Build your business case to develop a comprehensive carbon liability management plan

03 Apr 2012Archived News Climate Change Matters

Does your risk management team understand the requirements of the Clean Energy Act, 2011 as applicable throughout both the fixed carbon price period and in three years time when the permit trading period comes into effect?

 

Develop a comprehensive understanding of the new regulatory environment. Conduct a gap analysis

A gap analysis should be conducted which considers:

  • the effectiveness of company systems designed to capture and manage the range of carbon impacts, risks and legal issues
  • responsibilities ascribed to roles and the KPIs of individuals
  • record keeping and control
  • training and skills
  • processes for auditing and ensuring corrective steps are taken
  • processes in place for submitting interim and Provisional Emissions Numbers.

Look for opportunities amongst the regulatory certainties

The risk management team should decide the factors within the clean energy future regulatory environment that are certain: those that clearly apply through the immediate, fixed price period. An example of a benefit that could present during the fixed price period is the choice available to some businesses to opt-in to the carbon price scheme. This provision enables businesses to voluntarily take on their diesel emissions' responsibility. By managing your carbon liability you have a greater control over your corporate risk profile, potentially reducing costs.

There is arguably less certainty and less value in the purchase of carbon offsets in the short term. It may be preferable to focus now on ensuring understanding of the potential benefit offsets offer and simply monitor political and regulatory developments.

Develop a carbon management plan that aligns with other business systems

How can an effective carbon management plan benefit your broader business? Energy costs are escalating irrespective of a price on carbon. Managing your carbon liability has a corresponding benefit as the energy intensity of your business is reduced and therefore your exposure to rising energy costs.

Carbon liability management plans should integrate with existing risk management systems and processes, such as current systems for managing risks in trading currencies or commodities.

Ensure flexibility

Broader regulatory settings and your own business environment are not static. Build a requirement to review the plan and procedures regularly in order to be able to adapt to changes to Clean Energy legislation and to your own market and business environment.

Build on robust NGER data and reports. Develop assurance through a review process

Does your business have confidence in the integrity of its emissions data as calculated under NGER? The Australian National Audit Office found that 72 per cent of 2009/2010 NGER reports contained errors and 17 per cent of reports contained "significant" errors. NGER data of companies with sites that trigger the Clean Energy Act, 2011 threshold will inform the number of permits that will need to be acquired and acquitted. This necessitates a greater focus on the accuracy and audit-readiness of data sets.

Your business should undertake a review of your NGER data and reports in order to determine whether you wouldpass a reasonable assurance audit.

To conduct an effective review, you need to:

  • understand data capture systems and processes at both a corporate and site level
  • check for accuracy of recording, aggregation and transcription of source data
  • review the effectiveness of internal accuracy assurance measures
  • run through calculations to ensure that all are accurate
  • evaluate systems against the government's Guide to Record Keeping.

With 25 years in energy and carbon management, Energetics can help your business ensure that your carbon data is audit-quality, the elements of your carbon liability plan align with your business systems and are flexible enough to adapt to changing market and regulatory conditions.

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