Alcoa 2011 Annual Report Download - page 38

associated with business operations or provision of health or welfare benefits to employees due to changes in laws,
regulations or policies. The company is also subject to a variety of legal compliance risks. These risks include, among
other things, potential claims relating to product liability, health and safety, environmental matters, intellectual
property rights, government contracts, taxes, and compliance with U.S. and foreign export laws, anti-bribery laws,
competition laws and sales and trading practices. Alcoa could be subject to fines, penalties, damages (in certain cases,
treble damages), or suspension or debarment from government contracts. 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 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. 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 several 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 tax effective in 2012, Quebec’s transition to a
“cap and trade” system with compliance required in 2013 and European direct emission regulations expected by 2013.
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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