ifrs-s2-ibg-volume-7-coal-operations-part-b

Title: Volume 7—Coal Operations

Category: Part B—Industry-based Guidance for IFRS S2

Source: IFRS Foundation (https://www.ifrs.org)

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Year: 2023

Type: Industry

Industry-based Guidance on implementing

Climate-related Disclosures

Volume 7—Coal Operations

June 2023

IFRS S2

IFRS

® Sustainability Disclosure Standard

International Sustainability Standards Board

This Industry-based Guidance accompanies IFRS S2 Climate related Disclosures (published

June 2023; see separate booklet) and is issued by the International Sustainability

Standards Board (ISSB).

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© IFRS Foundation 2023

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IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

© IFRS Foundation

1

Introduction

This volume is part of the Industry-based Guidance on Implementing IFRS S2 Climate-related

Disclosures. This guidance suggests possible ways to apply some of the disclosure requirements in

IFRS S2 but does not create additional requirements.

This volume suggests possible ways to identify, measure and disclose information about

climate-related risks and opportunities that are associated with particular business

climate-related risks and opportunities that are associated with particular business

models, economic activities and other common features that characterise participation in

this industry.

This industry-based guidance has been derived from Sustainability Accounting Standards

Board (SASB) Standards, which are maintained by the International Sustainability

Standards Board (ISSB). The metric codes used in SASB Standards have been included for

Standards Board (ISSB). The metric codes used in SASB Standards have been included for

ease of reference. For additional context regarding the industry-based guidance contained

in this volume, including structure and terminology, application and illustrative

examples, refer to Section III of the Accompanying Guidance to IFRS S2.

IFRS S2 INDUSTRY-BASED GUIDANCE

2

© IFRS Foundation

Volume 7—Coal Operations

Industry Description

The Coal Operations industry includes entities that mine coal and those that

manufacture coal products. Mining activity covers both underground and surface

mining, and thermal and metallurgical coal.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Greenhouse

Gas

Emissions

Gross global Scope 1 emissions,

percentage covered under emissions-

limiting regulations

Emissions

Gross global Scope 1 emissions,

percentage covered under emissions-

limiting regulations

Quantitative

Metric tons (t)

CO₂-e,

Percentage

(%)

EM-CO-110a.1

Discussion of long- and short-term

strategy or plan to manage Scope 1

emissions, emissions reduction targets,

and an analysis of performance against

those targets

Discussion

and Analysis

n/a

EM-CO-110a.2

Water

Management

(1) Total water withdrawn, (2) total water

consumed; percentage of each in regions with High or Extremely High

consumed; percentage of each in regions with High or Extremely High Baseline Water Stress Quantitative Thousand cubic metres (m³),Percentage (%) EM-CO-140a.1 Number of incidents of non-compliance associated with water quality permits,

standards and regulations Quantitative Number EM-CO-140a.2 Reserves Valuation &Capital Expenditures Sensitivity of coal reserve levels to future price projection scenarios that account for a price on carbon emissions Quantitative Million metric tons (Mt)

account for a price on carbon emissions Quantitative Million metric tons (Mt) EM-CO-420a.1 Estimated carbon dioxide emissions embedded in proven coal reserves Quantitative Metric tons (t) CO₂-e EM-CO-420a.2 Discussion of how price and demand for coal or climate regulation influence the capital expenditure strategy for exploration, acquisition and development of assets Discussion and Analysis n/a EM-CO-420a.3 Table 2. Activity Metrics

ACTIVITY METRIC

CATEGORY

UNIT OF

MEASURE

CODE

n/a EM-CO-420a.3 Table 2. Activity Metrics

ACTIVITY METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Production of thermal coal Quantitative Million metric tons (Mt) EM-CO-000.A Production of metallurgical coal Quantitative Million metric tons (Mt) EM-CO-000.B IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 3

Greenhouse Gas Emissions Topic Summary Coal operations are energy intensive and generate significant direct greenhouse gas (GHG) emissions, including carbon dioxide from fuel use and methane released from coal beds during mining and post-mining activities. Regulatory efforts to reduce GHG emissions in response to the risks posed by climate change may result in higher operating and capital expenditures based on the magnitude of their direct emissions.

operating and capital expenditures based on the magnitude of their direct emissions.

