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Businesses worldwide face pressure to reduce the impact their activities have upon the environment, and in particular the volume of greenhouse gases they produce. In the United Kingdom, Department for Environment, Food and Rural Affairs (Defra) has described climate change as the "greatest environmental challenge facing the world today". Although there is currently no legislation in place in the UK forcing companies to reduce carbon emissions, tax benefits and consumer pressure provide a strong incentive for businesses to develop environmental strategies. Emissions trading is the primary tool advocated by the UK Government for tackling global climate change, a method which aims to tackle emissions reduction at the points where there is the lowest cost for doing so. For emissions trading to work, a uniform method of reporting is necessary to allow for comparisons to be made across organisations. Kilograms of CO₂ is the preferred unit of measurement for emissions and Defra have developed conversion tables which provide a standard CO₂ cost for typical business activities, allowing organisations to report on the volume of CO₂ they produce. This article describes the various methods by which businesses and organisations can report on their carbon emissions.

The leading emitters

Each year the world is becoming more and more industrialized and with that increased development of businesses, there is an increase in the demand for power and other needs of operation. With increased industries there is also an increase in the output of emissions, and in a decade where the world will be facing the real life effects of climate change, the idea of Carbon Emissions Reporting is becoming more prevalent. This is not a new idea that has just came about, GHG (Green House Gasses) emissions have been regulated and reported in a standardized way in some industries for years. Automobile manufacturers have responded to legislation in the past to reduce vehicle emissions in new designs (Melosi, 2004), which has led to an indirectly measurable reduction in GHG emissions. Utilities that generate electricity from, for example, coal burning power plants, have also been regulated with respect to emissions for a long time, initially to reduce more localized pollution and other environmental hazards such as acid rain. However, even to this day, these electricity generation companies are one of the largest culprits when it comes to the emissions of GHG. Due to the high levels of production of GHG on the daily by these industries, they are easy targets when dealing with the pressure that is being put on the idea of Carbon emissions reporting. As more and more evidence points us in the direction that global climate change is due to human activities, It is clear that the trend toward measuring and managing greenhouse gas (GHG) emissions on a global scale is not slowing, even though different countries and geographic regions are approaching the issue with different points of view and different levels of vigor(1). As seen in this graph, it is apparent that the U.S. is the greatest producer of GHG.

Along with an increase in measuring and managing GHG emissions, enterprises around the world should expect to see a higher level of independent assurance and audit reporting needed(1). This is due to a higher level of scrutiny on the credibility of their GHG reporting by a wide range of stakeholders(1). Because the threats of global climate change are felt around the world rather than by just the highest emitters here is a chart from the National oceanic and Atmospheric Administration.

Multinational Corporations

Across the globe the need to know the effects of emissions has driven many central and local governments to study the rate of their emissions. In many developed nations there have been institutions around big Multinational Corporations to report on their emissions rate. Many critics say that forced carbon reporting has negative economical consequences. The main worry is how much it would cost companies in order to report and limit their emissions. Currently there is limited available options that allow companies to report their emissions, which makes it even more expensive to institutionalize. Thus companies tend to be strongly opposed to this movement. It creates a series of problems on their production and requires these companies to assure continual upgrade of their assembly line to stay efficient while producing enough to make profit.

Even after considering the financial drawback; there are still a number of industrial board level leaders who encourage this new “Emission accounting.” Some progressive CEOs have been quoted embracing this new institution stating that it helped them cut back on their energy costs which had a positive return on their profits. A survey was conducted by DEFRA and PricewaterhouseCoopers that studied 150 large companies which reported their annual carbon emission. It found that 50 % of these companies reported having GHG (Green House Gas) reporting outweighed the costs. It further helps companies build their image among investors by becoming more environmentally friendly, which increases investment. Across the board of CEOs and board level leaders, there has been a slow but increasing transition for support of Carbon reporting.

[1]

Governmental Institutions

Ironically in this push for further disclosure and action on carbon reporting from governments, significant amount of the emission comes from governmental institutions like the military and health sectors. These infrastructures, which guarantee public safety and ensure growth, demand an enormous source of energy to operate. In the United Kingdom, of the carbon that was emitted by the Central Government, 73% came from the Defense and Health sectors

[2]. Similar trends are seen the United States as well as most developed nations by having most of their emissions come from activities within the defense and Health sectors. The two sectors mentioned above are tricky and often hard to implement cut backs on. They affect a large number of people which makes it more challenging to institute changes to help lower emissions. The UK federal government is committed to a 10% decrease on emissions, which has helped reduce emissions. Yet there still needs to be further collaboration and implementation between governments to help tackle this issue.

