Worried about your liability under new carbon reporting regulations? Take the See Through Carbon Quiz

If your business, institution or public body is suddenly having to comply with new carbon reporting regulations and you’re unsure about your liability, this quiz may help.

Your Liability Dilemma – Whose Car Repair Bill?

Your legal dilemma

You send your car to your local Mechanic for its annual roadworthiness test.

It passes, you pay the bill. As you leave the garage, you skid and crash into another car. 

The police report reveals your tire tread was 1.5mm. The legal minimum is 1.6mm. 

In court, the judge issues you with a fine for driving an unsafe vehicle and orders you to pay for the other car’s repair. The liability is yours.

QUIZ QUESTION 1

Q1: Do you:

• Option 1: SEE YOU IN COURT: Appeal the decision (‘I did nothing wrong’)
• Option 2: PASS THE BUCK: Send the bill to your insurers (‘That’s what insurance is for’)
• Option 3: SUCK IT UP: Pay the bill from your own pocket (‘I just want a quiet life’).

‘Pass The Buck’: The Court’s legal dilemma

SUCK IT UP is obviously unappealing, and you fear the legal costs of PASS THE BUCK might be considerable too, so you pick Option 1. SEE YOU IN COURT

In court, the judge cites a police photo with a ruler showing your tire tread at 1.5mm.

The court rejects your appeal. The liability is yours.

QUIZ QUESTION 2

Q2: Do you:

• Option 1: PASS THE BUCK: Send the bill to your insurers (‘That’s what insurance is for’)
• Option 2: SUCK IT UP: Pay the bill from your own pocket (‘I just want a quiet life’).

‘Pass The Buck’: Your Insurer’s legal dilemma

SUCK IT UP still looks like the worst-case, most expensive option, so you try your luck and forward the bill to your car insurance company, explaining you’ve tried and failed to avoid legal liability.

Your insurers now have the same options as you started with. 

QUIZ QUESTION 3

Q3: If you were the Insurer, which option would you choose?:

• Option 1: SEE YOU IN COURT: Refuse to pay (‘It’s your responsibility to drive a legal vehicle) 
• Option 2: PASS THE BUCK: Pass the bill to your local mechanic (‘You issued a road safety certificate, but the tire tread was illegal)
• Option 3: SUCK IT UP: Pay the bill (‘We’ll make it back in future premiums’)

For the same reasons as you, your Insurers choose Option 1 as it seems the least risky, highest-reward. 

In court, your Insurers argue that the particular circumstances of this event mean the tire tread could not possibly have diminished by 1mm between test and collision, so the roadworthiness certificate must have been erroneously issued.. 

The court agrees, ruling that your insurers cannot reasonably be held liable. The liablity lies elsewhere.

Your insurers send the bill to your Mechanic.

‘Pass The Buck’: Your Mechanic’s legal dilemma

Your Mechanic owns a small local garage, and outsources the actual testing to a specialist roadworthiness Test Centre.

Your Mechanic now has the same options you and your Insurers had. Which would you go for if you were them?

QUIZ QUESTION 4

Q4: If you were the Mechanic,, which option would you choose?:

• Option 1: SEE YOU IN COURT: Refuse to pay (‘I’m just the middle man’) 
• Option 2: PASS THE BUCK: Pass the bill to the Test Centre  (‘You’re the ones responsible for measuring the tire tread, and you passed it’l)
• Option 3: SUCK IT UP: Pay the bill (‘It will cost me more to fight this’)

Like you and your Insurer, your Mechanic chooses Option 1 as the safest bet.

In court, your Mechanic argues that the responsibility for issuing the roadworthiness certificate is entirely that of the Test Centre. 

The judge agrees the liability is the Test Centre’s.

Your Mechanic sends the bill to the Test Centre.

‘Pass The Buck’: The Test Centre’s legal dilemma

The Test Centre discovers the roadworthiness test for your car was conducted by a new employee on his first morning.

Before being told where the Test Centre’s tire tread ruler was kept, he had measured the tire tread using his own ruler, which only showed increments of 5mm, rather than 1mm.

This ruler was a freebie issued by an NGO called ‘Draw It Down’.

The Test Centre now has the same options as you, you Insurers and your Mechanic. 

QUIZ QUESTION 5

Q5: If you were the Test Centre,, which option would you choose?:

• Option 1: SEE YOU IN COURT: Refuse to pay (‘The inadequate freebie ruler was to blame’) 
• Option 2: PASS THE BUCK: Pass the bill to the NGO  (‘Your ruler was insufficiently precise’)
• Option 3: SUCK IT UP: Pay the bill (‘We screwed up’)

Like you, your Insurer, and your Mechanic, the Test Centre, reckons the lowest-cost choice is Option 1. 

