In 2009, there was a general sense in the US that some regulatory and economic certainty would finally be established relative to greenhouse gases, and CO2 in particular. The current administration made highly public moves and statements to that effect, which were mirrored by action in Congress and the Senate. EPA issued its finding of endangerment. And there was significant optimism that the COP15 Copenhagen meeting would bear fruit.
Fast forward to February 2010. There has been quite a shift in direction and now there is arguably more business risk related to CO2/GHG than there was going into 2009. Among recent highlights:
- Nike formally announced that they are abandoning the use of carbon offsets and Renewable Energy Certificates (RECs), citing, among other concerns:
there is substantial scrutiny of the use of RECs, in particular related to whether they in fact help create new renewable power, or whether they are simply payment to a project that would have existed anyway. … Moving forward, however, our preference is to achieve climate neutrality through a combination of energy efficiency and the purchase of more direct forms of renewable energy, through on-site applications and other means.
- The German Emissions Trading Authority (DEHSt) computer system was hacked and fraudulent European Union carbon allowance transactions were completed. Read a report here.
- Europol, the European law enforcement agency, reported on December 9, 2009 that
the European Union (EU) Emission Trading System (ETS) has been the victim of fraudulent traders in the past 18 months. This resulted in losses of approximately 5 billion euros for several national tax revenues.
As an immediate measure to prevent further losses France, the Netherlands, the UK and most recently Spain, have all changed their taxation rules on these transactions. After these measures were taken, the market volume in the aforementioned countries dropped by up to 90 percent.
- The Copenhagen meeting failed to achieve the concrete results that had been expected.
- The accuracy and veracity of data published by key climate scientists was called into question, creating the “Climategate” scandal.
- The UK government published a report supporting a fixed price or auction reserve on carbon emissions over the current market-driven cap and trade.
- National-level climate bills in the US are no longer getting the support they enjoyed in 2009. Read more.
- Arizona declined to participate in a regional GHG trading program, citing the difficult economy.
However, in contrast to the overarching trend, the US did see two important developments. First, EPA promulgated its CO2 emissions reporting regulation in October 2009, which is effective calendar year 2010. Second, SEC issued Interpretive Guidance on the inclusion of climate risks in financial disclosures.
There continues to be significant uncertainty related to the financial value/risk of climate-related activities. And that is not likely to change in the near future.