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Environmental Risk

Controlled risk is one of the pillars of the EDP strategy. Environmental Risk is one of the components of risk management. Environmental Risk has an operational and strategic arm.

The activity of electrical energy generation is deemed to create an environmental risk, due to the use of natural resources and the emissions and waste it produces. EDP manages environmental risk in production through: compliance with the licensing parameters for the operation of plants, the implementation in its facilities of Environmental Management Systems and EMAS registration – EU Eco-management and Auditing System.

Electrical energy distribution has been progressively adopting measures which incorporate environmental concerns in the operation and, more recently, the planning and construction of new lines. Impacts on bird life and the perceived health risks associated with the electric and magnetic fields generated by the electricity passing through the lines are the main risk factors identified in this field of activity. EDP manages environmental risk in electrical energy distribution through: compliance with the licensing parameters for energy distribution, the implementation in some facilities of Environmental Management Systems and the implementation of PPDA (Environmental performance plans).

The environmental risk of gas distribution is managed through compliance with the licensing parameters for gas distribution and implementation of EMS at all facilities.

Carbon dioxide emissions are a significant environmental risk factor and one of the main areas of risk management at EDP.

The risk associated with the allocation of emission licences to the energy sector has been predicted by EDP through a pro-active strategy, the main aim of which is to reduce CO2 emissions in 2020 by 70% in relation to 2008. Emissions will drop from 400 tCO2/MW in 2008 to 120 tCO2/MWh in 2020.

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Directive 2004/35/EC of the European Parliament and of the Council, on environmental liability with regard to the prevention and remedying of environmental damage, was approved on 21 April 2004.
Under the Environmental Liability Directive (ELD), the operators covered by the activities listed in Annex III are responsible for environmental damage to soil, water and biodiversity under a scheme of objective liability. This is an environmental liability regime covering all activities regulated by the European Union and involving a risk to the environment.

In contrast, operators not covered by Annex III may only be liable for damage to biodiversity under a regime of subjective responsibility.

Any of the above-mentioned schemes applies to the imminent threat of damage caused by any activity (hazardous or non-hazardous).

The main body of the standard on environmental liability concerns environmental damage. This includes damage caused to:

> Water (waters covered by Directive 2000/60/EC establishing a framework for community action in the field of water policy);

> Soil (with a significant risk to human health);

> Protected species and natural habitats
(regulated by Directives 79/409/EEC of 2 April on the conservation of wild birds and Directive 92/43/EEC of 21 May on the protection of natural habitats and of wild fauna and flora);

> And by air pollution provided it causes environmental damage.

The Directive states that environmental damage should be repaired with reference to the Baseline condition by means of primary remedial measures, and when this is not possible then by means of additional and/or compensatory measures. It also encourages Member States to take measures to encourage the development of financial guarantee markets and instruments, including financial mechanisms in the event of insolvency, in order to allow operators to use financial guarantees to cover their liabilities deriving from the environmental liability directive.

The transposition of the environmental liability directive did not occur in several Member States until 30 April 2007, and no harmonised system of environmental liability existed during this process. Some of the largest discrepancies are found, for example. in the scope of application and the recipients, exclusions and financial guarantees.

In Portugal, the directive was transposed to Decree-Law 147/2008 of 29 July. In terms of scope of application, the Portuguese legislator adopted a dual regime of Environmental Liability (Administrative and Civil), retained the directive’s framework concerning objective liability and broadened the scope of subjective liability to include water and soil. The scope was also widened to species and natural habitats protected by Portuguese law and it stipulated the compulsory provision of a financial guarantee for operators conducting the work activities of Annex III (with effect from 1 January 2010).EDP, as an Annex III operator, began preparations for the implementation of the directive in 2006. That preparation included several presentation sessions for managers and respective hierarchies of business units and corporate departments in order to raise awareness to the inclusion of the environmental liability directive in decision-making processes.

It also participated in external forums, e.g. Think Tank Meetings, to monitor the process of implementing the directive, to create knowledge and make known its concerns as a sector of business activity.  

It also implemented the "Environmental Liability Directive Implementation" project between 2007 and 2009, which was supported by the EDP Group’s Risk Portal . That project ended in 2009 with the definition of the insurable product for the activities carried out by EDP within the scope of the directive. EDP is currently monitoring legislative developments and ensuring their practical application in various facilities.

In Spain, HC Energía continues the work of identifying and making an inventory of habitats and biodiversity existing in the areas of influence of the energy generation centres, in order to determine the initial state of these areas and establish management practices and minimise the risks to prevent the occurrence of situations of environmental risk. In 2011, environmental risk assessments (ERA) were
performed in the following facilities of HC Energía:

> CH La Barca, the desk work was supplemented by a field campaign to verify the current state of the environment and describe a list of indicators on the state of the ecosystem services provided;

> CH TANES, the ERA was conducted in a similar manner to that of CH La Barca and based on an agreement with the Environment Advisory Entity for the Principality of Asturias, which selected CH, as it constitutes the main source of drinking water supply of Asturias. The results will be shared with the Asturias Environmental Administration and may serve as precedent for future work;

> SINOVA, a waste power station, and the information on its initial state is already available.
Moreover, EDP has a financial guarantee in the form of an insurance policy that allows it to take on its environmental responsibility inherent in the activities in all regions. In 2011, the value of the risk premium paid was EUR 263,549€.