Alcoa 2014 Annual Report Download - page 58

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 Alcoa may be liable may arise in the future at its present sites, where no problem is
currently known, at previously owned sites, sites previously operated by the Company, sites owned by its predecessors
or sites that it may acquire in the future. Compliance with environmental, health and safety legislation and regulatory
requirements may prove to be more limiting and costly than the Company anticipates. 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, Québec’s transition to a “cap and trade” system with compliance
required beginning 2013, the European Union Emissions Trading Scheme and the United States’ clean power plan for
existing power plants, proposed on June 18, 2014. 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.
The potential physical impacts of climate change on the Company’s operations are highly uncertain, and will be
particular to the geographic circumstances. These may include changes in rainfall patterns, shortages of water or other
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