Potential ‘loophole’ in carbon emissions reporting regulation must be resolved

The Governments draft regulations on greenhouse gas emissions reporting provides businesses with a clear framework, but a potential loophole around methodologies must be resolved if they are to be consistent and effective, says The Institute of Environmental Management & Assessment's (IEMA) Martin Baxter.

Current flexibility in the methodologies used to report on carbon emissions could create a loophole between companies, particularly around the purchase of green tariff electricity and on who “ultimately owns the carbon benefit”.

IEMA stressed that this needs significant attention as there could be material differences in reported emissions depending on the method used.

The environmental professional membership body said: “We recommend a requirement in the regulations that ‘grid average’ emissions at consumption should be the basis for the reporting of electricity emissions (allowing for other approaches but only if consumed electricity at grid average emission factor is also clearly disclosed).

“IEMA considers this will help ensure that mandatory GHG reporting will be implemented with some valuable consistency, minimise opportunities for confusion and misuse, and provide greater transparency”, it added.

Speaking exclusively to edie, IEMA’s executive director of policy, Martin Baxter said that in addition to the regulatory loophole, issues over reporting boundaries could also cause problems.

“If you think about, for example, joint venture companies where you might have financial control but require an apportionment of greenhouse gas emissions data from a part of the company where you don’t have operational control it could be quite problematic to get that data out”.

Conversely, Baxter added that despite issues arising in the draft regulations, GHG reporting is a “good proxy for energy efficiency and broader resource efficiency”.

“What we’ve seen is as companies take on board [reporting measures], efficiency becomes a priority. If you are measuring something, you are able to manage it. And if you’re managing something you’re able to do something about it and make improvements”.

“This is also partly because it gets that board level recognition, which is really important in terms of helping gain support for improvement initiatives”.

Under the draft regulations, Baxter believes companies are able to provide transparency and accountability on their operational output and is a better alternative to allowing companies to independently take action.

“Companies can be accountable to their investors and shareholders. We have focused on the internal benefits to an organisation that can be driven by an external reporting requirement and I think the evidence we gathered has shown that if you leave it up to the market you would potentially see that some companies won’t report so they’re not accountable to their company owners”.

According to Baxter, the absence of clarity on what should be reported means you will have different approaches to reporting, and this does not allow investors to compare performance and track progression over time based on consistent metrics.

Baxter recently responded to the Government’s dual consultations on “GHG Reporting Draft Regulations” and “Guidance for Business on Environmental Key Performance Indicators (KPIs)” saying the consultations together provide a significant opportunity to create a consistent framework for business environmental reporting.

However, he added that the draft environmental KPI guidance needs more focus on performance reporting if the benefits are to be fully realised.

“The government’s consultation on “Guidance for Business on Environmental Key Performance Indicators” provides a significant opportunity to drive consistency between companies on reporting on the environment across a range of environmental indicators including waste, water, materials and pollutants.

“However, IEMA is concerned that the proposed approach has failed to capture the business and environmental benefits,” he said.

Martin Baxter is IEMA’s executive director of policy

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