Research On The Accounting Treatment Of Carbon Emission Rights

Global warming has caused tremendous climate disasters which human beings have to face and deal with. In order to prevent the greenhouse effect to be even worse, the United Nations conference on climate change has made a series of efforts. It is worth mentioning that the Kyoto protocol established three emissions trading mechanisms which bring up a new kind of right called carbon emissions right. With the expansion of carbon emissions trading, global warming is not only an ecological problem, but also a severe economic item. As a result, we need to take it into accounting system so as to meet stakeholders’needs. National standard setting institutions and scholars have done a lot of research on carbon emissions accounting. However, consistent accounting standards have not yet being put forward because of various sources and USES from different reduction mechanisms which are relatively independent and flexible. Besides, the laws of carbon emissions trading have not defined what carbon emission rights is which makes it more difficult to understand the nature of the carbon emissions. Accountants generally find it hard to account for emission allowances. They prefer to use simple accounting practices. There are a diversity of accounting practices in different enterprises which makes accounting information lack of comparability and correlation. Therefore, it is necessary to do a further study on accounting for carbon emissions which serves low-carbon economy. Meanwhile, standard-setting institutions and enterprises of our country should actively participate in the development of the international accounting standards for carbon emissions and try to grasp the valuable opportunity for financial reform.This paper bases on five difficulties of carbon emissions accounting which comes from a review of domestic and foreign literature on the accounting treatment using normative study method and comprehensive induction method. This paper is divided into three parts to discuss these five difficulties including relevant accounting confirmation of carbon emission rights, accounting treatment of related obligations and accounting measurement. Firstly, this paper discusses whether acquisition of carbon emission rights for free or not and whether different sources and USES influence accounting treatment. Secondly, the paper identifies two different kinds of recognitions, which are the’liability for the allocation’and the’liability for the emission’. Thirdly, by discussing the choice of measurement attributes, this paper advocates to use cost measurement model in the current stage. However, considering the carbon financialization trend, we still need to do a further research on fair value measurement of emissions trading.Based on above conclusions, this paper discusses accounting treatment for our country’ emission trading system including clean development mechanism and voluntary greenhouse gas emissions trading system. It is worth mentioning that as the seller of certified emission reductions, enterprises in our country also need to allot total project cost between equipment and certified emission reductions. A unified global emission trading system has not been formed, so emissions trading mechanism is likely to change in the future, we need to focus on emission reduction policies and regulations and do a further research on accounting standards for carbon financial instruments.