Accounting for Greenhouse Gases

Abstract

This paper consists of a study of the main accounting perspectives regarding emission rights. Climate change and the lack of common international regulations have caused the existence of a large divergence on an accounting level. The paper aims to see how emission markets are regulated, explain the national and international rules which have been developed with the aim to eliminate the large accounting divergence. Accounting discrepancy at a global level has a negative influence on the decisionmaking of shareholders, creditors, suppliers, regulators, etc. due to the difficulty to compare and understand the financial situation regarding greenhouse gases. Thus, the necessity of accountable harmonization. Finally, in this analysis, two illustrative cases will be presented to show how these two companies reflect their greenhouse gas emission rights in their financial statements.