BP 2012 Annual Report Download - page 99

Business review: BP in more depth
Business review: BP in more depth
BP Annual Report and Form 20-F 2012
97
lower-carbon intensity and affect the sales and specifications of many of
BP’s products. Current measures and developments potentially affecting
BP’s businesses include the following:
t The European Union (EU) has agreed an overall GHG reduction target of
20% by 2020. To meet this, a ‘Climate and Energy Package’ of
regulatory measures has been adopted including: national reduction
targets for emissions not covered by the EUETS; binding national
renewable energy targets to double renewable energy in the EU
including at least a 10% share of final energy in transport; a legal
framework to promote carbon capture and storage (CCS); and a revised
EUETS Phase 3. EUETS revisions include a GHG reduction of 21% from
2005 levels, a significant increase in allowance auctioning, an expanded
scope (sectors and gases), no free allocations for electricity production
but free allocations for energy-intense and trade-exposed industrial
sectors. Finally, EU energy efficiency policy is currently addressed via
national energy efficiency action plans and the Energy Efficiency
Directive adopted in 2012.
t Article 7a of the revised EU Fuel Quality Directive requires fuel suppliers
to reduce the life cycle GHG emissions per unit of fuel and energy
supplied in certain transport markets.
t Australia has committed to reduce its GHG emissions by at least 5%
below 2000 levels by 2020. In support of this, a Clean Energy legislative
package of 19 bills was passed in November 2011, which includes
imposing a carbon price on the top 500 emitting entities meeting the
thresholds in the bill. The carbon price took effect on 1 July 2012 with a
fixed price of $23 Australian dollars (indexed to forecast inflation) until
1 July 2015, an international linked price (trading) with floor and ceiling
prices from 1 July 2015 through to 1 July 2018, and a market-based
price (trading) forward. A certain portion of allowances will be
distributed to ‘emission intensive trade exposed’ businesses for no
cost; this transitional support decreases with time. The majority of our
Australia business emissions will be subject to the pricing scheme and
will require additional expenditures for compliance.
t New Zealand has agreed to cut GHG emissions by 10-20% below 1990
levels by 2020, subject to a comprehensive global agreement for
emissions reductions coming into force. New Zealand’s emission
trading scheme (NZ ETS) commenced on 1 July 2010 for transport
fuels, industrial processes and stationary energy. New Zealand also
employs a portfolio of mandatory and voluntary complementary
measures aimed at GHG reductions. New Zealand has announced its
intention to make its next commitments for GHG reduction under the
UN Framework Convention rather than the Kyoto treaty.
t In the US, with the potential for passing comprehensive climate
legislation remaining very unlikely, the US Environmental Protection
Agency (EPA) continues to pursue regulatory measures to address
GHGs under the Clean Air Act (CAA).
– In late 2009, the EPA released a GHG endangerment finding to
establish its authority to regulate GHG emissions under the CAA.
– Subsequent to this, the EPA finalized regulations imposing light duty
vehicle emissions standards for GHGs.
– The EPA finalized the initial GHG mandatory reporting rule
(GHGMRR) in 2009 and continues to make amendments to the rule.
Reports under the GHGMRR are due annually. The majority of BP’s
US businesses are affected by the GHGMRR and submitted their
GHG emissions reports to the EPA under the GHGMRR on or before
the required deadlines. In addition to direct emissions from affected
facilities, producers and importers/exporters of petroleum products,
certain natural gas liquids and GHGs are required to report product
volumes and notional GHG emissions as if these products were fully
combusted. The EPA is expected to publically release direct and
product emission early in 2013 with certain confidential business
information protections.
– The EPA finalized permitting requirements for new or modified large
GHG emission sources in 2010, with these regulations taking effect
in January 2011, the second phase taking effect on 1 July 2011 and
the third phase finalized on 29 June 2012.
– In a legal settlement with environmental advocacy groups the EPA
committed to propose regulations under their New Source
Performance Standards (NSPS) for GHG emissions from refineries
by December 2011 and to finalize these by November 2012. These
deadlines were not met and it is not known when or if EPA will
propose regulations for refineries under their NSPS provisions.
– Legal challenges to the EPA’s efforts to regulate GHG emissions
through the CAA continue along with active political debate with the
final content and scope of GHG regulation in the US remaining
uncertain.
t A number of additional state and regional initiatives in the US will affect
our operations. Of particular significance, California is seeking to reduce
GHG emissions to 1990 levels by 2020 and to reduce the carbon
intensity of transport fuel sold in the state, California implemented a
low-carbon fuel standard in 2010. Although legal challenges continue,
the preliminary injunction stopping implementation was lifted and
implementation of the programme continues. The California cap and
trade programme started in January 2012 with the first auctions of
carbon allowances held in November 2012 and obligations commencing
in 2013.
t Canada has established an action plan to reduce emissions to 17%
below 2005 levels by 2020 and the national government continues to
seek a co-ordinated approach with the US on environmental and energy
objectives. Additionally, Canada’s highest emitting province, Alberta,
has been running a market mechanism to reduce GHG since 2007.
Controversy, partially driven by perceived GHG intensity regarding
Canadian oil sand produced crude, continues with some jurisdictions
contemplating policies to restrict or penalize its use.
t China has committed to reducing carbon intensity of GDP 40-45%
below 2005 levels by 2020 and increasing the share of non-fossil fuels
in total energy consumption from 7.5% in 2005 to 15% by 2020. The
country’s 12th (2011-2015) Development Programme has set the target
to reduce carbon intensity by 17% within five years, and this national
target has been deconstructed into provincial ones for local actions.
Meanwhile, two provinces and five cities are developing pilot schemes
for emissions trading. As part of the country’s energy saving
programme, the government also requires any operating entity with
annual energy consumption of 10 thousand tonnes of coal equivalent
(7ktoe/a) to have an energy saving target for the next five years. A
number of BP joint venture companies in China will be required to
participate in these initiatives.