Operational efficiencies can be achieved through the cost-effective reduction of GHG emissions. Such efficiencies can mitigate the potential financial impact of increased fuel costs from regulations that limit—or put a price on—GHG emissions.

Metrics EM-CO-110a.1. Gross global Scope 1 emissions, percentage covered under emissions-limiting regulations 1

emissions-limiting regulations 1 The entity shall disclose its gross global Scope 1 greenhouse gas (GHG) emissions to the atmosphere of the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),

perfluorocarbons (PFCs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3).

1.1

Emissions of all GHGs shall be consolidated and disclosed in metric tons of

1.1

Emissions of all GHGs shall be consolidated and disclosed in metric tons of carbon dioxide equivalent (CO2-e), and calculated in accordance with published 100-year time horizon global warming potential (GWP) values.

To date, the preferred source for GWP values is the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (2014).

1.2

Gross emissions are GHGs emitted into the atmosphere before accounting for offsets, credits or other similar mechanisms that have reduced or

for offsets, credits or other similar mechanisms that have reduced or compensated for emissions.

2 Scope 1 emissions are defined and shall be calculated according to the methodology contained in The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard(GHG protocol), Revised Edition, March 2004, published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

2.1

These emissions include direct emissions of GHGs from stationary or

Development (WRI/WBCSD).

2.1

These emissions include direct emissions of GHGs from stationary or mobile sources; these sources include equipment at mine sites, mine mouth electric generating facilities, coal seam methane emissions,

production and processing facilities, storage facilities, office buildings, and transportation (marine, road, and rail).

2.2

Acceptable calculation methodologies include those that conform to the

2.2

Acceptable calculation methodologies include those that conform to the GHG Protocol as the base reference, but provide additional guidance, such as industry- or region-specific guidance. Examples include:

2.2.1

GHG Reporting Guidance for the Aerospace Industry provided by the International Aerospace Environmental Group (IAEG) IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

2.2.2

Greenhouse Gas Inventory Guidance: Direct Emissions from Stationary Combustion Sources provided by the U.S. Environmental Protection Agency (EPA)

2.2.3

India GHG Inventory Program

2.2.4

ISO 14064-1

2.2.5

Petroleum Industry Guidelines for reporting GHG emissions, 2nd edition,

2011, published by IPIECA

2.2.6

Protocol for the quantification of greenhouse gas emissions from waste management activities published by Entreprises pour l’Environnement (EpE)

2.3

management activities published by Entreprises pour l’Environnement (EpE)

2.3

GHG emission data shall be consolidated according to the approach with which the entity consolidates its financial reporting data, which is generally aligned with the ‘financial control’ approach defined by the GHG Protocol as well as:

2.3.1

The financial approach detailed in Chapter 3 of the IPIECA/API/OGP Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions, 2nd

Petroleum Industry Guidelines for Reporting Greenhouse Gas Emissions, 2nd Edition, 2011 (hereafter, the ‘IPIECA GHG Guidelines’)

2.3.2

The approach provided by the Climate Disclosure Standards Board (CDSB) that is described in REQ-07, ‘Organisational boundary,’ of the CDSB Framework for reporting environmental and social information 3 The entity shall disclose the percentage of its gross global Scope 1 GHG emissions covered under an emissions-limiting regulation or programme intended to limit

covered under an emissions-limiting regulation or programme intended to limit or reduce emissions directly, such as cap-and-trade schemes, carbon tax/fee systems, and other emissions control (for example, command-and-control approach) and permit-based mechanisms.

3.1

Examples of emissions-limiting regulations include:

3.1.1

California Cap-and-Trade (California Global Warming Solutions Act)

3.1.2

European Union Emissions Trading Scheme (EU ETS)

3.1.3

3.1.2

European Union Emissions Trading Scheme (EU ETS)

3.1.3

Quebec Cap-and-Trade (Quebec Environment Quality Act)

3.2

The percentage shall be calculated as the total amount of gross global Scope 1 GHG emissions (CO2-e) that are covered under emissions-limiting regulations divided by the total amount of gross global Scope 1 GHG emissions (CO2-e).

