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An introduction to the Carbon Emissions Reporting regime in Australia

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This is a blog post from a CPA Australia Carbon Emissions Reporting Discussion Group meeting – the inaugural meeting – that I attended on 18th November 2008.  Danny Power from PwC is the convenor. 

There will be an election of office-bearers at the end of the next meeting.  The topics under discussion are going to be quite broad-ranging.  Danny is linking it to the sustainability reporting issues, and Danny seems to think the label might change later.  However, Carbon Emissions Reporting is the current label for the group – thinks we might need to break into several discussion groups at some point (I’m not sure about that – see how popular it is).  There were about 40 people in attendance at this first meeting, though, which is always a good sign. 

Why did Danny set up the discussion group?

  • Compliance issues
  • The accountant’s role as a business advisor and in managing the reporting systems
  • Impacts for all organisations whether direct or indirect
  • “The Science” – still seems controversial, and if you’re going to report on it you need a working knowledge of what the processes are and how it works. 
  • Possibly the most important – to create a support and peer group for each other.

Schemes, coverage, compliance and impacts

This section of the presentation was given by Mick Zeljko of the Climate Change Team of PricewaterhouseCoopers. 

The finance function of most companies will be generally involved it seems in managing the reporting process, which is a substantial – very substantial – part of the new CPRS. 
Emissions Schemes

Current programs:

  • Mandatory Renewable Energy Target (MRET)
  • NSW Greenhouse Gas Abatement Scheme (GGAS)
  • Qld Gas Electricity Scheme (GECS)
  • Greenhouse Challenge Plus
  • Energy Efficiency Opportunities

The scope of these current programs is fairly limited and tend to be industry-specific.  There is a general feeling that perhaps people have been a little bit lax about the current programs, and it’s been pretty relaxed with the result that there has not been a lot of accuracy in the numbers that are currently being reported.  Probably a lot of companies don’t really have a lot of confidence in their reporting schemes. 

New Schemes:

  • National Greenhouse and Energy Reporting System (NGERS)
  • Carbon Pollution Reduction Scheme (CPRS)

NGERS will cover a lot less companies than those that are affected by ETS.  Types of gasses – six Kyoto gasses – CO2 and Methane and so on.  All measured in terms of CO2 equivalency – for example, methane is 20 times stronger than CO2, so 1 tonne of emitted methane is 20 CO2 Tonne Equivalents.

The NGERS does get down to 200 terajoules and 50 kilotonnes in 2010.  ETS will require only 25KT in 2010 so it is a little disconnected from NGERS – you can probably expect that the two programs will come into alignment. 

The Emission Trading Scheme (ETS) is now officially called CPRS – Carbon Pollution Reduction Scheme.  The feeling is that it sounds better to be reducing carbon pollution than trading the rights to emit pollution.  The scheme generally caps Australia’s emissions, and then identifies industries subject to the cap.  These industries are then allocated permits and at the end of the year have to have permits to cover what they emitted or pay a substantive fine.  If you don’t have the permits, you have to go buy them from someone who does.  This is the essence of the ‘cap and trade’ system.  

Under the scheme:

  • Government allocates or auctions permits up to the cap annually.
  • Companies compete on the market to acquire required permits.
  • Permits can be traded at market prices between firms and third parties.
  • Scheme requires robust monitoring, reporting and assurance of data.
  • Transitional assistance measures are included
  • A number of elements are yet to be finalised
    • Including emissions target trajectories, penalties for non-compliance and complementary measures for non-covered sectors. 

A green paper was released in July.  Everyone affected is throwing a submission at the government.  The government is aiming to have draft legislation ready by the end of the year.  There remains a whole bunch of stuff that is yet to be finalised, particularly emissions trajectories.  We don’t know what the limits will be yet though – what the targets will be. 

Covered sectors:

  • Stationary energy
  • Industrial processes
  • Fugitive emissions (e.g. mining and landfill)
  • Waste
  • Transport
  • Reforestation (opt-in – gets you credits)
  • Agriculture may come in later, around 2015.

