Alcoa 2013 Annual Report Download - page 49

While Alcoa believes it has adopted appropriate risk management and compliance programs to address and reduce
these risks, the global and diverse nature of its operations means that these risks will continue to exist, and additional
legal proceedings and contingencies may arise from time to time. In addition, various factors or developments can lead
the Company to change current estimates of liabilities or make such estimates for matters previously not susceptible of
reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory
developments or changes in applicable law. A future adverse ruling or settlement or unfavorable changes in laws,
regulations or policies, or other contingencies that the Company cannot predict with certainty could have a material
adverse effect on the Company’s results of operations or cash flows in a particular period. For additional information
regarding the legal proceedings involving the Company, see the discussion in Part I, Item 3. (Legal Proceedings) of this
report and in Note N to the Consolidated Financial Statements in Part II, Item 8. (Financial Statements and
Supplementary Data).
Alcoa is subject to a broad range of health, safety and environmental laws and regulations in the jurisdictions in
which it operates and may be exposed to substantial costs and liabilities associated with such laws and
regulations.
Alcoa’s operations worldwide are subject to numerous complex and increasingly stringent health, safety and
environmental laws and regulations. The costs of complying with such laws and regulations, including participation in
assessments and cleanups of sites, as well as internal voluntary programs, are significant and will continue to be so for
the foreseeable future. Environmental laws may impose cleanup liability on owners and occupiers of contaminated
property, including past or divested properties, regardless of whether the owners and occupiers caused the
contamination or whether the activity that caused the contamination was lawful at the time it was conducted.
Environmental matters for which we may be liable may arise in the future at our present sites, where no problem is
currently known, at previously owned sites, sites previously operated by us, sites owned by our predecessors or sites
that we may acquire in the future. Compliance with environmental, health and safety legislation and regulatory
requirements may prove to be more limiting and costly than we anticipate. Alcoa’s results of operations or liquidity in
a particular period could be affected by certain health, safety or environmental matters, including remediation costs and
damages related to certain sites. Additionally, evolving regulatory standards and expectations can result in increased
litigation and/or increased costs, all of which can have a material and adverse effect on earnings and cash flows.
Climate change, climate change legislation or regulations and greenhouse effects may adversely impact Alcoa’s
operations and markets.
Energy is a significant input in a number of Alcoa’s operations. There is growing recognition that consumption of
energy derived from fossil fuels is a contributor to global warming.
A number of governments or governmental bodies have introduced or are contemplating legislative and regulatory
change in response to the potential impacts of climate change. There is also current and emerging regulation, such as
the mandatory renewable energy target in Australia, Australia’s carbon pricing mechanism introduced in 2012,
Québec’s transition to a “cap and trade” system with compliance required beginning 2013 and the European Union
Emissions Trading Scheme. Alcoa will likely see changes in the margins of greenhouse gas-intensive assets and
energy-intensive assets as a result of regulatory impacts in the countries in which the Company operates. These
regulatory mechanisms may be either voluntary or legislated and may impact Alcoa’s operations directly or indirectly
through customers or Alcoa’s supply chain. Inconsistency of regulations may also change the attractiveness of the
locations of some of the Company’s assets. Assessments of the potential impact of future climate change legislation,
regulation and international treaties and accords are uncertain, given the wide scope of potential regulatory change in
countries in which Alcoa operates. The Company may realize increased capital expenditures resulting from required
compliance with revised or new legislation or regulations, costs to purchase or profits from sales of, allowances or
credits under a “cap and trade” system, increased insurance premiums and deductibles as new actuarial tables are
developed to reshape coverage, a change in competitive position relative to industry peers and changes to profit or loss
arising from increased or decreased demand for goods produced by the Company and indirectly, from changes in costs
of goods sold.
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