BP 2010 Annual Report Download - page 81


Businessreview
Business review
 Signatoriesformallycommittocarbonreductiontargetsoractionsby
2020.Around80countries,includingallthemajoreconomiesandmany
developingcountries,havemadesuchcommitments.Supportingthose
efforts,principleswereagreedformonitoring,verifyingandreporting
emissionsreductions;establishmentofagreenfundtohelpdeveloping
countrieslimitandadapttoclimatechange;andmeasurestoprotect
forestsandtransferlow-carbontechnologytopoorernations.
• TheEuropeanUnion(EU)ClimateActionandRenewableEnergy
Packagewhichrequiresincreasedgreenhousegasreductions,
improvementsinenergyefciency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-fthofourreported2009globalCO2emissionsandcanbe
expectedtorequireadditionalexpenditurefrom2013whenthenext
revisionofthescheme(EUETSPhase3)comesintoeffect.Themain
changesinEUETSwillbeasignicantincreaseintheauctioningof
allowances,theendoffreeallocationsforelectricityproduction,an
expandedscopecoveringadditionalcommercialsectorsandgases,
certainfreeallocationsdeterminedmainlybyEU-widesector
benchmarksascompensationforcarbonleakage(relocationtoless
regulatedjurisdictions),andconsiderationofcarboncaptureandstorage
installations.
• TheEURenewablesEnergyDirective(RED)requiresthattheshareof
energyfromrenewablesourcesinallformsoftransportin2020beat
least10%ofthenalconsumptionofenergyintransportinthat
memberstate.
• Article7aoftherevisedEUFuelsQualityDirectiverequiresfuel
supplierstoreducethelifecycleGHGemissionsperunitoffueland
energysuppliedincertaintransportmarketsfrom2011.
• BP’sfacilitiesintheUKaresubjecttotheUKCarbonReduction
CommitmentScheme(CRCEES),whichhasrecentlybeenmodiedto
endtherecyclingofrevenuesbacktoparticipants.Thiscanbe
expectedtorequireadditionalexpendituresforcompliance.
• AustraliahascommittedtoreduceitsGHGemissionsbybetween
5-25%below2000levelsby2020,dependingontheextentof
internationalaction.AproposedGHGemissionstradingscheme(CPRS)
hasbeenscrappedbytheincomingcoalitiongovernment,butaforum
(theMultiPartyClimateChangeCommittee)hasbeenestablishedto
investigateoptionsforimplementingacarbonpriceandtohelpbuild
consensusonAustralia’smeasurestoaddressclimatechange.
• NewZealandhasagreedtocutGHGemissionsby10-20%from1990
levelsby2020,subjecttocertainconditions.NewZealand’semission
tradingscheme(NZETS)commencedon1July2010fortransport
fuels,industrialprocesses,andstationaryenergy.Theagriculturesector
(45%ofNewZealand’sGHGemissions)hasbeenproposedtojointhe
NZETSinJanuary2015.
• IntheUS,followingthefailuretopasscomprehensiveclimate
legislation,theUSEnvironmentalProtectionAgency(EPA)ispursuing
regulatorymeasurestoaddressGHGsundertheCleanAirAct(CAA).
 – Inlate2009,theEPAreleasedaGHGendangermentndingto
establishitsauthoritytoregulateGHGemissionsundertheCAA.
 – Subsequenttothis,EPAnalizedregulationsimposinglightduty
vehicleemissionsstandardsforGHGs.
 – T heEPAnalizedtheinitialGHGmandatoryreportingrule(MRR)in
2009andamendedorproposedamendmentstoitseveraltimes
during2010.
 – TheEPAnalizedpermittingrequirementsfornewormodiedlarge
GHGsourcesin2010,withtheseregulationstakingeffectin
January2011.
 – TheEPA’seffortstoregulateGHGemissionsthroughtheCAAare
subjecttonumerouslegalchallengesandactivepoliticaldebateso
thatthenalcontentandscopeofGHGregulationintheUSremains
uncertain.
• AnumberofadditionalstateandregionalinitiativesintheUSwillaffect
ouroperations.Ofparticularsignicance,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andisontargettocomplete
emissionscap-and-trade,lowcarbonfuel,andotherGHGregulationsin
2011forprogrammestartupinJanuary2012.
• Canadahasadoptedanactionplantoreduceemissionsto17%below
2005levelsby2020andthenationalgovernmentseeksaco-ordinated
approachwiththeUSonenvironmentalandenergyobjectives.
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andspecicationsofmanyof
ourproducts.
USandEUregulations
Approximately62%ofourxedassetsarelocatedintheUSandtheEU.
USandEUenvironment,healthandsafetyregulationssignicantlyaffect
BP’sexplorationandproduction,rening,marketing,transportationand
shippingoperations.SignicantlegislationandregulationintheUSandthe
EUaffectingourbusinessesandprotabilityincludesthefollowing:
United States
• TheCleanAirAct(CAA)regulatesairemissions,permitting,fuel
specicationsandotheraspectsofourproduction,distributionand
marketingactivities.Stricterlimitsonsulphurandbenzeneinfuelswill
affectusinfuture,aswillactionsonGHGemissions.Additionally,many
stateshaveseparateairemissionlawsinaddition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mandatesandimposingGHGemissions
thresholdsforcertainrenewablefuels.StatessuchasCaliforniaalso
imposeadditionalfuelcarbonstandards.
• TheCleanWaterAct(CWA)regulateswastewaterandotherefuent
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,storage,transportationanddisposalofwastesassociated
withouroperationsandcanrequirecorrectiveactionatlocationswhere
suchwasteshavebeen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theCERCLAor
similarstatelaws,includingcostsattributedtoinsolventorunidentied
parties.BPisalsosubjecttoclaimsforremediationcostsunderother
federalandstatelaws,andtoclaimsfornaturalresourcedamages
undertheCERCLA,theOilPollutionActof1990(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imposesworkplacesafetyand
healthrequirementsonouroperationsalongwithsignicantprocess
safetymanagementobligations.
• TheEmergencyPlanningandCommunityRight-to-KnowActrequires
emergencyplanningandhazardoussubstancereleasenotication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(MTSA),theDOTHazardous
Materials(HAZMAT)andtheChemicalFacilityAnti-TerrorismStandard
(CFATS)regulationsimposesecuritycomplianceregulationson
approximately150BPfacilities.Theseregulationsrequiresecurity
vulnerabilityassessments,securitymitigationplansandsecurity
upgrades,increasingourcostofoperations.
BPAnnualReportandForm20-F2010 79