Liability generally relies upon the emitter.  Generally it is upstream supply liability.

Emissions covered include:  Scope 1 (i.e. direct for example emissions from a generator) emissions only.  Contrast with NGERS which includes Scope 2 (e.g. indirect such as a factory’s use of electricity) across all 6 Kyoto Greenhouses. 

Threshold

  • Direct emissions of 25,000 tonnes of CO2e (Carbon Equivalents). 

The affected businesses will need to be collecting up systems, processes and governance to get NGERS into place. 

I wonder what the definition of an entity (i.e. a ‘business’ will be in the covered industry?). 

The first NGERS reporting period has commenced, those these systems etc will need to be in place from the point of view of affected NGERS entities.  CPRS Green Paper submissions are now closed.  The draft legislation is due out in early September, and they seem to want to have the legislation in place by the end of the year.  The Government wants to set medium-term national trajectories soon, and are aiming for a 1 July 2010 start.  These trajectories will affect how many permits are available – they will not determine who is affected by CPRS. 
We in Australia will have two full reporting periods and  given thethen full trading will commence under CPRS.  Unless it doesn’t  current financial crisis. 

Under NGERS – compliance is about registering and reporting.  Penalties apply for corporations and CEOs.

Project Definition

There are a a whole lot of rules and legislation around wh`o effectively owns the emissions.  A big mining site will have a lot of issues just working out what are we reporting on.

Systems Implementation

  • Collect greenhouse and energy data
  • Calculate greenhouse and energy data – there is a measurement determination that tells you how you work out how much CO2 you emit.  There are proxy things in place. 
  • Got to have good storage of records for any audit down the track.

Maybe I have a large IT bent, but I can see that this is going to be a problem for anybody seeking to implement Greenhouse Gas Reporting Systems and implement it through the accounting information system.  Or even if they don’t. 

Clearly it will have an impact upon reporting processes, and who does it – and I suspect this job will often fall to the finance function. 

Reporting

  • Register with GEDO
  • Prepare and submit data using OSCAR.  (See Greenhouse Challenge Plus).
  • There will be a lot of internal reporting as well particularly for companies that are CPRS-liable. 

Governance

  • Need a whole lot of things covering all of this to make sure it keeps ticking along. 

Companies will have to be NGERS compliance at a minimum. 

Assurance – large emitters (>125KT CO2) will require third party assurance of the information prior to submission.  Beyond these core issues we don’t know much around how it is taxed and so on.  The draft legislation hasn’t come out yet.  There are thousands of submissions being put in place.

If you are liable there are serious financial implications and also some compliance costs.  Indirect impacts will result in price increases it seems – which will be the main issue for SME’s. 
Indirect impacts are going to be increasing on just about everyone.  Transport and logistics – may see a complete change in the competitive position between transport for example.  For instance you will need to reconsider where you get your services from e.g. road vs rail.

Need to do a risk assessment now.  Carbon due diligence.  Green paper submissions were a big thing a little while ago.

Strategic Response – can do a lot of stuff now.  There are opportunities for new services and products – carbon market planning and financial advice.

CPRS Accounting Issues:

  • Permits acquired to satisfy obligation = intangibles
  • Permits acquired for trading = inventory
  • Measurement choices available
  • Impact of CPRS on impairment calculations
  • Accounting disclosures which may be required.
  • How to account for forward purchase agreements of carbon pollution permits
  • Broadly – what impact will the acquisition, trading, hedging and surrender of carbon plollution permits on reporting.
  • Tax treatment?  Still yet to be decided. 

We also noted in the presentation that cashflow issues exist potentially for people that have to buy permits up front. 

There will be another meeting in February, probably, of the Discussion Group.  It was a very interesting discussion and it will be interesting to see where these compliance issues around the Carbon Emission Emissions Reporting processes take us.  And as we can see above – there are assurance implications (although supposedly only for >125KT emitters?).