So the Test Centre passes the liability buck down the line.

‘Pass The Buck’: The NGO’s dilemma

‘Draw It Down’ is a loose network of concerned citizens who share a common cause. They offer their time and skills pro bono. Supporters donate all goods and services they require in kind.. 

As a legal entity, it’s a Company Limited by Guarantee (CLG). A CLG is cheaper to set up than a charity or CIC. As its name suggests, CLGs protect company directors from personal liability. Draw It Down has no assets or money – in fact it doesn’t even need a bank account.

In court, Draw It Down argues they were only providing a free ruler, for people to use however they wanted. Any liability consequent on its use was clearly the responsibility of the user. 

Draw It Down points to Clause 3 of their End User Licence Agreement, signed by everyone receiving the freebie ruler, which states:

 ‘LIABILITY: Licensee is responsible for any carbon report it submits to regulatory authorities’.

The court goes into recess. You await the verdict.

QUIZ QUESTION 6

Q6: You’re the judge – what’s your verdict?:

• Option 1: GUILTY: Dismiss Draw It Down’s case. Just because they gave away a freebie ruler does not absolve them of the responsibility of anyone using it for any purpose. They were negligent in not marking it with increments of 1mm. 
• Option 2: NOT GUILTY:  Draw It Down, in giving away a free ruler, could not possibly be liable for such a vanishingly unlikely chain of events. You are minded to punish the Test Centre, the Mechanic and the Insurer for vexatious litigation and wasting the court’s valuable time.

The Actual Liability Problem Revealed – New Green Regulations

Before jumping to the answers below, you might like to read this key to the real-world situation this car analogy:thought experiment illustrates.

• The Legal System = The Legal System. Not roadworthiness rules on tire tread depth, but emerging national, EU or local regulations governing accurate carbon reporting.

• Tire Tread Regulation = new ‘Mandatory Era carbon reporting requirements, like the EU’s Corporate Sustainability Reporting Directive (CSRD), Cross-Border Adjustment Mechanism (CBAM), or the UK government’s Carbon Reduction Plan.

• You = any business/public body falling under new carbon reporting regulations. New regulations passed in the past couple of years are now starting to kick in. Initially they require big businesses, carbon-intensive businesses and any government or commercial entities paid with government money to be compliant. unless the climate fixes itself, we all give up, or human civilization collapses, it’s only a matter of time until everyone is required to be compliant.

• Your Insurer = Your Insurer Like casinos, insurance companies,calculate the likelihood of a particular event, and charge a premium priced slightly above that probability in return for taking on liability. To stay in business, insurance companies need to be minutely familiar with the actuarial risks of non-compliance fines for financial regulation, but have no comparable data with which to calculate the risk profile of insuring against the regulators judging a submission non-compliant. The carbon reporting statutes are brand new, sketchy on methodological detail, and untested in the courts. With no case law or precedent to guide their risk assessment calculations, pricing any premium would be a wild guess. Insurance companies are not in the business of wild guesses. Their duty to their shareholders is either quote a very expensive premium to cover their own risk in taking on liability, or not quote at all.

• The Mechanic = any Consultant you pay to help report your carbon footprint. Like your Mechanic, consultants offer a range of services, of which carbon reporting is just one. Established financial accounting firms adding a new service, start-up carbon consultancies responding to the new regulatory environment, and sectoral specialist consultancies integrating carbon reporting with other services, all face the same problem of accurate Scope 3 reporting. This is a storytelling problem, immune to technological shortcuts, because thirty years of Voluntary reporting has bequeathed no functional dataset on which to train an AI.

• The Test Centre = any key 3rd-party with whom you have no direct contractual relationship, but your Consultant needs to fulfil their contractual obligations to you, e.g. a specialist commercial database with accurate conversion factors for Life Cycle Assessment calculations of energy-intensive products like cement, iron and steel, aluminium, fertilisers, hydrogen and electricity, targeted by CBAM legislation. 

• Draw It Down  = See Through Carbon, an accurate, free, open, transparent carbon reporting ecosystem that charges nothing for its services and makes the carbon-related data it collects publicly visible online. Its methodology is either based on what regulators recommend, or the judgement of a neutral panel of pro bono experts motivated only by creating the most accurate possible carbon reporting standards. The Clause 3 is a direct quote from See Through Carbon’s End User Licence Agreement.

