IDEAS home Printed from https://ideas.repec.org/a/taf/acceur/v10y2013i2p223-239.html
   My bibliography  Save this article

Accounting for Carbon Emission Allowances in the European Union: In Search of Consistency

Author

Listed:
  • Celeste M. Black

Abstract

With the commencement of Phase III of the European Union Emissions Trading System (EU ETS) in 2013, it is projected that approximately one-half of emission allowances will be acquired through auctioning and the provision of free allocations to installations will be substantially tightened. As a result, it is likely that many companies will hold purchased (as opposed to freely allocated or gratis) allowances and will have more significant liabilities under the scheme. The accounting treatment of emission allowances has therefore become more relevant and the lack of uniformity in practice that resulted after the withdrawal of IFRIC 3 is now a more pressing concern. This study uses content analysis to examine disclosed accounting policies of companies with significant emission liabilities under the EU ETS and identifies three more common approaches adopted to date. These can be generally described as the following: (i) a net liability approach, based on the classification of allowances as intangibles but only showing an emission liability when it exceeds the free allocation; (ii) an approach broadly based on IFRIC 3 (recognising the free allocation at fair value and a corresponding gross liability under the EU ETS); and (iii) an approach based on inventory classification, with free allocations given at nil value. The diversity in these treatments highlights the need for guidance from the International Accounting Standards Board.

