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Accounting for Carbon

IETA and the Association of Chartered Certified Accountants (ACCA) engaged in a report which investigates how large emitters in the European Emissions Trading Scheme (EU ETS) are accounting for emission allowances. The research involved a detailed survey of the financial statements of the largest greenhouse gas (GHG) emitters in the EU ETS (26 companies), followed by telephone interviews with accountants at five of these companies to explore in detail why accounting practices vary. Since the EU ETS commenced in 2005 there have been no firm rules about how to account for European emission allowances, and this uncertain situation has allowed a range of accounting models to flourish. The survey corroborates previous research,1 revealing that a diversity of emission allowance accounting practices are being used in Europe.

This report reveals how large emitters in the European Emissions Trading Scheme (EU ETS) are accounting for emission allowances. The diversity of emission-allowance accounting practices being used in Europe shows carbon financial accounting to be in its formative stages – rules and practices are still unsettled.

With this report, ACCA, in partnership with IETA, is opening up the debate to a wider international audience.

Download the report.


Facilitating a Smooth Transition into a Mature Environmental Financing Mechanism

Our annual State of the CDM report is based on extensive collaboration and data collection among stakeholders in the current CDM process— project developers, DOEs, investors and others. Consistent with previous versions of IETA’s State of the CDM report, it sets out the ways in which the current CDM system falls short of the sort of administrative efficiency that a well‐established regulatory regime, with an enormously important and broadly‐ supported purpose, should have. State of the CDM 2008 goes further than previous years’ reports in setting out a vision for the future of the CDM. Following the comprehensive set of recommendations this report lays out will not only make the CDM work more efficiently, and deliver more sustainable development more quickly, it will prepare the CDM for the expansion in scope that IETA believes the Parties should aim toward in the post‐2012 framework.


Trouble-Entry Accounting - Revisited

There is a widespread feeling that the EU ETS has made great progress but that the pace of change has not always been matched by its infrastructure. Carbon financial accounting is a case in point. The industry is plagued with diversity of accounting and no uniform approach seems to be in sight since the International Accounting Standards Board withdrew its accounting interpretation set out in IFRIC 3. The impact of accounting is increasingly important. Companies trading within the EU ETS perceive increasingly how allowances and carbon credits represent a significant asset. For example, between 2008 and 2012 some 2 billion allowances* will be issued.

The important question is how these are recorded for accounting purposes. The survey, which IETA completed in conjunction with PwC, will be a step in the right direction of bringing in more transparency and understanding on the real accounting issues within the EU ETS. On this basis IETA and PwC will be in a position to stimulate further debate and action on a uniform standard.

The purpose of the survey and of this publication is to present a synopsis of the accounting approaches applied in practice and to understand the key themes and issues arising given the absence of specific accounting guidance.

Download this document

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