3.2.1

For emissions subject to more than one emissions-limiting regulation, the entity shall not account for those emissions more than once.

3.3

regulation, the entity shall not account for those emissions more than once.

3.3

The scope of emissions-limiting regulations excludes emissions covered under voluntary emissions-limiting regulations (for example, voluntary trading systems), as well as reporting-based regulations.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5

4 The entity may discuss any change in its emissions from the previous reporting period, including whether the change was because of emissions reductions,

divestment, acquisition, mergers, changes in output or changes in calculation methodology.

5 In the case that current reporting of GHG emissions to the CDP or other entity (for example, a national regulatory disclosure program) differs in terms of the scope and consolidation approach used, the entity may disclose those emissions.

scope and consolidation approach used, the entity may disclose those emissions.

However, primary disclosure shall be according to the guidelines described above.

6 The entity may discuss the calculation methodology for its emissions disclosure,

such as if data are from continuous emissions monitoring systems (CEMS),

engineering calculations or mass balance calculations.

EM-CO-110a.2. Discussion of long- and short-term strategy or plan to manage

EM-CO-110a.2. Discussion of long- and short-term strategy or plan to manage Scope 1 emissions, emissions reduction targets, and an analysis of performance against those targets 1 The entity shall discuss its long- and short-term strategy or plan to manage its Scope 1 greenhouse gas (GHG) emissions.

1.1

Scope 1 emissions are defined according to The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition,

Corporate Accounting and Reporting Standard (GHG Protocol), Revised Edition,

March 2004, published by the World Resources Institute and the World Business Council on Sustainable Development (WRI/WBCSD).

1.2

The scope of GHG emissions includes the seven GHGs covered under the Kyoto Protocol—carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O),

hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).

2

(SF6), and nitrogen trifluoride (NF3).

2 The entity shall discuss its emission reduction target(s) and analyse its performance against the target(s), including, if relevant:

2.1

The scope of the emission reduction target (for example, the percentage of total emissions to which the target is applicable);

2.2

Whether the target is absolute or intensity-based, and the metric denominator if it is an intensity-based target;

2.3

The percentage reduction against the base year, with the base year

2.3

The percentage reduction against the base year, with the base year representing the first year against which emissions are evaluated towards the achievement of the target;

2.4

The time lines for the reduction activity, including the start year, the target year and the base year;

2.5

The mechanism(s) for achieving the target; and

2.6

Any circumstances in which the target or base year emissions have been,

or may be, recalculated retrospectively or the target or base year has been reset.

or may be, recalculated retrospectively or the target or base year has been reset.

IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation

3 The entity shall discuss the activities and investments required to achieve the plans or targets, and any risks or limiting factors that might affect achievement of the plans or targets.

4 The entity shall discuss the scope of its strategies, plans or reduction targets, such as whether they pertain differently to different business units, geographies or emissions sources.

5 The entity shall discuss whether its strategies, plans, or reduction targets are

5 The entity shall discuss whether its strategies, plans, or reduction targets are related to, or associated with, emissions limiting or emissions reporting-based programmes or regulations (for example, the EU Emissions Trading Scheme,

Quebec Cap-and-Trade System, California Cap-and-Trade Program), including regional, national, international or sectoral programmes.

6 Disclosure of strategies, plans or reduction targets shall be limited to activities

6 Disclosure of strategies, plans or reduction targets shall be limited to activities that were ongoing (active) or reached completion during the reporting period.

Water Management Topic Summary Coal operations have an impact on both the quality and quantity of local water resources.

Coal operations are water intensive. The use of water in coal washing to remove sulphur,

cool drilling equipment and transport coal in slurry pipelines can impact resources. The

cool drilling equipment and transport coal in slurry pipelines can impact resources. The severity of these risks can vary depending on the region’s water availability and the regulatory environment. Reducing water use and contamination also could create operational efficiencies for entities and lower their operating costs. Wastewater treatment and discharge often is regulated by jurisdictional authorities. Violating limits

treatment and discharge often is regulated by jurisdictional authorities. Violating limits on selenium, sulphate and dissolved solids could affect coal operations entities through significant penalties, compliance costs, delays in production or higher costs related to mine closure.

