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CCCA_V4No2_Col-MillerThom-FIN.qxd:CCCA_V1No2_Col-LabrEmpl-V1.qxd 4/29/10 4:33 PM Page 40 Legal Update – Miller Thomson LLP Does your company need a climate change checkup? ith international and national climate lish a cap-and-trade type of system for emitters Business opportunities Wchange initiatives apparently stalled in in various industrial sectors. Companies typically stop their checkup at the aftermath of the global economic crisis In addition to regulatory risks, where the point of identifying risks; however cli- and a lack of progress at Copenhagen, there are carbon taxes, corporations face mate change issues can create significant busi- Canadian businesses that are not regulated as economic risks that can affect their compet- ness opportunities as well. Corporations large-scale emitters of greenhouse gases itiveness. In 2007, Québec was the first to whose products and services reduce GHG (GHGs) might think they will be unaffected impose a type of “carbon tax” (called a emissions may be generating valuable emis- by climate change regulatory and policy “duty”) that applies to the bulk sale of fossil sions credits for compliance and voluntary developments.As climate change fatigue sets fuel.The duty depends on the fuel’s carbon markets. Opportunities also include expand- in, corporations may question whether cli- intensity. In mid-2008, British Columbia ing markets for GHG-reducing materials, mate change even remains relevant. introduced a “revenue neutral” carbon tax products and services, such as energy retrofit We would argue that a spate of sharehold- (i.e. the revenue is returned to taxpayers audits and carbon footprinting. Pursuing ers’ resolutions in 2009 demanding greater through personal and business tax cuts).The “green” funding for energy efficiency, con- corporate disclosure of corporate GHG emis- tax rises over time and is imposed on most servation and new construction is also a bud- sion status and corporate strategic planning carbon-based fuels. ding opportunity. However, to be successful around climate change issues speaks to con- For publicly traded companies, the biggest in this burgeoning marketplace, you need a tinued relevance for some shareholders.This climate change risk is meeting increased cli- full understanding of the funding process, also highlighted the growing expectations on mate change risk disclosure demands. Under time limits and quantification and verifica- businesses to factor the positive and negative existing securities law, publicly traded issuers tion requirements before factoring these con- effects of climate change into their corporate are subject to continuous disclosure require- tributions into your checkup. plans. Despite the temptation for corporate ments, which undoubtedly include climate Given the complexity,rapid pace of change counsel to adopt a wait-and-see response, the change. However, recent reviews of practices and uncertainty and inconsistency across push for increasing disclosure and the worry in the United States suggest that at least three- jurisdictions, corporate counsel may wish to of being left behind in an expanding market- quarters of S&P 500 companies are silent in “duck and cover” in the hope that the winds place are causing some corporations to ask: respect of climate change opportunities, risks of change do not affect them.The emerging “Do we need a climate change checkup to and potential for impacts on shareholder val- consensus, however, is that all businesses, take stock of how we respond to climate ues. Studies of Canadian companies indicate regardless of their size will be required to change risks and opportunities?” Canadian corporations fare no better. With grapple with both the risks and opportunities The first step is to identify whether there guidance only beginning to emerge, assessing created by climate change. Those who have are regulatory requirements that are or will the adequacy of disclosure remains a compli- conducted their own checkup, on their own impose GHG monitoring, assessment, report- ance officer’s nightmare. Canadian corpora- time, may be best situated to respond. ing and reduction requirements. Alberta, tions should prepare for increasing disclosure Please contact: In British Columbia: Tony British Columbia and Ontario have all taken requirements and be mindful that silence is no Crossman at 604-643-1244, tcrossman@ steps to implement mandatory GHG report- longer an acceptable option. millerthomson.com; In Ontario: Aaron Atcheson ing regimes applicable to various types of large In addition to legal and regulatory risks, at 519-931-3526,aatcheson@millerthomson.com; scale emitters. From reporting requirements, physical and reputational risks that vary In Alberta: Teresa Meadows at 780.429.9706, the next regulatory question is whether regu- considerably depending upon the sector and tmeadows@millerthomson.com; and in Québec: lated limits on permissible GHG emissions location of your company, also need to be Luc Gratton at 514.871.5482, lgratton@ have been imposed.Until recently,Alberta was considered. These risks can have many millerthomsonpouliot.com. the only province with emissions reductions effects, such as increasing the costs of insur- The authors would like to thank Charles Bois, Luc targets in place,but British Columbia,Ontario ance and financing, facility construction, Gratton, Sarah Hansen and John Tidball for their con- tributions to the analysis of provincial initiatives and and Québec have, or are in the process of operating and maintenance and limiting Virginia Huang for the corporate disclosure discussion introducing the legislation necessary to estab- market opportunities. contained in this article. 40 CCCA Canadian Corporate Counsel Association SUMMER 2010