Under the National Greenhouse and Energy Reporting Act 2007 (NGER Act), 2008-2009 was the first year corporations that triggered the emissions threshold were obliged to register and report on their greenhouse gas emissions, energy production and energy consumption. For 2009-2010 the threshold requiring corporations to register and report has reduced by a third. Now corporations producing 87.5 kilo-tonnes (Kt) of carbon equivalent emissions and over; or 350 terra-joules (Tj) of energy produced or consumed by their corporate group will be required to register under the NGER Act by 31 August 2010 and report by 31 October 2010. Failure to do so could result in incurring a penalty of up to $220,000. Corporations controlling a single facility producing 25 Kt or consuming or producing 100 Tj will also be required to report regardless of whether the corporate group threshold is also met.
Enforcement and compliance
Additional civil penalties will apply for each additional day after the deadline a corporation fails to register. Similar penalty levels apply for those corporations who register on time but fail to report appropriately by 31 October 2011. Chief executive officers and other company officers who fail to take responsible steps or who act recklessly or negligently in a manner which leads to contravention of obligations under the NGER Act could also find themselves vicariously liable.
Know your corporate group
Under the NGER Act it is the “controlling corporation” that is liable for reporting on the emissions and energy data for all “facilities” within its corporate group. The first step for many corporations will be to undertake initial data collection to determine if their corporate group triggers the threshold. To do this a corporation must understand what entities (i.e. subsidiaries, joint ventures and partnerships, etc.) need to be counted in calculating the emissions of its “corporate group”.
Know your facilities
The second consideration is what “facilities” are under the “operational control” of this corporate group. Understanding which group of activities constitute a “facility” in the context of your business may be critical because there is a lower single facility threshold which may independently trigger reporting obligations for the whole group. “Facilities” are also the primary unit against which any reporting occurs.
What activities constitute a facility can be very different depending on the industry and business model. The rule of thumb is - does it create emissions or consume or produce energy and is it a single site, a single industry or part of a single production process? Equally, a “facility” will be under the corporation’s “operational control” if it can be said to have the greatest authority to introduce and implement operating, health and safety and environmental policies for that facility.
Know which data counts – collecting and calculating emissions and energy data
The process of collecting data on emissions and energy consumption or production will be easier for some industries than others. Certain industries that have previously been required to undertake some type of emissions reporting will already be familiar with the emissions terminology used in the NGER Act and regulations and guidelines (i.e. scope 1 and scope 2 emissions). It is corporations which have not previously been exposed to any emissions reporting requirements which need to be the most diligent.
Session for the first year of reporting
In the first year of NGER Act reporting, two of the most common errors were using the wrong method to calculate emissions and failing to include emissions attributable to a “facility” under their “operational control”. The first error resulted in some smaller emitters dramatically over calculating their emissions, while the second error resulted in emitters failing to collect and report on data from their contractors.
In order to reduce the risk of non-compliance with reporting obligations, chief executive officers and other company officers who are required to sign-off on a corporations registration application and the emissions and energy report are likely to increasing look to specialists to assist them establish adequate and cost effective system for data collection and calculation.
NGER Act for contractors – how it may affect you…
One of the most common errors in the first year (2008-2009) of reporting under the NGER Act was the failure of “controlling corporations” to collect and account for the emissions of their contractors.
As controlling corporations become savvy to the need to implement systems to collect emissions data, contractors will be increasingly asked to supply emissions data on an on-going or periodic basis. In extreme cases contracts may be renegotiated to include obligations on contractors to provide data in the format required by the controlling company’s reporting system and bear the associated costs.
By 31 October each year controlling corporations are required to submit their reports for their emissions for the preceding financial year. Ideally a controlling corporation will inform contractors well in advance of any information they require and the burden of providing this information will be minimal. However, on other occasions issues of data accuracy, the costs associated with the data collection and even carbon pass-through issues may arise.
To avoid any last minute strains, we recommend contractors raise the issue of data supply early to enable you to prepare and get the appropriate advice should issues arise.
What should you do?
Carbon management, in whatever form will remain a critical factor for Australian business. Those who understand and are prepared for it will come to enjoy a significant advantage over those who have not gone down this path. While Federal legislation to introduce a CPRS or another mechanism to achieve similar outcomes may still be some way off, the related issues addressed in this update are a day to day reality.