Suggested Citation

  • Celeste M. Black, 2013. "Accounting for Carbon Emission Allowances in the European Union: In Search of Consistency," Accounting in Europe, Taylor & Francis Journals, vol. 10(2), pages 223-239, November.
    • Handle: RePEc:taf:acceur:v:10:y:2013:i:2:p:223-239
    DOI: 10.1080/17449480.2013.834730
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/17449480.2013.834730
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/17449480.2013.834730?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cook, Allan, 2009. "Emission rights: From costless activity to market operations," Accounting, Organizations and Society, Elsevier, vol. 34(3-4), pages 456-468, April.
    2. repec:dau:papers:123456789/10174 is not listed on IDEAS
    3. Peter Warwick & Chew Ng, 2012. "The ‘Cost’ of Climate Change: How Carbon Emissions Allowances are Accounted for Amongst European Union Companies," Australian Accounting Review, CPA Australia, vol. 22(1), pages 54-67, March.
    4. Jan Bebbington & Carlos Larrinaga-Gonzalez, 2008. "Carbon Trading: Accounting and Reporting Issues," European Accounting Review, Taylor & Francis Journals, vol. 17(4), pages 697-717.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rong He & Le Luo & Abul Shamsuddin & Qingliang Tang, 2022. "Corporate carbon accounting: a literature review of carbon accounting research from the Kyoto Protocol to the Paris Agreement," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 261-298, March.
    2. Sonia M. S. Gomes & Maisa S. Ribeiro & Fátima S. Freire & Luciana S. M. Sardeiro & Alana B. Guessi, 2024. "Challenges in Accounting for Carbon: Analysis of Accounting Policies of the World's Largest Polluters," International Journal of Business and Management, Canadian Center of Science and Education, vol. 19(5), pages 121-121, September.
    3. Thereza RS de Aguiar, 2018. "Turning accounting for emissions rights inside out as well as upside down," Environment and Planning C, , vol. 36(1), pages 139-159, February.
    4. Yonca Ertimur & Jennifer Francis & Amanda Gonzales & Katherine Schipper, 2020. "Financial Reporting for Pollution Reduction Programs," Management Science, INFORMS, vol. 66(12), pages 6015-6041, December.
    5. Patricia Milanés Montero & Esteban Pérez Calderón & Ana Isabel Lourenço Dias, 2020. "Transparency of Financial Reporting on Greenhouse Gas Emission Allowances: The Influence of Regulation," IJERPH, MDPI, vol. 17(3), pages 1-25, January.
    6. Federico Galán-Valdivieso & Laura Saraite-Sariene & Juana Alonso-Cañadas & María del Carmen Caba-Pérez, 2019. "Do Corporate Carbon Policies Enhance Legitimacy? A Social Media Perspective," Sustainability, MDPI, vol. 11(4), pages 1-23, February.
    7. Tae Hee Kim & Sun Hye Lee & Petros Vourvachis, 2023. "Accounting Standard-Setting for an Emission Trading Scheme: The Korean Case," Journal of Business Ethics, Springer, vol. 182(4), pages 1003-1024, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rong He & Le Luo & Abul Shamsuddin & Qingliang Tang, 2022. "Corporate carbon accounting: a literature review of carbon accounting research from the Kyoto Protocol to the Paris Agreement," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 261-298, March.
    2. Haseeb Ayaz, 2017. "Analysis of Carbon Emission Accounting Practices of Leading Carbon Emitting European Union Companies," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 3(4), pages 463-486, October.
    3. Patricia Milanés Montero & Esteban Pérez Calderón & Ana Isabel Lourenço Dias, 2020. "Transparency of Financial Reporting on Greenhouse Gas Emission Allowances: The Influence of Regulation," IJERPH, MDPI, vol. 17(3), pages 1-25, January.
    4. Yonca Ertimur & Jennifer Francis & Amanda Gonzales & Katherine Schipper, 2020. "Financial Reporting for Pollution Reduction Programs," Management Science, INFORMS, vol. 66(12), pages 6015-6041, December.
    5. Thereza RS de Aguiar, 2018. "Turning accounting for emissions rights inside out as well as upside down," Environment and Planning C, , vol. 36(1), pages 139-159, February.
    6. Liu, Yang Stephanie & Zhou, Xiaoyan & Yang, Jessica Hong & Hoepner, Andreas G.F. & Kakabadse, Nada, 2023. "Carbon emissions, carbon disclosure and organizational performance," International Review of Financial Analysis, Elsevier, vol. 90(C).
    7. Hopwood, Anthony G., 2009. "Accounting and the environment," Accounting, Organizations and Society, Elsevier, vol. 34(3-4), pages 433-439, April.
    8. Yang Stephanie Liu & Xiaoyan Zhou & Jessica Yang & Andreas Hoepner, 2016. "Corporate Carbon Emission and Financial Performance: Does Carbon Disclosure Mediate the Relationship in the UK?," ICMA Centre Discussion Papers in Finance icma-dp2016-03, Henley Business School, University of Reading.
    9. Tae Hee Kim & Sun Hye Lee & Petros Vourvachis, 2023. "Accounting Standard-Setting for an Emission Trading Scheme: The Korean Case," Journal of Business Ethics, Springer, vol. 182(4), pages 1003-1024, February.
    10. Frank Hartmann & Paolo Perego & Anna Young, 2013. "Carbon Accounting: Challenges for Research in Management Control and Performance Measurement," Abacus, Accounting Foundation, University of Sydney, vol. 49(4), pages 539-563, December.
    11. J.I. Gorospe- Oviedo & A.I. Mateos- Ansótegui, 2012. "Related party transactions and emissions rights: accounting and direct international taxation," Chapters, in: Larry Kreiser & Ana Yábar Sterling & Pedro Herrera & Janet E. Milne & Hope Ashiabor (ed.), Carbon Pricing, Growth and the Environment, chapter 8, pages 117-131, Edward Elgar Publishing.
    12. Carmela Gulluscio & Pina Puntillo & Valerio Luciani & Donald Huisingh, 2020. "Climate Change Accounting and Reporting: A Systematic Literature Review," Sustainability, MDPI, vol. 12(13), pages 1-31, July.
    13. Peter Warwick & Chew Ng, 2012. "The ‘Cost’ of Climate Change: How Carbon Emissions Allowances are Accounted for Amongst European Union Companies," Australian Accounting Review, CPA Australia, vol. 22(1), pages 54-67, March.
    14. Kaidonis, Mary & Moerman, Lee & Rudkin, Kathy, 2009. "Paradigm, paradox, paralysis: An epistemic process," Accounting forum, Elsevier, vol. 33(4), pages 285-289.
    15. Olivier Boiral & Marie‐Christine Brotherton & Léo Rivaud & David Talbot, 2022. "Comparing the uncomparable? An investigation of car manufacturers' climate performance," Business Strategy and the Environment, Wiley Blackwell, vol. 31(5), pages 2213-2229, July.
    16. Rolf Uwe Fülbier & Thorsten Sellhorn, 2023. "Understanding and improving the language of business: How accounting and corporate reporting research can better serve business and society," Journal of Business Economics, Springer, vol. 93(6), pages 1089-1124, August.
    17. Linnenluecke, Martina K. & Smith, Tom & McKnight, Brent, 2016. "Environmental finance: A research agenda for interdisciplinary finance research," Economic Modelling, Elsevier, vol. 59(C), pages 124-130.
    18. Wen-Hsien Tsai & Shang-Yu Lai & Chu-Lun Hsieh, 2023. "Exploring the impact of different carbon emission cost models on corporate profitability," Annals of Operations Research, Springer, vol. 322(1), pages 41-74, March.
    19. Binh Bui & Carolyn Fowler, 2022. "Carbon controls in a New Zealand electricity utility: An application of theoretical triangulation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4423-4451, December.
    20. Zhifang Zhou & Tao Zhang & Kang Wen & Huixiang Zeng & Xiaohong Chen, 2018. "Carbon risk, cost of debt financing and the moderation effect of media attention: Evidence from Chinese companies operating in high‐carbon industries," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1131-1144, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:acceur:v:10:y:2013:i:2:p:223-239. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAIE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.