More notices as events warrant.

Accounting for the Emission Trading Scheme

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As part of the good old PhD, I’m looking at some of the impacts of reporting changes around the adoption of IFRS in Australia upon audits.  As part of this, I’m taking a look at accounting for the Emissions Trading Scheme – mostly because it’s interesting and topical.

The Australian Government has flagged an intention to create an emissions trading scheme, but has rather less-than-helpfully (in some ways) left the creation of accounting for its business impact to the International Accounting Standards Board.  According to the IASB work program, an exposure draft regarding accounting for emissions trading scheme will be provided in the second half of 2009, and IFRS standards will be released in 2010.  Alternative accounting models are to be brought to IASB in Q3 2008 (presumably, about now).

Rather less than conveniently, if IASB’s work program doesn’t slip, the new accounting standards will be released about the time the emissions trading scheme is implemented.  Hmmm.

The project overview is provided here for IASB: emissions trading scheme.

However, the above seems to relate to how to account for the dollar impact of the scheme (presumably, accounting for assets and expenses created by the scheme etc).  There is in addition a current reporting obligation under the National Greenhouse and Energy Reporting Act 2007.  This is of course NOT the ETS, but it does give us some things to do right now.  A copy of the guidelines for reporting obligations can be found on the government’s website.

By 2010, organisations that produce more than 50 kilotonnes of CO2 and/or use 200 terajoules of energy are subject to these requirements.  There is an enormous scope of the non-accounting information that is required just in order to determine whether or not the corporation exceeds the threshold (see also this link:  https://www.oscar.gov.au/Deh.Oscar.Extension.Web/Content/NgerThresholdCalculator/Default.aspx).

These reporting requirements appear to apply to at least government agencies, although it is uncertain whether State Departments (e.g. Queensland Health) are captured by these requirements.  The advice for government agencies is that they should set up their systems to make this apply, and likely it will be made apply in any event due to the need for them to maintain a reputation.

A lot to absorb.  By the way this blog is starting to creak under its own weight and desperately needs a redesign – I will redesign the categories and so on when I get a chance (so perhaps this is permanent).

Evernote is good, but it’s not everything…

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Well, my setup for my mobile life is slowly coming together.  Firstly, I have a Blackberry for when I am out and about – full integration into Exchange server hosted by WebCentral.  It’s an expensive approach by the time Telstra and Webcentral have their cut, but it works well and is my primary mobile device.  Then I have two laptops – a Dell Vostro 1500 (the luggable for power-computing) and an HP Mini-Note 2300 for mobile computing (it’s small, light, and light-powered but does what’s necessary – mostly).  I have an HP Media drive that I use to synch files between the luggable and the HP – I’m currently using SyncToy from evil Microsoft to synchronise the files, although I did try SyncBack as well.  SyncToy is generally easier to use but its reputation is not as solid as SyncBack’s – my trouble with SyncBack is its complete lack of feedback as to what it’s actually synced and what it hasn’t.  I use GMail for my personal email, and it runs on my mobile based upon the Google Apps hosted solution. 

I also use Office Document Imaging to convert all my filenotes to PDF, so that they become part of my backup routine.  Ironically, the only thing I don’t keep electronically like this is my accounting records, as one day I may actually hand them over to an accountant.  And much to my annoyance I continue to use Office 2007 after a run-in with Open Office – it completely lost a major spreadsheet on me by overwriting a filename and annoying me somewhat – also Open Office files (native) don’t seem to be indexed by Copernic, my desktop searching engine.  I use ThinkingRock to manage my tasks and projects and todo lists (I did revert to Outlook tasks, which was good for mobility, but bad for trying to manage projects and generally implement GTD).  The new version of ThinkingRock 2 is much more polished so I am coming back to the TR fold (I was silly for going away, even if I did get mobility out of Outlook tasks). 