[3]

Homes and Vehicles

The use of cars is more prevalent in the United States than any other nation in the world. Americans’ extensive use of private cars to reach their destinations makes vehicles in the United States one of the leading emitters of carbon. Cars use fossil fuels which produce carbon dioxide as a byproduct when burned to produce energy.The rate of carbon emission in this manufacturing field can be measured by the MPG (Miles per gallon) of each car. Car manufacturers are attempting to switch over to an alternate source of energy to help lower emissions and increase sales. They have a very big incentive to build cars that are emission free and can run on a sustainable form of energy.

Homes in the United States also use a lot of energy to power different heating, cooling and other appliances. There has been an increasing emphasis that has been put on the construction of homes to make them more efficient. Homes are being built with solar panels and more insulation to decrease their impact on the environment by lowering their energy consumption. Improvements like this can be attributed to carbon emission reporting. Politicians in the state of Oregon have even proposed “Mandatory Certificates” for each homes that will be built. These certificates will detail a house’s emission as well as energy consumption. This proposition gained support from environmentalists but due to strong opposition from the Oregon Home Builders Association and Oregon Realtors Association it failed to become the state law.

[4].

There are advancements being made in both car production and home designs. Yet the transition is still needs further improvements. The average MPG for cars has shown little improvement since the mid 1990s and the current economic recession is deterring investors in the realtor business to invest on homes that are more energy efficient. The main drawback that exists in the transition towards a more efficient car or home is the cost. Higher costs of more efficient cars and homes, even though they have a net return over time, discourages most buyers from making the change to a more environmentally friendly and efficient product.

Mandatory Green House reporting

Many environmentalist and organization in favor of green energy support the proposal of mandating companies/ factories to starting reporting green house gas emissions. Mandatory green house emission reporting is often neglected by business owners for several reasons. The main one being that it creates a drag in their production and most of all it would cost a lot to implement. In a study conducted by DEFRA, it was determined that it costs a factory on average $55,000 to start this process. Furthermore, companies would face increasing scrutiny if consumers understood the impact they have on the environment.

[5] Therefore mandatory GHG reporting didn’t receive enough support. In the past there were several attempts to institute such legislation but none received enough votes to pass Congress. But in the wake of BP oil crises in the Gulf of Mexico and increasing social awareness about the environment, the Environmental Protection Agency (EPA) started the environmental Green House Gas Reporting Program. The EPA’s GHG reporting program became a law on January 1, 2010. It forces 85% of the nation’s top emitters to report on how much GHG they have emitted. In no ways does it mandate them to cut back on their overall emissions. According to this law companies are due to report their emission for the year of 2010 on March 21 of 2011. In the first year of this legislation only 85% of the nations leading emitters are required to report their annual reports. Plans are to slightly increase this number each year to ultimately have 100% of major emitters in the nation to start keep tabs on the amount they emit.

This program is the initial step into countering rising emissions rate. If companies are forced to report their emissions, they will be more inclined to lower their impact. Furthermore, they will have the ability to attract more investments as consumers prefer environmentally friendly products.

Drawbacks to Mandatory Reporting

Carbon reporting is a task that is rarely done in the business world today and book keeping of how much carbon is emitted presents a daunting challenge for some companies. That is why there are several organizations that oppose this proposition. Many of them are in the energy producing or providing realm of industries. These industries argue that since they heavily rely on smaller facilities that are located in remote areas, it will cost significantly more than other sectors to implement changes. The EPA estimates that rule of mandating carbon emission reporting will cost the oil and gas industry $62 million for the first year and $19 million in subsequent years {{reflist}] [6]. Most oil and gas companies expect this rate to be higher. According to some oil companies’ estimates the rate could range from somewhere between $100 million and $850 million on data management softwares alone.

[7].

External links

• Defra
• The Carbon Trust
• Carbon Reporting
• Tree Hugger
• Verisai
• EPA Regulations
• Greenhouse emissions report
• Energy and environment

Category:Carbon finance