon data, it is likely that many companies will now seek assurance or independent verification of their carbon data.

Carbon Masters have experience in carrying out independent verification in line with ISO 14064 (part 3) and in providing assurance on a wide range of Corporate Social Responsibility data. In our experience, verification and assurance garlic or viagra can be particularly valuable for companies who have been measuring their emissions internally but are reporting this information publicly for the first time.

Ultimately, for Mandatory Greenhouse Gas Reporting to succeed it must lead to real and

significant carbon reductions. Whilst the scheme does cialis refractory period not come into force until later this year, the design and the high level of company support makes the outlook for these new regulations promising.

 

About Carbon Masters

Carbon Masters is a carbon management consultancy which helps organisations in the public and private sector to measure, manage, reduce and report their carbon emissions.

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