Metrics EM-CO-140a.1. (1) Total water withdrawn, (2) total water consumed; percentage of each in regions with High or Extremely High Baseline Water Stress 1

of each in regions with High or Extremely High Baseline Water Stress 1 The entity shall disclose the amount of water, in thousands of cubic metres,

withdrawn from all sources.

1.1

Water sources include surface water (including water from wetlands,

rivers, lakes and oceans), groundwater, rainwater collected directly and stored by the entity, and water and wastewater obtained from municipal water supplies, water utilities or other entities.

2

water supplies, water utilities or other entities.

2 The entity may disclose portions of its supply by source if, for example, significant portions of withdrawals are from non-freshwater sources.

2.1

Fresh water may be defined according to the local laws and regulations where the entity operates. If no legal definition exists, fresh water shall be considered to be water that has less than 1,000 parts per million of dissolved solids.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

dissolved solids.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 7

2.2

Water obtained from a water utility in compliance with jurisdictional drinking water regulations can be assumed to meet the definition of fresh water.

3 The entity shall disclose the amount of water, in thousands of cubic metres,

consumed in its operations.

3.1

Water consumption is defined as:

3.1.1

Water that evaporates during withdrawal, use and discharge

3.1.2

Water that is directly or indirectly incorporated into the entity’s product or service

3.1.3

3.1.2

Water that is directly or indirectly incorporated into the entity’s product or service

3.1.3

Water that does not otherwise return to the same catchment area from which it was withdrawn, such as water returned to another catchment area or the sea 4 The entity shall analyse all of its operations for water risks and identify activities that withdraw and consume water in locations with High (40–80%) or Extremely

that withdraw and consume water in locations with High (40–80%) or Extremely High (>80%) Baseline Water Stress as classified by the World Resources Institute’s (WRI) Water Risk Atlas tool, Aqueduct.

5 The entity shall disclose its water withdrawn in locations with High or Extremely High Baseline Water Stress as a percentage of the total water withdrawn.

6 The entity shall disclose its water consumed in locations with High or Extremely

6 The entity shall disclose its water consumed in locations with High or Extremely High Baseline Water Stress as a percentage of the total water consumed.

EM-CO-140a.2. Number of incidents of non-compliance associated with water quality permits, standards and regulations 1 The entity shall disclose the total number of incidents of non-compliance,

including violations of a technology-based standard and exceedances of quantity or quality-based standards.

2

or quality-based standards.

2 The scope of disclosure includes incidents governed by applicable jurisdictional statutory permits and regulations, which include the discharge of a hazardous substance, violation of pre-treatment requirements or total maximum daily load (TMDL) exceedances.

2.1

Typical parameters of concern include selenium, total dissolved solids (TDS), sulphate, total suspended solids (TSS) and pH.

3 The scope of disclosure shall only include incidents of non-compliance that

3 The scope of disclosure shall only include incidents of non-compliance that resulted in a formal enforcement action(s).

3.1

Formal enforcement actions are defined as governmental recognised actions that address a violation or threatened violation of water quantity or quality laws, regulations, policies or orders, and can result in administrative penalty orders, administrative orders and judicial actions,among others.

4

administrative penalty orders, administrative orders and judicial actions,among others.

4 Violations shall be disclosed, regardless of their measurement methodology or frequency. These include violations for:IFRS S2 INDUSTRY-BASED GUIDANCE 8© IFRS Foundation

4.1

Continuous discharges, limitations, standards and prohibitions that are generally expressed as maximum daily, weekly or monthly averages; and

4.2

Non-continuous discharges, limitations that are generally expressed in terms of frequency, total mass, maximum rate of discharge and mass or concentration of specified pollutants.

Reserves Valuation & Capital Expenditures Topic Summary Coal entities may be unable to extract a significant proportion of their coal reserves if

Coal entities may be unable to extract a significant proportion of their coal reserves if greenhouse gas (GHG) emissions are controlled to limit global temperature increases.

