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In recent years, the U.S. federal and state government, as well as governments around the world, have sought to control greenhouse gas emissions by imposing tighter limits on permissible emissions levels for cars, trucks, and other products that use fossil fuels, as well as on the fuels themselves. Companies operating in these markets may face considerable additional costs when complying with these new regulations, or may find their products unable to compete with others in the market that are able to comply more easily.
This risk factor is meant for use in a public company’s periodic disclosure, such as a Form 10-K, or a registration statement, such as a Form S-1, to disclose risks relating to regulations relating to greenhouse gas (GHG) emissions regulation. This clause includes practical guidance and drafting notes. Tailor this risk factor to the company’s business and the regulatory regime applicable to its industry.
Our business could be adversely impacted by laws, orders or regulations from [U.S. federal, state, or international governments] requiring new or more stringent limits on Greenhouse Gas ("GHG") emissions, "tailpipe" emissions or internal combustion engines.
Tailoring GHG emissions risks
Each type of business may be affected by GHG emissions rules differently. Companies operating in different markets, such as regional, national, or multinational markets, will need to disclose GHG emissions regulations that are proposed or that exist wherever they operate. Additionally, companies in different industries will be subject to different laws, rules, and regulatory regimes. Replace the examples of regulations provided in this risk factor with examples that are tailored to the company’s business, if necessary.
GHG emissions mainly originate from exhaust from combustion engines and heaters, as well as fugitive sources of methane gas. Federal laws, state laws, orders, or regulations [as well as laws, orders, and regulations in markets we serve around the world] have been adopted, and may in the future be adopted, that impose limits on GHG emissions or otherwise require the adoption of zero-emission electric vehicles. Examples include California’s AB 32 cap and trade law and the 2021 executive order signed by President Biden directing the federal government to, among other things, purchase only zero-emission vehicles to replace its fleet of more than 600,000 cars and trucks by 2035. GHG emissions regulations continue to evolve and may affect our business based on, among other things, the timing of any new or more stringent requirements; the amount of any required further reduction in emissions levels; the type and implementation of any market-based or tax-based regulatory regime intended to reduce emissions; the relative availability of offsets; the existence of cost-effective, commercial-scale carbon capture and storage technologies, along with supporting regulations and liability-mitigation mechanisms; the breadth, availability, and relative cost of any alternatives to compliance with regulations; and the ability of our [products] to qualify as compliance alternatives under any programs to limit GHG emissions implemented by one or more statutory, regulatory, or standards-based organizations (such as The World Business Council for Sustainable Development). If our [products] are not able to meet compliance standards for GHG emissions, or if they do not perform as well as other alternative fuels and vehicles, our solutions could be less competitive. Moreover, additional federal, state, or foreign taxes could be imposed on tailpipe emissions, which would adversely impact the cost of our [products], as compared to [competing products] that do not generate tailpipe emissions.
RESEARCH PATH: Capital Markets & Corporate Governance > IPOs > Clauses
For more information relating to ESG disclosure, see
> THE ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG) RESOURCE KIT
For information on drafting risk factors, see
> RISK FACTOR DRAFTING FOR A REGISTRATION STATEMENT and > TOP 10 PRACTICE TIPS: RISK FACTORS
> ESG DISCLOSURES RISK FACTOR (REPUTATIONAL RISK) and > ESG DISCLOSURES RISK FACTOR (CLIMATE CHANGE)
> CORPORATE ESG DISCLOSURE: RECENT TRENDS AND DEVELOPMENTS
> 5 TIPS ON GETTING STARTED WITH AN ESG STRATEGY VIDEO