BP 2009 Annual Report Download - page 50

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BP Annual Report and Accounts 2009
Business review
Greenhouse gas regulation
Increasing concerns about climate change have led to a number of
international, national and regional measures to limit greenhouse gas
emissions; additional stricter measures can be expected in the future.
Current measures and developments affecting our businesses include
the following:
• The Kyoto Protocol currently commits 38 ratified parties to meet
emissions targets in the commitment period 2008 to 2012.
• The UN summit in Copenhagen in December 2009 where Parties to
the UN Framework Convention on Climate Change (UNFCCC) took
note of the Copenhagen Accord. The Accord recognizes the scientific
view that the increase in global temperature should be below 2°C.
Signatories to the Accord are to append to it their emissions targets
for 2020 or their proposed GHG mitigation measures. By the end of
January 2010 the UNFCCC had received submissions of national
pledges to cut and limit greenhouse gases by 2020 from 55
countries. According to the UNFCCC, these countries together
account for 78% of global emissions from energy use.
• The European Union (EU) Climate Action and Renewable Energy
Package which requires increased greenhouse gas reductions,
improvements in energy efficiency and increased renewable energy
use by 2020 as well as including the Revision of the EU Emissions
Trading Scheme (EU ETS) directive. This regulates approximately
one-fifth of our reported 2009 global CO2emissions and can be
expected to require additional expenditure from 2013 when the
revision of the scheme (EU ETS Phase 3) comes into effect.
• Australia has committed to reduce its GHG emissions by between
5-25% below 2000 levels by 2020, depending on the extent of
international action. Australia has also developed an emissions trading
scheme. If passed in law, it will cover around 70% of the nation’s
GHG emissions including stationary energy and transport emissions.
• New Zealand has agreed to cut GHG emissions by 10-20% from
1990 levels by 2020, subject to certain conditions. New Zealand is
extending the scope of its Emission Trading Scheme in July 2010.
• In the US, recent national legislation has imposed stricter automobile
fuel emissions standards and biofuel mandates and legislative
proposals would impose GHG emission limits through cap-and-trade
programmes as well as mandates for alternative energy and
increases in energy efficiency.
• The US Environmental Protection Agency (EPA) released a GHG
endangerment finding in late 2009 giving it authority to regulate
GHG emissions under the Clean Air Act; it has also issued a GHG
reporting rule covering major stationary emission sources and
upstream fuel suppliers.
• A number of additional state and regional initiatives in the US will
affect our operations including regulation in California seeking to
reduce GHG emissions to 1990 levels by 2020, including
reductions in the carbon intensity of transport fuel sold in the
state.
• Canada has adopted an action plan to reduce emissions to 20%
below 2006 levels by 2020 and the national government seeks a
coordinated approach with the US on environmental and energy
objectives, such as a North America-wide cap-and-trade system.
Each of these measures can increase our production costs for certain
products, increase demand for competing energy alternatives or products
with lower-carbon intensity and affect the sales of many of our products.
US and EU regulations
Approximately 60% of our fixed assets are located in the US and the EU.
US and EU environment and health and safety regulations significantly
affect BP’s exploration and production, refining, marketing, transportation
and shipping operations. Significant legislation in the US and the EU
affecting our businesses and profitability includes the following:
United States
• The Clean Air Act (CAA) regulates air emissions, permitting, fuel
specifications and other aspects of our production, distribution and
marketing activities. Stricter limits on sulphur and benzene in fuels
will affect us going forward. Additionally, many states have separate
laws similar to the CAA.
• The Energy Policy Act of 2005 and The Energy Independence and
Security Act of 2007 affect our US fuel markets by, among other
things, imposing renewable fuel mandate and imposing GHG
emission thresholds for certain renewable fuels. States such as
California also impose additional carbon fuel standards.
• The Clean Water Act (CWA) regulates wastewater and other effluent
discharges from BP’s facilities, and BP is required to obtain discharge
permits, install control equipment and implement operational controls
and preventative measures.
• The Resource Conservation and Recovery Act (RCRA) regulates the
generation, handling, and disposal of wastes associated with our
operations and can require corrective action at locations where such
wastes have released.
• The Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), can, in certain circumstances, impose the
entire cost of investigation and remediation on a party who owned or
operated a contaminated site or arranged for waste disposal at the
site. BP has incurred, or expects to incur, liability under CERCLA or
similar state laws, including costs attributed to insolvent or
unidentified parties. BP is also subject to claims for remediation costs
under other federal and state laws, and to claims for natural resource
damages (NRD) under CERCLA, the OPA 90 and other federal and
state laws.
• The Toxic Substances Control Act regulates BP’s import, export and
sale of new chemical products.
• The Occupational Safety and Health Act (OSHA), imposes workplace
safety and health requirements on our operations along with
significant process safety management obligations.
• The Emergency Planning and Community Right-to-Know Act, requires
emergency planning and hazardous substance release notification as
well as public disclosure of our chemical usage and emissions.
• The US Department of Transportation (DOT) regulates the transport
of BP’s petroleum products such as crude oil, gasoline and
petrochemicals.
• The Marine Transportation Security Act and the DOT Hazardous
Materials (HAZMAT) and the Chemical Facility Anti-Terrorism
Standard (CFATS) regulations impose security compliance regulations
on BP and require security vulnerability assessments, security
mitigation plans and require security upgrades that increase our cost
of operations.