Pre-audits go critical for some 100 greenhouse gas emitters in Québec: Ernst & Young

(Montreal, 15 December 2011) Québec is stepping into the carbon market era with the adoption of a new greenhouse gas (GHG) emissions cap-and-trade system that gives rise to new legal and financial risks for emitters – but also opens up new opportunities, according to Ernst & Young. Just as in traditional financial markets, audits are key to guaranteeing system integrity and certifying emission data credibility for emitters, buyers and sellers.

“The new regulation adopted today complements the existing regulation governing mandatory reporting for the emission of certain substances into the atmosphere,” says Thibaut Millet, Ernst & Young’s Climate Change and Sustainability Services Leader in Québec. “This announcement is positive for the environment and for future generations, but in the short term it means increased administrative complexity and added costs for establishments whose annual GHG emissions reach or exceed the yearly threshold of 25,000 metric tons of CO2 equivalent.”

Capping and reduction of GHG emissions will start on January 1st 2013. Regulated emitters in the industry and electricity sectors in particular have every interest in putting 2012 to good use to make sure their transition is smooth.

A pre-audit (trial run) on 2011 data is an effective way to review the data acquisition process, emissions calculation and controls put in place to be able to make the necessary adjustments in January 2012 to pass the required verification test on the 2012 declaration.

“The clock is ticking on business leaders to validate the integrity of their data and the quality of their controls,” explains Millet. “2012 is a perfect opportunity to prepare in order to avoid a qualified opinion – or a refusal to issue an opinion – on the regulatory verification the following year. These situations have arisen in British Columbia and they’ve been perceived very negatively by stakeholders in the businesses concerned.”

All establishments whose annual GHG emissions exceed the threshold of 25,000 metric tons of CO2 equivalent will have to comply in 2012 with the reporting and verification requirements of the “Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere”. Ernst & Young offers the following thought leadership:

• Different emission calculation methods are used for different types of establishments. Make sure you choose the right one for you and define appropriate data acquisition and emission calculation methods for application in January 2012.
• Where the Regulation does not prescribe a method for a particular type of establishment, emitters are responsible for defining one in collaboration with the Ministère and for having it approved. The window of opportunity for implementing a method between now and January is closing quickly.
• A third-party pre-audit of 2011 emissions is the best way to measure and settle differences before they become problematic.
• Certain establishments can receive early reduction credits. An assessment should be carried out in order to apply for credits before the end of 2012 to take advantage of this possibility.

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