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Carbon Trading

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<mark>Journal publication date</mark>1/12/2008
<mark>Journal</mark>European Accounting Review
Issue number4
Volume17
Number of pages21
Pages (from-to)697-717
Publication StatusPublished
Early online date19/11/08
<mark>Original language</mark>English

Abstract

The impetus for this special debating forum arises from the concern about the impact of anthropogenic induced global climate change (GCC) and the assumption that GCC raises issues of significance with respect to the accountability of firms to stakeholders for financial and non-financial performance. Governments and supra-national bodies have sought to respond to GCC in a variety of ways, with the creation of markets in which carbon may be traded being just one manifestation. Carbon markets have the effect of putting a price on what was until very recently free and this change is likely to have financial consequences for firms in the longer term. In order to place the accounting implications of carbon markets in context, the paper provides a scientific and policy introduction to GCC. As regards accounting issues, the paper reviews the problems that are associated with the valuation of pollution allowances and their identification as assets (and the liabilities that arise if companies pollute beyond allowed levels). A closer inspection of the risks and uncertainties that arise from GCC initiates a discussion of non-financial accounting and reporting about carbon. Non-financial reporting is necessary to allow conditions for democratic accountability in an uncertain setting.