Several states—California, Connecticut, Maine, Massachusetts, New York, Oregon, Rhode Island, Vermont and Washington—use a 1990 baseline to measure emissions reductions, while the emissions baseline for Colorado, Minnesota and Nevada is 2005 and Maryland and New Jersey is 2006. Vehicle exhaust emissions are regulated at the EU level, meaning that before vehicles are approved for sale they must meet certain standards set out in EC Regulation 715/2007. (To be clear, a review of the actions of VW’s auditors and lawyers is beyond the scope of this article.). 310 Code Mass. 11). Greenhouse Gas Tail Pipe Emission Reduction Measures . Maine was the first state to enact legislation setting specific GHG reduction targets in 2003, followed by California in 2006. The Volkswagen emissions scandal started on 18 September 2015, when the United States Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to German automaker Volkswagen Group.Volkswagen had intentionally programmed turbocharged direct injection (TDI) diesel engines to activate emissions controls only during emissions testing. During the years it perpetrated this fraud, Volkswagen consistently portrayed itself as having an ethical culture, good corporate governance, effective risk management, and a strong commitment to sustainability. ICYMI | When Will We Be Able to Breathe in Accounting? Would society and stakeholders be better served by sustainability reports at higher levels of assurance that are designed to more fully inform stakeholder decisions? In 2016, Volkswagen was the defendant in a consolidated nationwide consumer class action and government civil enforcement action that resulted in a $15 billion settlement. From 2006 to 2010, ULSD was phased in for onroad diesel. Regs. Should the auditors have exercised additional scrutiny under the circumstances—which included a history of poor ethical corporate culture, weak corporate governance, an aggressive new sales strategy, and bold claims of technological advances? document.write('<'+'div id="placement_289809_'+plc289809+'">'); Several states have also implemented market-based policies aimed at limiting GHG emissions from major sectors. State percentage reduction requirements range from 10% by 2020 up to 90% by midcentury. Fraudulent financial reporting includes “misrepresentation in, or internal omission from, the financial statements of events, transactions, or other significant information” (para. var plc456219 = window.plc456219 || 0; At least one state, Massachusetts, is a participant in RGGI and TCI and also implements a state program, parallel to RGGI, limiting GHG emissions from certain power plants that rely on fossil fuels. Did the members of the audit team have sufficient industry expertise to assess business and audit risk, given the negative consequences that the nondetection of fraud can have, not just for the company and its stake-holders, but also for the audit firm? Meanwhile, all three pillars of sustainability—economic, social, and environmental—collapsed under the diesel fraud, as costs mounted, stakeholders were alienated, and the air was polluted. Furthermore, auditors must gain an understanding of the company’s “relevant industry, regulatory, and other external factors,” “its operations,” and “its ownership and governance structures” (para. Of note, in 2012 CARB adopted regulations authorizing “linkage” with other GHG emissions trading programs, which provided for the use of allowances and offsets earned in external cap-and-trade programs for compliance with California’s program. var AdButler = AdButler || {}; AdButler.ads = AdButler.ads || []; The use of the term Shell’s “Net Carbon Footprint” is for convenience only and not intended to suggest these emissions are those of Shell or its subsidiaries. AdButler.ads.push({handler: function(opt){ AdButler.register(165519, 289809, [300,600], 'placement_289809_'+opt.place, opt); }, opt: { place: plc289809++, keywords: abkw, domain: 'servedbyadbutler.com', click:'CLICK_MACRO_PLACEHOLDER' }}); if (!window.AdButler){(function(){var s = document.createElement("script"); s.async = true; s.type = "text/javascript";s.src = 'https://servedbyadbutler.com/app.js';var n = document.getElementsByTagName("script")[0]; n.parentNode.insertBefore(s, n);}());} var AdButler = AdButler || {}; AdButler.ads = AdButler.ads || []; A key part of that strategy was to vastly expand diesel vehicle sales in the United States (Jack Ewing, Faster, Higher, Farther: The Volkswagen Scandal, W.W. Norton & Company, 2017). The policy would provide for each TCI jurisdiction to invest program proceeds “into low-carbon and more resilient transportation infrastructure.”. var plc461033 = window.plc461033 || 0; The damage will be felt for some time to come. Volkswagen should have seen it coming days, months, or even years before. Code art. A3). Generally, states have set targets as a future percentage reduction compared to a specific year’s emissions levels or baseline, but the overall stringency of state programs can vary depending on the percentage reduction required and baseline used to measure such reductions. On the way to its findings, the investigation looked into accounts of tampering of emissions controls in Class 2b (medium duty) and Class 3 (heavy duty) diesel pickup trucks from 2010 through 2019. AdButler.ads.push({handler: function(opt){ AdButler.register(165519, 282686, [300,250], 'placement_282686_'+opt.place, opt); }, opt: { place: plc282686++, keywords: abkw, domain: 'servedbyadbutler.com', click:'CLICK_MACRO_PLACEHOLDER' }}); if (!window.AdButler){(function(){var s = document.createElement("script"); s.async = true; s.type = "text/javascript";s.src = 'https://servedbyadbutler.com/app.js';var n = document.getElementsByTagName("script")[0]; n.parentNode.insertBefore(s, n);}());} var AdButler = AdButler || {}; AdButler.ads = AdButler.ads || []; The sixth meeting of the Intersessional Working Group on Reduction of GHG Emissions from Ships met 11-15 November 2019. var div = divs[divs.length-1]; Additional revisions to the cap are expected to be made in 2021 through 2025. GENERAL PROVISIONS ... Acts 2019, 86th Leg., R.S., Ch. (Ed. Of note, House Bill 1261 requires the AQCC to identify, solicit stakeholder input from, and consider impacts on communities disproportionately impacted by climate change. var plc459496 = window.plc459496 || 0; (function(){ Arguments can be made about whether these restrictions are fair or appropriate. ICYMI | Building