Stewardship of capital resources while considering medium- to long-term trends,

particularly related to climate change mitigation actions, is critical to prevent asset impairment and maintain profitability and creditworthiness. Globally, regulations and

impairment and maintain profitability and creditworthiness. Globally, regulations and policies are and may continue to be put into place to limit GHG emissions from coal-fired power plants—the customers of coal entities—thus reducing demand for and the price of coal. Coal demand also is being affected by regulations governing other harmful air emissions that apply to coal-fired power plants. An expansion of GHG-mitigation

emissions that apply to coal-fired power plants. An expansion of GHG-mitigation regulations may increase the magnitude of potential financial impacts in the medium to long term. Along with improved competitiveness of alternative energy technologies,

these jurisdictional regulations and policies pose long-term risks for the reserves and capital investments of coal operations entities.

Metrics EM-CO-420a.1. Sensitivity of coal reserve levels to future price projection

Metrics EM-CO-420a.1. Sensitivity of coal reserve levels to future price projection scenarios that account for a price on carbon emissions 1 The entity shall perform a sensitivity analysis of its reserves to determine how several future scenarios may affect the determination of whether the reserves are proven or probable.

2 The entity shall analyse the sensitivity of its current proven and probable reserves using the price trajectories published by the International Energy Agency (IEA) in

using the price trajectories published by the International Energy Agency (IEA) in its World Energy Outlook (WEO) publication, including:

2.1

Current Policies Scenario, which assumes no changes in policies from the mid-point of the year of publication of the WEO

2.2

New Policies Scenario, which assumes that broad policy commitments and plans that have been announced by countries—including national pledges to reduce greenhouse gas emissions and plans to phase out fossil-energy

to reduce greenhouse gas emissions and plans to phase out fossil-energy subsidies—occur, even if the measures to implement these commitments have yet to be identified or announced. This broadly serves as the IEA baseline scenario.

2.3

Sustainable Development Scenario, which assumes an energy pathway occurs that is consistent with the goal of limiting the global increase in temperature to 1.5°C by limiting concentration of greenhouse gases in the atmosphere.

temperature to 1.5°C by limiting concentration of greenhouse gases in the atmosphere.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 9

2.4

The entity shall consider the WEO scenarios as a normative reference, thus any updates to the WEO made year-on-year shall be considered updates to this guidance.

2.5

Reserves are defined as mineral deposits that could be economically and legally extracted or produced at the time of the reserve determination.

2.6

Proven reserves are reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade

dimensions revealed in outcrops, trenches, workings or drill holes; grade or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geographical character is so well defined that size, shape, depth and mineral content of reserves are well established.

2.7

Probable reserves are reserves for which quantity and grade or quality are computed from information like that used for proven (measured) reserves,

computed from information like that used for proven (measured) reserves,

but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation.

3 The entity shall conduct a reserves sensitivity analysis and disclose, in the aggregate, an estimate of reserves estimated for each product type based on

aggregate, an estimate of reserves estimated for each product type based on different price and cost criteria, such as a range of prices and costs that may reasonably be achieved, including standardised futures prices or management’s own forecasts.

4 The entity shall also disclose the price and cost schedules and assumptions on which disclosed values are based.

5 The entity may summarise its findings in the following table format:

5 The entity may summarise its findings in the following table format:Table 3. Sensitivity of Reserves to Prices By Principal Product Type and Price Scenario

PRICE CASE

PROVEN RESERVES

PROBABLE RESERVES

(Scenario) Coal Product A Coal Product A (tons) (measure) (tons) (measure) Current Policies Scenario (base)

New Policies Scenario

Sustainable Development Scenario

6 The entity may disclose the sensitivity of its reserve levels in other price and demand scenarios in addition to those described above, particularly if these scenarios differ depending on the type of coal reserves, regulatory environment in the countries or regions where mining occurs, end-use of the entity's products, or other factors.

IFRS S2 INDUSTRY-BASED GUIDANCE 10© IFRS Foundation

7 For additional sensitivity analyses, the entity should consider disclosing the following, per the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations Report Figure 8 as well as the Implementing the Recommendations of the TCFD Report, Section E:

7.1

The alternative scenarios used, including other 2ºC or lower scenarios

7.2

Critical input parameters, assumptions, and analytical choices for the climate-related scenarios used, particularly as they relate to key areas such

climate-related scenarios used, particularly as they relate to key areas such as policy assumptions, energy deployment pathways, technology pathways, and related timing assumptions

7.3

Time frames used for scenarios, including short-, medium-, and long-term milestones (e.g., how organisations consider timing of potential future implications under the scenarios used) EM-CO-420a.2. Estimated carbon dioxide emissions embedded in proven coal reserves 1

EM-CO-420a.2. Estimated carbon dioxide emissions embedded in proven coal reserves 1 The entity shall calculate and disclose an estimate of the carbon dioxide emissions embedded in its proven coal reserves.

