Abstract
This paper introduced a non-monetary double-entry carbon accounting method for entities in emission trading systems. To mitigate climate change, government imposed carbon emission reduction obligations to industries with high greenhouse gas emissions. These entities performed carbon accounting and participated in emission trading systems annually to acquire enough carbon emission allowance and carbon credit to compensate for their greenhouse gas emissions. However, current carbon accounting methods did not account for their long-term emission potential, undermining assessment for their sustainability and financial risk. The proposed method addressed this issue by considering carbon emission allowance and carbon credit as carbon asset and emission potential from life cycle and embodied carbon assessment as long-term liability. Double-entry accounting methods were used to introduce carbon accounting balance sheet, income statement and flow statements and to enable carbon management performance analysis by analogous methods on financial statements. A case study was performed with historical data of an emission trading system. The result revealed that an entity's future carbon emission potential imposed significant long-term liability and risk. Its relevant emission expense was also found to incur much earlier before the actual emission. But more research was needed to expand the method to entities with their carbon neutrality targets, to enable comparison of entities in different emission trading systems and to ensure data credibility in generated reports.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.