TITLE:
Climate Change Challenges to Accounting
AUTHORS:
Constancio Zamora Ramírez, José María González González
KEYWORDS:
Climate Change; Carbon Assets; Carbon Markets; Carbon Finance; Weather Derivatives; Catastrophe Bonds; Carbon Accounting; Carbon Reporting
JOURNAL NAME:
Low Carbon Economy,
Vol.4 No.1,
March
27,
2013
ABSTRACT: Low carbon economy is causing the implementation and development of
carbon markets that affect an increasing organizations number. These markets
entail new challenges to accounting practitioners. The aim of this paper is, on
the one hand, to know how the financial statements are being affected by the
obligations of companies to control and compensate their carbon emissions, by
analyzing the different positions adopted by both regulatory organizations and
companies in the practice; and, on the other hand, to analyze the content and
specific problematic of accounting statements that report on emissions in
physical terms. This paper considers the accounting treatment of new carbon
assets and liabilities which external information is not sufficiently
regulated. Also, the paper analyzes the new contractual relationships that are
being developed such as complex derivative structures, purchasing carbon units
through ERPAs (Emissions Reduction Purchase Agreements), carbon monetization,
carbon collateralization and carbon funds. Finally, new report requirements to
companies that are arising, like Carbon Accounting or risks and strategies
regard to climate change (Carbon Reporting), are also analyzed.