Liable entities to be better informed in carbon decisions

Australia’s peak body for carbon market professionals has announced that a consortium led by Baker & McKenzie and ClimateWorks Australia with additional support from Seed Advisory Pty Ltd and ClimateMundial has been commissioned to undertake its latest research project.

Carbon Decision Making and Risk Management: A Guide for Business is the latest project to be added to the Carbon Market Institute’s comprehensive suite of publications which are designed to take liable entities along a journey to becoming sophisticated carbon market participants.

“The recent introduction of Australia’s carbon pricing mechanism presents a new range of issues to be managed by liable entities,” says Carbon Market Institute markets and research manager Lloyd Vas.

“For the first time, these businesses are compelled to examine their operations to determine how they can meet their emissions compliance obligations at least cost,” he says.

“What’s important about this research project is that it highlights strategic decisions not just at management level, but raises key questions about managing carbon exposure for boards. There is an opportunity in this new market for liable entities to outperform their sector peers through least cost compliance, which will in turn enhance shareholder value,” says Vas.

This research project aims to provide liable entities with a decision-tree type framework to analyse their business operations from a carbon cost perspective.

It will also assist liable entities with what is essentially a ‘make or buy’ decision. Performing a carbon price sensitivity analysis against a range of scenarios, the research will provide the reader with the methodology and a software tool to assist in making carbon management decisions.

“Liable entities will have the opportunity to see the software tool first hand at Carbon Expo Australasia in Melbourne,” says Vas. “A practical workshop on 7 November will showcase the tool and delegates will be provided with a better understanding of the ‘make or buy’ decision and the risks involved.”

As 34 local governments are liable under the carbon pricing mechanism, the report will include a chapter specific to local government with a particular focus on CFI landfill projects.

The report will conclude with an in-depth analysis of the risk management options where business has decided to employ a ‘buy’ strategy.

Carbon Decision Making and Risk Management: A Guide for Business is the first in a new suite of three CMI ‘Guides for Business’. In the coming months, the Institute will also publish An Analysis of Carbon Units: A Guide for Business and Carbon Procurement and Trading: A Guide for Business.

This latest project builds on the success of the Institute’s 2011-12 program of research:

  • Australia’s Clean Energy Legislative Package: A Guide for Business, authored by Baker & McKenzie
  • Implementing the Carbon Farming Initiative: A Guide for Business, authored by Norton Rose and RAMP Carbon
  • Carbon Market Integrity: A review of the Australian Carbon Pricing Mechanism, authored by Bond University and peer reviewed by Baker & McKenzie
  • Reporting and Accounting Requirements for the Australian Carbon Market: A Guide for Business, authored by Ernst & Young and the University of Melbourne
  • Evolution of the Australian Carbon Market: Lessons from commodity and financial markets, authored by PwC

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