a Diverse Professional Community, ICYMI | Fostering Diversity and Inclusion in the Accounting Workplace, Assurance Attestation Statements on Sustainability Reports, Building a Diverse Professional Community, Building a Next-Generation Internal Audit…, Becoming Successful in Today’s Professional…, The lawyer never knew about the illegal or fraudulent conduct: No legal or ethical violations, The lawyer knew about the illegal or fraudulent conduct and helped perpetrate it: ethical violation (and potentially legal violation). Signed by Phillip Brooks, director of the EPA’s Air Enforcement Division, the letter was addressed to various Volkswagen and Audi corporate entities and copied to Volkswagen’s outside counsel. At least 15 states and Puerto Rico have enacted legislation establishing GHG emissions reduction requirements, with more requiring state agencies to report or inventory GHG emissions. The commission laid out a split-level approach, putting forth legislation in two steps. var div = divs[divs.length-1]; On Oct. 1, 2019, the TCI released a framework for its draft regional policy proposal, addressing which entities would be regulated under the program, emissions reporting and monitoring requirements and equity concerns. Statutory Reduction and Reporting Requirements + Market-based Policy. div.id = "placement_461032_"+plc461032; In 2000, the EPA finally issued more stringent Tier 2 standards, including for NOx and PM, which were phased in gradually in automobiles and were in full force beginning with model year 2007. diesel particulate filters. The initial rule established an annual emissions allowance budget from 2013 to 2020 and phased-in requirements for regulated entities during three compliance periods. var abkw = window.abkw || ''; The Regional Greenhouse Gas Initiative (RGGI), formed in 2009, is the nation’s first binding cap-and-trade program aimed at reducing GHG emissions from the power sector. In other words, they were necessary, reasonable, and achievable. Collectively, diesel standards reduce harmful emissions from both onroad and nonroad diesel sources by more than 90%. As in earlier corporate debacles where the role of the company’s lawyers has come into question (such as the Enron accounting scandal and the General Motors ignition switch case), observers might ask: what duty, if any, did Volkswagen’s lawyers have to report the fraud if they knew of it? Under the MAW method, mass emissions are calculated for subsets of a complete data set, called windows. The second, the Transportation Climate Initiative (TCI), is aimed at reducing emissions from the transportation sector. Read the Fuel Quality Standards (Automotive Diesel) Determination 2019; Biodiesel. International Accounting Standard (IAS) 315, Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment, requires auditors to evaluate whether “management, with the oversight of those charged with governance, has created and maintained a culture of honesty and ethical behavior” (para. We are the nation's most respected bipartisan organization providing states support, ideas, connections and a strong voice on Capitol Hill. Washington generally relies on a 1990 baseline to measure emissions, but its 2050 goals are flexible in that they can be based either on a percentage reduction from 1990 emissions levels or the state’s expected emissions or business as usual in 2050 without reduction targets in place. Colorado also enacted a separate piece of legislation (, Copyright 2021 by National Conference of State Legislatures. Ann. California’s program linked with Québec’s cap-and-trade program in 2014. The window size is defined by the work, or CO 2 emissions, over the window, which must be equal to those of the WHTC. Once it became clear that its number was up, Volkswagen destroyed evidence of the fraud. California is employing a multi-sector GHG cap-and-trade program, and several Northeast and Middle Atlantic states are participating in the Regional Greenhouse Gas Initiative (RGGI), the first binding cap-and-trade program aimed at reducing GHG emissions from the power sector. In addition to participating in the RGGI program described below, Massachusetts also implements a separate cap-and-trade program limiting GHG emissions from 21 fossil fuel-fired power plants in the state. Starting with the 2015 sustainability report, the auditor makes clear that its assurance, even though limited, should not be relied upon by stakeholders: “The report is not intended for any third parties to base any [financial] decision thereon. The lawyer learned about the illegal or fraudulent conduct midstream: must withdraw and report internally, and may report externally if sufficiently serious. To date, none of the auditors and lawyers associated with Volkswagen has been publicly identified as being the subject of any investigation connected with the scandal. We do not assume any responsibility towards third parties.” In the 2017 report, the sentence “Our responsibility lies only with the Company” was added to the report between the two sentences above. Previously, Maryland had enacted the Greenhouse Gas Reduction Act of 2009, setting reduction targets of 25% below 2006 levels by 2020 and establishing a long-term goal of reducing statewide emissions by up to 90% below 2006 levels by 2050. The Climate Change Act 2008 committed the UK to an 80% reduction in carbon emissions relative to the levels in 1990, to be achieved by 2050. 7, 2016, https://for.tn/1R2T4iX). Auditing standards also require auditors to consider a company’s legal and regulatory environment (ISA 250, Consideration of Laws and Regulations in an Audit of Financial Statements), including “undertaking specified audit procedures to help identify noncompliance with those laws and regulations that may have a material effect on the financial statements” (para. ), Tropospheric Ozone: Human Health and Agricultural Effects, CRC Press, 1994]. Volkswagen’s own internal auditors—after the fact—recommended 31 measures to improve governance and compliance (Volkswagen Group Annual Report 2016,http://bit.ly/2WsF7in). ISAE 3000 is used more often by CPA firms (primarily the Big Four), and AA1000AS is used more often by “specialist assurance providers/technical experts” (Rao 2017). The diesel fuel standard describes automotive diesel, renewable diesel and synthetic diesel. “ high ” or “ moderate ” or “ limited ” assurance ( AA1000AS, 2008, 10... 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