Introduction
This paper examines the implications of using different approaches when it comes to accounting for carbon emissions. This essay provides a brief background on the Kyoto protocol. Then it goes into the issues surrounding accounting for carbon. The starting place that needed to be addressed was how to account for carbon credits and the free allowances, next was the obligation. The paper subsequently examines the current practices for accounting for carbon, such as the IFRIC 3 approach, the net liability approach, and the recognition of government grants approach, followed by that there was some other issues that had to be alluded to that are important for when accounting for carbon.. Finally this paper attempts to formulate an ideal structure for how to report carbon in accounts.
Brief Background
Accounting for carbon has become more of an issue as time has passed. With the introduction of the Kyoto Protocol, markets have been developed for the trading of carbon over a wide series of industries. The Kyoto Protocol was a treaty brought into place to ensure the reduction of greenhouse gas emissions. The European Union Emissions Trading Scheme (henceforth known as EU ETS) is a mechanism used to reduce greenhouse gases. The EU ETS is a cap-and trade scheme, under which companies are told how much CO2 they can emit (the cap), and if they emit less than the cap, they have surplus left for sale. If they emit more that the se cap they can buy credits from other businesses that come in under their cap (the trade) (Ratnatunga and Balachandran, 2009)
Issues
What kind of asset is a carbon credit?
A carbon credit can be accounted for in many different ways. The top two approaches that have been used by companies as found by Lovell,...
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...ounting, Organizations and Society, 34 (3), 499--534.
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The U.S. has approximately 119,000 companies involved in the environmental technologies and services industry, which is a $782 billion market. Also, firms must offset new or additional emissions with emission reductions by a 5-to-1 ratio. This means any firm who increases their emissions output in one area by one ton must reduce their emissions output in another area by 5 tons (McKee, 1991). Finally, new emissions producing companies will have to start up with state-of-the-art equipment.
The climate crisis of the 21st century seems to be all about climate change and or global warming. Many people think the most of the manmade climate is being caused by the world’s largest companies that use the most power, which between them produced nearly two-thirds of the greenhouse gas emissions generated since the dawning of the industrial age, new research suggests. The companies range from investor owned firms, household names such as Chevron, Exxon and BP to state owned and government ran companies. The analysis say that, which has been welcomed by the former Vice President Al Gore as a "crucial step forward" found that most of the majority of the companies were in the business of producing oil, gas or coal. (Kenny)
The Kyoto Protocol set by the United Nations allocates countries to offset their greenhouse gas emissions by growing what they lost, that is reforestation, and/or establishing a forest in a barren land, that is afforestation. Each country is allowed a certain quota that limits their greenhouse emissions. For companies that uses deforestation for commercial purposes must reforest the land they cut off to compensate for the loss. More often than not the land is left alo...
David, Suzuki. “Carbon Offsets Are One of Many Solutions Needed for Global Warming.” Current Controversies: Carbon Offsets. Ed. Debra A. Miller. Detroit: Greenhaven Press, 2009. Print.
“At present, the global system for carbon emissions trading is embodied in the Kyoto Treaty,” said Al Gore, which points out that Global Warming is not a national problem, but global problem. The Kyoto Treaty states that parties involved will reduce greenhouse emissions in their nation (United Nations). These facts introduce the idea of transforming this perilous world into an innocuous one. It supports his claim for having a preferable future for all, where there will be no droughts, devastations, deaths, or poverties due to global warming. His repetition of the word “reduce” engages the audience of having a solution to climate change. Mr. Gore continues with his ideas to reduce Global Warming by saying, “...Carbon Capture and Sequestration (CSS)...will play a significant...role as one of the major blocks of a solution to climate crisis.” This fact is an example of a paradox as before this statement he mentioned that CSS, a method to capture the CO2 burned from the burning coal, is an expensive method which most companies resist from using. His use of paradoxes throughout his speech makes the audience rethink their opinions. These statistics are part of many other logically statements that Mr. Gore used to support his claim. Some of these logical procedures include; electronic cars, reduction of renewable
One of the most compelling and difficult environmental problems society is facing today is climate change. People do not realize how much the environment has changed for the worse in the last ten years, until they are told that the last two decades of the 20th century have been the hottest in the last 400 years, according to climate studies (Conserve Energy Future). Today the carbon dioxide levels have reached 396.81 parts per million (ppm). “Carbon dioxide (CO2) has also increased over the last 100 years-- from about 300 ppm to 370 ppm. Interestingly, the majority of these additions have occurred in the last 50 years, when temperature increases have been slowest” (geocraft). There are no known solutions yet to reverse these effects in the environment, however there are many things people can do to prevent it from increasing. By implementing a carbon tax the government can tax corporations on how much carbon they emit into the atmosphere. With the extra money from the tax, scientist can invest in alternative ways to reduce how much carbon is emitted. Reducing climate change is going to take years and so nothing is going to get fixed anytime soon, but meanwhile we can use that extra money to begin cleaning up the atmosphere. There are many ways to explain climate change, some say its due to the emission of carbon dioxide (CO2) into the atmosphere, others say it is the burning of the fossils fuels, some even say it’s the greenhouse gases. All of these sayings mean the exact same thing, no matter how one says it. I believe there are more convenient ways to solve climate change; and if the government would to implement a carbon tax on companies they will then be forced to re-evaluate all the carbon they emit to the environment and red...
...ology, but presumably they can indeed not offset the cost incurred in carbon storage. Hence overall the economics are negatively contributed (36). Although this doesn’t factor-in significantly in the growth or fall of CO2-EOR projects still it has reasonable contribution in putting a foundation for the future of such a technology.
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... Carbon Market is a form of trading that specifically targets carbon dioxide (calculated in tonnes of carbon dioxide) and is the bulk of emissions trading. Carbon trading is a common method countries use to meet their obligations from the Kyoto Protocol, which involves an attempt to reduce future climate change.
The world’s greatest powers have shown a lack of interest in the way that they are destroying the environment around them. The rise of the climate through the years has been altering how different organisms have had to survive. The world’s use of fossil fuels and CO2 emissions is at an all-time high. The countries with the highest CO2 emissions are same countries with the largest economies. The United States, China, India, Japan, and Russia are the top five leaders in CO2 emissions. All together they account for around 60% of the total carbon emissions worldwide. In order to cut down on the amount of CO2 emissions counties need start regulating their larger industries that create the highest amount of carbon emissions.
Environmental accounting at organizational level aims to address the needs of organization to measure the economic efficiency of their environmental conservation and the business activities of the company as a whole (Kundu & Hauff, 2009). Environmental accounting includes environmental management accounting. In environmental management accounting, there is a particular focus on material and energy balance aspects and environmental cost information. This accounting is further classified into segment environmental accounting which is an internal environmental accounting tool to select an investment activity, or a project, related to environmental conservation from among all processes of operations, and to evaluate environmental effects for a specified period (Maunders,