Foreign Exchange and Debt Revaluation Taxes Other Information British Columbia Carbon Tax and Cap and Trade Financial Instruments and Derivatives Critical Accounting Estimates and Judgments Teck 2012 Annual Report 62 In preparing consolidated financial statements, management has to make estimates and judgments that affect the  reported amounts of assets, liabilities, revenues and expenses. Based on historical experience and other factors,  including expectations of future events, management makes judgments that are believed to be reasonable under  the circumstances. Actual results could differ from our estimates. Critical accounting estimates are those that could  affect the consolidated financial statements materially and involve a significant level of judgment by management.  Management’s critical accounting estimates apply to the assessment of the impairment of goodwill, the estimated  recoverable reserves and resources, and the valuation of other assets and liabilities such as decommissioning and  restoration provisions and accounting for income taxes. We hold a number of financial instruments and derivatives, which are recorded on our balance sheet at fair value  with gains and losses in each period included in other comprehensive income and profit for the period as appropriate.  The most significant of these instruments are marketable securities, foreign exchange forward sales contracts,  metal-related forward contracts and settlements receivable and payable. Some of our gains and losses on metal- related financial instruments are affected by smelter price participation and are taken into account in determining  royalties and other expenses. All are subject to varying rates of taxation depending on their nature and jurisdiction. The Province of British Columbia (B.C.) introduced a carbon tax on virtually all fossil fuels in 2008. The tax is imposed  on various fossil fuels used in B.C. and, on July 1, 2012, the final increase planned by government saw the tax rate  reach $30 per tonne of CO ² -emission equivalent. For 2012, our seven B.C.-based operations paid $46 million in  provincial carbon tax, primarily from our use of coal, diesel fuel and natural gas. We anticipate that this will increase  to approximately $40–50 million in carbon tax in 2013 as the current tax rate will apply for the full calendar year.  The B.C. government also established a greenhouse gas emissions reporting regulation. Beginning in 2010, the  regulation required facilities in the province that emit over 10,000 tonnes of CO ² -equivalent annually from regulated  sources to report their emissions and those that emit over 25,000 tonnes per year from regulated sources to obtain  independent verification of their emissions. These obligations, including third-party verification where required, were  met in 2012 for the 2011 performance of our seven B.C.-based operations. The B.C. government was expected to  implement greenhouse gas cap-and-trade regulations in 2012 as part of its Western Climate Initiative commitments.  These regulations have not materialized and it is not known when or whether they will be established.  In September, the Chilean government approved a tax reform bill retroactively effective to January 1, 2012 that increased  the corporate first category income tax rate from 18.5% to 20%. The effective all-in corporate income tax rate, including  withholding taxes on profits distributed out of Chile, remains at 35%. Our U.S. dollar denominated debt is subject to revaluation based on changes in the Canadian/U.S. dollar exchange  rate. As at December 31, 2012, all of our U.S. dollar denominated debt is designated as a hedge against our U.S. dollar  denominated foreign operations and working capital items. As a result, any foreign exchange gains or losses arising  on our designated U.S. dollar debt are recorded in other comprehensive income. The sales of our products are denominated in U.S. dollars, while a significant portion of our expenses are incurred in  local currencies, particularly the Canadian dollar. Foreign exchange fluctuations can have a significant effect on our  operating margins, unless such fluctuations are offset by related changes to commodity prices.