- The businesses that will be subject to the scheme will have to self-report the amount of carbon emissions that they generate. Whether this is based on inputs or outputs, it means some rather detailed manufacturing reporting, and that's where the engineers will need to set up the appropriate systems.
- Businesses will be issued permits assigning given carbon allowances for what they are allowed to consume. Depending on the scheme's design, some permits may be given out for free, while others may be issued upon payment of a given price per tonne of carbon emissions involved. It you emit less carbon than you are permitted, you can sell the excess allowances on the open market. If you emit more carbon than you have allowances for, you will be assessed a fine, unless you purchase other businesses' excess allowances. That is where the accountants come in, to keep track of the company's exposure and ensure that everything is being properly reported.
- Over time, the amount of carbon allowances will be proportionately reduced, in order to compel reductions in the generation of emissions.
- Who will qualify for free allowances?
- Will the scheme cover all emitters, or will certain exemptions or minimum thresholds apply?
- How efficiently will the open market for excess allowances work?
- As emissions caps are being progressively reduced, will it be cheaper to invest in new equipment in order to meet the targets, or will it be cheaper to pay the fines?
- Would it be worth your while to invest in new equipment now, if the market price for your excess allowances will generate a positive net present value?
- Similar concerns arise about the financial viability of investing in carbon offset projects and other methods of securing credits.