1.1

This estimate applies a factor for potential CO2 only and does not include an estimate for all potential greenhouse gas emissions because these are dependent on downstream use (for example, utility electricity generation,

dependent on downstream use (for example, utility electricity generation,

industrial heating and electricity generation, cement production or steel production).

2 Estimated potential carbon dioxide emissions from proven coal reserves shall be calculated according to the following formula, derived from Meinshausen et al:

2.1

E = R × V × C, where:

2.1.1

E are the potential emissions in kilograms of carbon dioxide (kg CO2)

2.1.2

R are the proven reserves in gigagrams (Gg)

2.1.3

(kg CO2)

2.1.2

R are the proven reserves in gigagrams (Gg)

2.1.3

V is the net calorific value in terajoules per gigagram (TJ/Gg)

2.1.4

C is the effective carbon dioxide emission factor in kilograms CO2 per terajoule (kg/TJ) 3 In the absence of data specific to the entity’s coal reserves, carbon content shall be calculated using default data for each major type of coal resource published by the Intergovernmental Panel on Climate Change (IPCC) in its 2006 IPCC Guidelines

the Intergovernmental Panel on Climate Change (IPCC) in its 2006 IPCC Guidelines for National Greenhouse Gas Inventories.

3.1

The entity shall use default carbon content values per unit of energy listed in IPCC Table 1.3 Default Values of Carbon Content, Volume 2: Energy,Chapter 1.

3.2

The entity shall use calorific values per weight of coal resource contained in IPCC Table 1.2 Default Net Calorific Values (NCVs) and Lower and Upper

in IPCC Table 1.2 Default Net Calorific Values (NCVs) and Lower and Upper Limit of the 95% Confidence Intervals, Volume 2: Energy, Chapter 1.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 11

4 The entity shall use engineering estimates to determine the weight of its coal reserves in gigagrams.

5 For other assumptions required to estimate the carbon content of coal reserves,

the entity shall rely on guidance from the IPCC, Greenhouse Gas Protocol, US Energy Information Agency (EIA) or the International Energy Agency (IEA).

EM-CO-420a.3. Discussion of how price and demand for coal or climate regulation influence the capital expenditure strategy for exploration, acquisition

regulation influence the capital expenditure strategy for exploration, acquisition and development of assets 1 The entity shall discuss how projections for price and demand for coal and the path of air quality and climate regulation influence the entity’s capital expenditure (CAPEX) strategy.

1.1

This discussion should include the entity’s projections and assumptions about future coal prices and the likelihood that certain price and demand scenarios occur.

2

about future coal prices and the likelihood that certain price and demand scenarios occur.

2 The entity shall discuss the implications of price and demand scenario planning (EM-CO-420a.1) and how they may affect decisions to explore, acquire and develop new reserves.

3 The entity may discuss factors that materially influence its CAPEX decision making, which may include:

3.1

How the scope of air quality and climate change regulation—such as

making, which may include:

3.1

How the scope of air quality and climate change regulation—such as which countries, regions or industries are likely to be impacted—may influence where the entity focuses its exploration and development

3.2

Its view of the alignment between the time horizon during which price and demand for coal may be affected by climate regulation and time horizons for returns on capital expenditures on reserves

3.3

horizons for returns on capital expenditures on reserves

3.3

How the structure of climate regulations—a carbon tax versus cap-and-

trade—may differently affect price and demand, and thus the entity’s capital expenditure decision making 4 The entity may discuss how these trends affect decision-making in the context of the various types of reserve expenditures, including development of assets,

acquisition of properties with proven reserves, acquisition of properties with

acquisition of properties with proven reserves, acquisition of properties with unproven resources and exploration activities.

IFRS S2 INDUSTRY-BASED GUIDANCE 12© IFRS Foundation

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