Putting Carbon Markets into Practice: A Case Study of Financial Accounting in Europe

Heather Lovell, Jan Bebbington, Carlos Larrinaga and Thereza Raquel Sales de Aguiar
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Heather Lovell: School of GeoSciences, University of Edinburgh, Drummond Street, Edinburgh EH8 9XP, Scotland
Jan Bebbington: University of St Andrews, The Gateway, North Haugh, St Andrews KY16 9RJ, Scotland
Thereza Raquel Sales de Aguiar: School of Management and Languages, Heriot-Watt University, Edinburgh EH14 4AS, Scotland

Environment and Planning C, 2013, vol. 31, issue 4, 741-757

Abstract: In this paper we explore how carbon markets have entered the world of financial accounting. The advent of the European Union Emissions Trading System (EU ETS) in 2005 provided the opportunity for global climate change concerns to be translated from policy into something that could, and should, be recognised within financial accounting. That is, the EU ETS provided a mechanism whereby greenhouse gas emission allowances acquired a financial value, simultaneously creating an obligation (or liability) on certain European organisations when they emit greenhouse gases. Prima facie, this process created the need for financial accounts of companies covered by the EU ETS to reflect the new commodity of carbon. Disagreement amongst accountants about how to treat emission allowances has arisen, with the initial international accounting guidance issued in late 2004 subsequently being withdrawn, and not yet replaced. Taking this absence of guidance as a starting point, we undertake an empirical project (through a survey, consultation analysis, and interviews) to establish what financial reporting practices are being adopted by participants in the EU ETS, and the level of momentum for standardisation. We draw on sociological theories about accounting, measurement, and markets.

Keywords: carbon markets; financial accounting; European Union Emissions Trading System (EU ETS); standard setting; emission allowances (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:envirc:v:31:y:2013:i:4:p:741-757

DOI: 10.1068/c1275

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