Climate-change legislation and regulation.

• Author: Miller, Matt
• Position: Washington insights

Energy issues are getting international attention. While some related issues--global warming and climate change--are topics that are subject to some controversy in scientific circles, numerous governments have already formalized commitments to take action and respond to climate change.

The majority of these commitments come with a pledge to reduce greenhouse gas emissions (carbon dioxide is the main culprit blamed for global warming).

Many global companies are already affected by the regulation of carbon emissions. As such, many have altered their corporate planning, capital investments and manufacturing processes. Europe's carbon regulation--a potential model for the U.S.--has mandated that more than 10,000 manufacturers and power plants buy permits to emit carbon if they exceed their government allowance.

The prospect of U.S. corporations operating in a carbon-constrained economy presents a myriad of issues. Such a policy change would alter corporate planning for pertinent sectors, especially energy and manufacturing; and compliance requirements and implementation costs could potentially cost trillions of dollars.

Further, companies engaging in carbon-reduction activities should ensure their actions are appropriately communicated to provide capital markets with sufficient information to understand the underlying financial and economic consequences. Presently, there is no definitive accounting guidance in relation to emissions and abatement activities, but the International Accounting Standards Board has reportedly decided to put the issue back onto its active agenda.

Congressional Activity

In the U.S., key members of Congress and both presidential candidates appear eager to address climate change and related issues via legislation. Sens. John McCain (R-Ariz.) and joe Lieberman (I-Conn.) first introduced greenhouse gas emission-control legislation in the Senate more than five years ago. Since this initial legislation, Democratic leadership has moved more legislation higher on its list of priorities, resulting in a flurry of activity.

In the past year alone, the 110th Congress introduced more than 50 separate bills to address greenhouse gas emissions and held more than 100 committee hearings on climate change-related topics.

Clearly, legislation in this area remains a priority, but a lack of consensus on how to best address these and related issues within the Senate has caused it to proceed slowly. Several policy options have been proposed...