CAP Regulatory Compliance & Reporting 2 — Questions and Answers
Question 1: Under the EPA's Mandatory Greenhouse Gas Reporting Rule (40 CFR Part 98), which facilities are required to report?
- All US businesses with any GHG emissions
- Facilities emitting 25,000 metric tons CO2e or more per year (Correct answer)
- Only power plants and refineries regardless of emission level
- Federal government facilities only
Correct answer: Facilities emitting 25,000 metric tons CO2e or more per year
40 CFR Part 98 requires facilities that emit 25,000 metric tons CO2e or more annually to report to EPA.
Question 2: The SEC's climate disclosure rules require publicly traded companies to report Scope 1 and Scope 2 emissions. What additional disclosure may be required for larger accelerated filers?
- Scope 4 (avoided emissions)
- Scope 3 (value chain emissions) if material (Correct answer)
- Only biogenic CO2 separately
- Real-time emissions monitoring data
Correct answer: Scope 3 (value chain emissions) if material
Larger accelerated filers must also disclose Scope 3 emissions if they are material or included in climate targets.
Question 3: California's Cap-and-Trade Program is administered by which agency?
- California Environmental Protection Agency (CalEPA)
- California Air Resources Board (CARB) (Correct answer)
- California Public Utilities Commission (CPUC)
- South Coast Air Quality Management District (SCAQMD)
Correct answer: California Air Resources Board (CARB)
CARB administers California's Cap-and-Trade Program under AB 32 and subsequent legislation.
Question 4: In the EU Emissions Trading System (EU ETS), what is the function of the 'linear reduction factor' (LRF)?
- Sets the penalty rate for excess emissions
- Determines the annual decrease in total allowances issued (Correct answer)
- Calculates the benchmark for free allocation
- Defines the conversion factor between different GHGs
Correct answer: Determines the annual decrease in total allowances issued
The LRF mandates a fixed annual percentage reduction in the total cap of allowances, driving long-term decarbonization.
Question 5: Which international framework established the first legally binding targets for developed nations to reduce GHG emissions?
- Paris Agreement (2015)
- Montreal Protocol (1987)
- Kyoto Protocol (1997) (Correct answer)
- Rio Earth Summit Declaration (1992)
Correct answer: Kyoto Protocol (1997)
The Kyoto Protocol (1997) was the first legally binding international treaty setting GHG reduction targets for Annex I countries.
Question 6: When verifying a company's GHG inventory for regulatory reporting, an auditor discovers that the company applied an outdated emission factor. What is the most appropriate corrective action?
- Accept the report as-is since the factor was approved in a prior year
- Require recalculation using the current emission factor and restatement if material (Correct answer)
- Issue a qualified opinion only if the error exceeds 10%
- Flag the issue but allow submission to the regulator without correction
Correct answer: Require recalculation using the current emission factor and restatement if material
Material errors from outdated emission factors require recalculation and restatement to ensure regulatory report accuracy.
Question 7: Under the GHG Protocol Corporate Standard, which boundary-setting approach assigns emissions based on a company's equity share in an operation?
- Operational control approach
- Financial control approach
- Equity share approach (Correct answer)
- Contractual instrument approach
Correct answer: Equity share approach
The equity share approach allocates GHG emissions proportional to the company's ownership stake in a joint venture or facility.
CAP Regulatory Compliance & Reporting 2
Under the EPA's Mandatory Greenhouse Gas Reporting Rule (40 CFR Part 98), which facilities are required to report?