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Details
Deep dive
Background
The Mandatory Reporting of Greenhouse Gas Emissions (MRR) regulation in California is administered by the California Air Resources Board (CARB). First approved in 2007 and last amended in 2018, the MRR is a key plank of climate change mitigation policy in California requiring the annual reporting of greenhouse gas (GHG) emissions by certain businesses and facilities in the state. The MRR was established as part of the implementation of the California Global Warming Solutions Act (GWSA) of 2006 which originally aimed at reducing greenhouse gas (GHG) emissions in California to 1990 levels by 2020. This initial GHG emissions reduction target was met before schedule in 2016, and more ambitious statewide targets have since been set for the state including achieving carbon neutrality by 2045. The MRR was preceded by environmental regulations such as the California Environmental Quality Act (CEQA) and the Pavley Act (AB 1493), which focused on reducing emissions from vehicles. The MRR was designed to provide accurate and consistent data on GHG emissions, enabling the tracking of progress toward statewide emissions reduction goals. More recently, AB 32 has been complemented by the Climate Corporate Data Accountability Act (CCDAA) which has extended mandatory GHG emissions reporting to a larger number of businesses.
What are the requirements of the MRR?
Businesses and facilities subject to the MRR are required to annually report their Scope 1 (direct) and Scope 2 (indirect) GHG emissions. The annual report must include emissions data from specific GHGs listed in the MRR regulations including carbon dioxide, methane, and nitrous oxide. The annual emissions report must include overall emissions as well as emissions associated with particular processes. In calculating their emissions, reporting entities must follow standardized methodologies. All reports must pass through third-party verification before submission through an online tool provided by the CARB. Depending on the type of entity (see below), reports are due by April 10 or June 1 of each calendar year.
Which entities are affected by the MRR?
The MRR requires annual emissions reporting from the following facility operators in California, irrespective of emissions level:
Electricity generation units that report carbon dioxide (CO₂) mass emissions all through the year.
Facility operators engaged in any of the following: cement production, lime manufacturing, nitric acid production, petroleum refineries, geologic sequestration of carbon dioxide, and injection of carbon dioxide.
The MRR requires annual emissions reporting from the following facility operators in California when annual emissions of carbon dioxide, methane, and nitrous oxide are 10,000 metric tons carbon dioxide equivalents (CO₂e) or more:
Stationary fuel combustion; glass production; hydrogen production; iron and steel production; pulp and paper manufacturing; petroleum and natural gas systems; geothermal electricity generation; lead production.
Suppliers of carbon dioxide and fuel for consumption within California. This includes, among others, liquefied petroleum gas producers; operators of interstate pipelines delivering natural gas; and importers of liquefied petroleum gas, compressed natural gas, or liquefied natural gas.
Electric power entities including, among others, electricity importers and exporters and retail providers of electricity.
Operators of petroleum and natural gas systems including, among others, petroleum and natural gas production facilities (offshore and onshore); underground and liquified natural gas storage facilities; and liquefied natural gas import and export facilities.
Penalties for noncompliance
The CARB has established robust enforcement mechanisms to ensure timely and accurate emissions reporting. Noncompliance with the reporting requirements of the MRR can result in significant sanctions including financial penalties. Penalties are intended to eliminate any financial gain a responsible party may have achieved by failing to comply, and to discourage similar violations from occurring within the industry in the future. In the determination of penalties, the CARB looks into all relevant factors, including, among others, a reporting entity's previous violation record as well as the size and complexity of its operations. Recent enforcement action by the CARB in relation to inaccurate emissions reporting has resulted in penalties of $850,000 on Tesoro Refining & Marketing Company LLC, $624,000 on BP West Coast Products LLC (BP), and $493,500 on ExxonMobil Oil Corporation.