Finally, I use Evernote for little snippets of information that I collect and need to refer to, or that I stumble across while I’m researching stuff for papers I’m presenting and so on.  What is fantastic about Evernote is it’s ability to bring a lot of material together in one place, treat it the same, tag it, and bring it back, and do it from multiple vectors (PC, Mac, Internet, mobile phone) and keep it all in synch, for a reasonable price.  If used well, it can be very good.  A major difference from version 2 is the lack of version control.  I also originally came across Evernote while searching for a personal wiki approach, and EverNote doesn’t really support that type of functionality, it keeps it simple stupid.  I now use WikidPad to do that sort of thing.

Overall, Evernote is a great repository for keeping research together, and keeping things in synch between multiple devices (as you can see above, a fair chunk of my setup is devoted to synching stuff between machines.So it’s a great tool for doing what says it does.  Unfortunately it means I no have Yet Another Place with information stored – files (which I index with Copernic), some websites and now Evernote.  I wonder if my stuff in Evernote will convert over in a few years time – hopefully it’s successful and continues to operate, otherwise I will have a lot of information contained in Evernote that can’t be migrated to anything else.

I suppose in some ways it’s not unlike Lotus Notes, ironically, in its original syncing format, although it’s not collaborative I guess.  It is personally focussed.  Still it’s worth my $A47 for a premium subscription, and I’ll think about where it goes from here.  It’s a good tool to add to my suite of stuff I use, but it’s probably not going to be my nirvana for file and information management any time soon. 

Maybe one day I’ll get there.

Thinking Rock 2.0 to Outlook Import Code – Provided as is and all disclaimers!

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A commenter (Richard Brand) on an earlier post asked for the code I used to import only the active tasks into Outlook from the xml file.  I do believe this is possibly the worst programming code ever written, but it works, mostly, for how I used it at any rate.

I should note though that when I do the import into Outlook, it regularly freezes my Blackberry Task list so that I have to do a hot boot (take out the battery) to reset it (it comes up with a java error).

Code provided as is, without warranty, use it at your own peril and, quite frankly, it probably won’t work for you :).  But you may be desperate enough to try.

Note:  you will need to put this into an Outlook VB code module, and link that to a button the toolbar (which you click to do the import).  If you have no idea what I’m talking about, you probably shouldn’t be trying this.  You will also need to provide the path to your TR file (“myFile” is the variable).  All tasks imported from TR have the category “ZZZ Thinking Rock”.  Projects are ignored (Outlook doesn’t want to know about them), but project tasks that are currently active are brought over.  At the end of this process, all active tasks are imported into Outlook.

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Ubuntu, Ubuntu, we want you!

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I think I have expressed an overriding concern regarding Windows Vista on both my blog and through my Twitter feed.  In essence, I feel gypped.  Vista is a great way to slow down an astronomically fast machine.  Sometimes I’ll be typing away on it and it will decide to do something on its merry own, slowing down my typing speed. 

The underlying ethos seems to be that Vista will go off and do things that it thinks needs to be done, with no intervention from you.  There is probably a frustrated scriptwriter somewhere with a proposal for a new show called ‘Vista knows best’.  Generally, it gets it right.  Generally.  Unfortunately, after six months of ‘sticking with this turkey’ because Microsoft knows its best, I’d really like to be able to dump it in a nearby bin. 

Recently, I reformatted my home PC with Windows XP.  That alone was enough grief – have you ever tried finding the WinXP DVD that came with your machine when you bought it?  Oh that’s right – no software supplied, it was all on that hard drive.  The hard drive that went bung exactly twelve months and two weeks after I bought the machine from Dell.  So that caused grief, but nothing that couldn’t be overcome.

During the course of that reformatting I came to the realisation that there was a new version of AVG anti-virus.  Beaut, I thought – I’ll update the copy on my laptop.  This I proceeded to do, but unfortunately the install complained that a particular Windows Update patch was not present.  ‘No problem’, I thought (which of course would be exactly when the problems started).  I’ll go into trusty Windows Update and download the patches there.