QUIZ QUESTION 7

Q7: Now you know the purpose of the car tire tread analogy, do you think See Through Carbon could possibly be held ‘liable’ for any carbon reports made by people using it?

• YES: legal liability is still a question everyone should take extremely seriously under all circumstances.
• NO: this car analogy illustrates how the question of legal liability, while important to keep financial systems stable, is ludicrously inappropriate in the context of carbon reporting.

QUIZ ANSWERS

Knowing what this quiz is actually about, you may have gathered that carbon reporting in its current form has no clean, unambiguously correct answers.

This is because the thought experiment the quiz sets up assumes carbon reporting is as mature, standardised and well-understood as financial reporting. This is a category error. 

The reality of carbon reporting is that it’s in its infancy. 

No one – not even the regulators – is, or can be, 100% sure of anything. Not only is the whole mandatory regulatory environment utterly different from the previous voluntary self-regulation, but the climate emergency that made it necessary is getting more acute by the day, as emissions keep rising.

Businesses are used to minor shifts of the goalposts. What no one is prepared for is for the playing field itself to be increasingly flooded, burnt, getting bigger, more unplayable and boggier with every passing day.

The answers, for what they’re worth:

A1: Because the purpose of carbon reporting (reducing existential risk to human civilization) is fundamentally different from the purpose of road safety (minimising the risk within a jurisdiction of traffic injuries), the premise of these options is incorrect. 

A business’s ‘real-world’ options in complying with, say, the EU’s CBAM regulation on steel trading are:

• Option 1: Comply. Under the EU’s ‘cap and trade’  Emission Trading System (ETS)  you will effectively get a 100% rebate on the carbon tax as reward for accurate reporting. 
• Option 2: Ignore it, and risk being fined €85/tonne for non-compliance.
• Option 3: Stop trading in the EU. 
• Option 4: Hope the climate somehow fixes itself before your legal obligation to accurately report your emissions kicks in January 2026, or any liability issues arise.

Does this make the choice clearer?

A2: see A1 above, and make your own judgement regarding liability.

A3: see A1 above, and make your own judgement regarding liability.

A4: see A1 above, and make your own judgement regarding liability.

A5: see A1 above, and make your own judgement regarding liability.

A6: No one knows, as all this is untested in court, but as a prudent business executive, which of the 4 options above is more likely to keep you out of jail, meet your fiduciary duties to the shareholders regarding liability , or meet your compliance KPI to earn your annual bonus?

A7: See below. ‘Liability’ may be the wrong question.

Staying out of jail for carbon reporting

As you may have gathered by now, this quiz has no clean, unambiguously correct answers. Liability is probably the wrong question to be asking.

Congratulations, and welcome to the real world carbon reporting as it abandons the Age of Voluntary and drags itself into the Mandatory Era.

No one, even the regulators themselves, has the ‘right’ answers to a question as huge and complex as our species’ shortest route to speeding up carbon drawdown. This should not be surprising. As more than two dozen COP meetings have demonstrated, breaking our fossil fuel addiction is the greatest challenge our species has faced in its 300,000 year history.

Homo sapiens still has options, but the more we postpone addressing them, the fewer, and worse, they become.

When explaining our existential crisis to children, we describe it as ‘Saving the Planet’. The adult version should be ‘Mitigating the worst effects of human-induced climate change on human civilization’, but far too much of our debate about it remains mired in childish, simple solutions, fantasies like carbon capture, carbon trading, carbon offsetting.

These are sophisticated excuses for Business As Usual, and papal indulgences for inaction. Like the notion of ‘liability’ in the context of carbon, they are category errors.

See Through Carbon isn’t the only solution. Like all other ‘solutions’, it cannot work in isolation. 

But it’s another thread in the lifeline thrown to us by a sustainable future.

Regulations like the EU’s Corporate Sustainability Reporting Directive (CSRD) and  Cross Border Adjustment Mechanism (CBAM) or the UK’s Carbon Reduction Plan initiative are initial, tentative steps towards sustainability. They contain a tariff of penalties for non-compliance, for businesses to guide them in calculating ‘liability’.

Such legislation clearly signposts the destination, but the exact path is still winding, full of obstacles and hard to discern. Certainly not something any Expert can meaningfully guarantee, however expert they may be when it comes to financial risk management.

Whatever the solution, See Through Carbon’s accurate, free, open, transparent ecosystem is surely a step in the right direction. 

For more:

• Why ecosystems like See Through Carbon can afford to take Option Two where commercial entities can’t.

• How See Through Carbon swaps free carbon footprint calculation for open data, explained in its End User Licence Agreement