Carbon Disclosure Project – Nordic 260 Report 2011
‘Competition for wood fibre is driven by a regulatory demand for non-fossil fuel created from the biofuel sector which is driving up prices for wood raw material.’
SCA
Regulatory uncertainty is holding back emissions-reducing investments
Judging by the Nordic 260 responses, regulation accounts for some of the most clearly identifiable material risks that companies face in relation to climate change. In Transportation, Energy & Utilities, Materials and Industrials, almost all respondents say that costs and/or sales are sensitive to a range of international, regional and national regulations and taxes relating to fuel, energy and emissions. Moreover, developments in the regulatory framework are not always easy to predict.
In most cases, the issue is not climate change regulation in itself. On the contrary, most large firms in the Nordic region consider themselves to be ahead of the game when it comes to low-carbon technology, and many say explicitly that they expect to benefit from tougher standards – provided that such standards are consistently applied.
However, the lack of international agreement on tackling climate change – both within the UN Framework Convention on Climate Change and in international organisations governing sectors such as shipping and aviation – creates uncertainty over future regulation. Companies are also concerned that the vacuum may be filled by inconsistent national and regional regulations that will prove distortionary or difficult to enforce.
Among the concerns highlighted in company responses: • The EU and Norway have offered further reductions in GHG emissions by 2020 if other large emitters make similar commitments as part of a global deal. Emissions may have to fall by 30% instead of 20% in the EU, and 40% instead of 30% in Norway (compared with 1990 levels). But companies are unsure whether to take the necessary action now or, like some of their competitors (at home and abroad), to wait and see.
• The lack of progress towards a global carbon market in aviation has led the EU to step into the breach by bringing the sector under the aegis of its Emissions Trading System (ETS) from 2012. But the application of the ETS to non-EU carriers’ flights to and from the EU faces stiff legal and political challenges. Airlines in the Nordic region fear that their non- EU competitors will, one way or another, gain an unfair advantage.
• Progress towards a market-based mechanism in shipping has also been slow. Some see regulation as a more likely alternative, in the form of mandatory requirements under the IMO’s Energy Efficiency Design Index and Ship Energy Efficiency Management Plan schemes. But this too could take time, and some Nordic respondents say they will need to see the details before spending substantial amounts on upgrading their fleets.
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