Perhaps not surprisingly, there were several updates waiting (I have been, naively, simply trusting that Windows updates will be reliable and have the critical ones automatically installed only).  Instead of looking for and installing the specific update AVG was complaining about, I simply downloaded all of the patches that were waiting there (cue Family Feud sound effect). 

Vista decided as a result that I needed a new driver for my wireless card (check), and a new driver for the Nvidia graphics card (check).  Got a coffee, rebooted & installed.  Bang – no network, no graphics display.  It took a while to work out, though, that that was the problem – a bit difficult to troubleshoot without a screen.  Twelve hours later, after searching forums ad infinitum, I finally reconnected and downloaded the proper nvidia drivers and network card driver, but even then Vista kept switching me back to the drivers it felt I needed to have.  Eventually I was able to turn that off.

After filling my heart with soft thoughts of fairy floss and candy for Microsoft, I thought – OK, I’ll try Ubuntu, I’ve got a spare external hard drive, let’s boot off that and see how we go.  That experience was actually very positive.  Quite positive.  This is a six-month old laptop, so the hardware is fairly new, and Ubuntu 8.04’s install got most of it right.  And it is lovely to look at, and on this fast machine it’s beautiful to operate.  I even managed to install new software through the lovely package manager. 

Overall – Ubuntu 8.04 = lovely.

Still, for a complete newbie, getting Ubuntu right was a steep learning curve.  It probably took about two days to come to grips with it (finicky downloads played a part in that).  I did have difficulties with the wireless driver and the nvidia graphics – I finally got the nvidia graphics sorted, but the wireless card continued to elude me as I kept needing to manually start the network.   I’m sure there are solutions there but I had already lost two days that I couldn’t afford to lose.

At this stage, out of the box, Ubuntu seems to do most of the things most people would want from a PC.  Unfortunately, that last ten percent is still a roadblock.  I have a Blackberry hosted through Managed Exchange, so I needed to have Evolution as my mail client – Web Central doesn’t seem too keen on that, and I couldn’t get that configured, so a killer application of email is still an issue.  Also, all of my accounting software needs are met by MYOB.  Cue one for Vista. 

I also looked for blogging software, which I thought would be an easy find but it wasn’t that simple to get software as good as Windows Live Writer for my WordPress blog.  Finally, as a person who does a lot of presentations and report-writing (I’m a management consultant – it comes with the territory), I need Visio or an equivalent.  There still doesn’t seem to be a Visio equivalent.

Overall, Ubuntu 8.04, you won’t let me avoid the Microsoft hegemony just yet, but you’ve come a long way baby.  If I really, really tried hard, I think I could get it work for me.  A few niggly things (graphics, wireless card), as well as some problematic (and possibly fairly specific to me) software (Outlook, MYOB, Visio, MS Project) are stopping me making the jump.  Dual boot does not meet my needs.  Open Office 2 is great for my needs (I am very cold on Office 2007), and generally the bells and whistles Ubuntu implements automatically are pretty much the equivalent of Vista, if not better. 

I am thinking of a mini-notebook so that the lump of iron I currently cart around can be the desktop replacement it really is, and if I get that I’ll run Ubuntu on it.  For now I have to stick with Vista, but I’m not a fan of it (really, really not a fan) and neither am I a fan of Office 2007, although it generally works fine.  I’ve made an investment in Microsoft Software – I have the whole suite, dabnabbit!  Legal and everything.  I have Visio, Office 2007, and MS Project – that’s about $3000 in software.  Even so, I’m keeping an eye on Ubuntu 8.04; perhaps I need a class in it.  If Ubuntu is better, I’ll walk away from that investment.  If any OS is going to replace Vista, what I saw shows that Ubuntu is the one.  Roll on the next version of Ubuntu, perhaps?

You’ve come a long way baby – just not quite there yet.