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Accounting for Carbon Emission Allowances – An Exploratory Study

 

     

Varsha

 

Kashyap*

 

Masters

 

Student,

 

Massey

 

University,

 

Auckland,

 

New

 

Zealand

 

Asheq

 

Rahman

 

Professor,

 

Massey

 

University,

 

Auckland,

 

New

 

Zealand

 

Natasja

 

Steenkamp

 

Senior

 

Lecturer,

 

CQ

 

University,

 

Mackay,

 

Australia

 

 

 

* Correspondence Author:  Varsha Kashyap  School of Accountancy  Massey University  Private Bag 102 904  Auckland  Email: varshakashyap123@gmail.com       BIOGRAPHICAL NOTE   Varsha Kashyap 

Varsha Kashyap is a Masters student in the School of Accountancy, Auckland campus of Massey  University. Her research interests are in the area of intellectual capital and sustainability. 

varshakashyap123@gmail.com  

Prof. Asheq Rahman 

Prof. Asheq Rahman is the PhD coordinator of School of Accountancy, Auckland campus of Massey  University and teaches at undergraduate and postgraduate level. His research interests are in the areas  of financial accounting, disclosure and accounting institutional systems. 

a.r.rahman@massey.ac.nz  

Dr Natasja Steenkamp 

Dr Natasja Steenkamp is a senior lecturer in accounting in the School of commerce and law, Mackay  campus of CQ University and teaches at undergraduate and postgraduate level. Her research interests  are in the areas of intellectual capital and sustainability. 

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ACCOUNTING FOR CARBON EMISSION ALLOWANCES – AN EXPLORATORY STUDY

Abstract

Purpose – To investigate how accounting for carbon emission allowances (hereafter referred to as CEA), is being conducted by companies in the currently unregulated disclosure setting of the European Union Emission Trading Scheme (EU ETS).

Design/Method – Annual reports of UK companies affected by EU ETS are analysed to identify the accounting practices of recognition, measurement and reporting of CEAs. These accounting practices are recognised by the four key stages of the CEA lifecycle within the company. These stages are (1) received for free, (2) purchased, (3) used and (4) surrendered. Disclosure practices in annual reports are also explored. The investigation is based on a framework derived from the recent recommendations on CEA accounting of the International Accounting Standards Board (IASB) and other prominent bodies.

Findings/Conclusion – Only one quarter of the UK companies disclose their CEA accounting practices. Most companies recognise CEAs received for free or purchased at cost as intangible assets with a corresponding credit entry either to provisional liability or cash. Companies do not disclose their practices regarding revaluation, amortisation and impairment of these intangible assets. When companies have emissions, a cost is recognised in the income statement and a provisional liability is recognised. For surrendered CEAs, most companies recognise a provisional liability with a corresponding credit entry to intangible assets. Companies that do disclose their accounting practices for carbon allowances are publicly listed and are in Steel, Cement and Bricks sectors. Most of these companies disclose their accounting practices in the accounting policy notes of their annual reports.

Practical implications – The paper provides useful information to policy makers on the current state of CEA accounting under the EU ETS. The findings will also be useful to companies attempting to adopt CEA accounting. Likewise, educators and researchers can get meaningful insights into CEA accounting from this study.

Originality/value: This paper is one of the few pioneering studies on the actual practice of CEA accounting. It is likely to open a new area of research on how CEA accounting and disclosure are conducted.

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ACCOUNTING FOR CARBON EMISSION ALLOWANCES – AN EXPLORATORY STUDY

1. Introduction

The global emissions trading markets were worth $64 billion (€47 billion) in 2007 and are expected to continue to grow in spite of its teething challenges (Ramakrishnan, 2008). Emissions’ trading is one of the methods proposed by the Kyoto Protocol for the reduction of greenhouse gas emissions around the world. Emissions trading schemes (ETS), such as the European Union Emissions Trading Schemes (EU ETS), are now reasonably well-established. While the regulatory aspect of monitoring for carbon allowances traded under the EU ETS has been reasonably established, the issue of accounting for reporting for carbon allowances under the scheme is yet to be determined. One of the reasons for this according to Bebbington and Larrinaga-Gonzalez (2008) is the presence of “different actions developed to tackle global climate change have accounting implications that deserve the research of accounting academics” (p. 712). This reasoning may apply to an absence of a world-wide accounting standard. However, with the growing size of the established market for tradable allowances suggests that action for accounting for that form of carbon abatement is urgently needed. The need arises from the investors’ need to better estimate the effects of carbon emissions reduction on firm financial performance and firm financial value. Many questions have arisen in this regard. Some of these questions have been summed up by Elfrink and Ellison (2009) in the following manner:

…if EAs (emission allowances) are recorded as assets, how are they valued and classified? How do the EAs and GHG emissions affect the profit and loss statement? When and how are liabilities imported? When and how are government grants recognized? Is revaluation of the related assets and liabilities appropriate? How does a participant account for sales of EAs? (p. 30)

The purpose of this study is to address these questions by investigating how accounting for carbon emission allowances (CEAs) is being conducted by companies in the EU ETS. The investigation is

undertaken in two stages. First, a literature review is undertaken to ascertain what has been proposed on CEA accounting by policy makers and experts. Secondly, a framework for CEA accounting is developed based on these proposals and an empirical study is undertaken using UK companies’ annual reports to ascertain how firms recognise, measure and report allowances. Four key stages of the CEA lifecycle within the company are recognized. These stages are (1) receipt for free, (2) purchase, (3) use and (4) surrender. Recognition, measurement and reporting practices of CEAs are identified by each of these stages. Disclosure practices in the annual reports are also identified. The UK companies’ annual reports are used

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because they are in English, there are many companies in the UK that fall under the EU ETS, and the UK companies are more likely to disclose CEA accounting practices because of UK’s competitive stock market. Annual reports of only one year are used to ensure that the continuously changing regulatory scene of accounting regulations does not contaminate the data.

This study provides evidence to standard setters and policy makers about how companies currently account for CEA. The evidence may be useful in developing a comprehensive and uniform accounting standard and guidelines for how to account for CEAs. The findings can also be useful to companies attempting to adopt CEA accounting. Additionally, educators and researchers can get meaningful insights into CEA accounting from this study. It is believed that the time has come to include the accounting for CEA under an ETS in accounting education curricula.

The paper is structured as follows. The Kyoto Protocol, CEA and the need for CEA Accounting is discussed in Section 2. The proposals for CEA accounting are discussed in Section 3. The research method employed in the paper is explained in Section 4. Section 5 presents the results. In Section 6, the paper concludes with a summary and some suggestions for future research.

2. Kyoto Protocol, CEA and the need for CEA Accounting

It is argued that human induced global warming is one of the main reasons for climate change. One response to mitigate global warming was the Kyoto Protocol signed in Kyoto, Japan, in 1997. The Kyoto Protocol has 175 signatory countries, which includes the European Union (EU) (CPA Australia, 2008; Jee Hoon, 2010). The Kyoto Protocol requires participating countries to reduce their greenhouse gas emissions (Jee Hoon, 2010).

To assist the signatory countries to limit their greenhouse gas emissions and meet their obligations, the Kyoto Protocol introduces three flexible mechanisms: joint implementation, the clean development mechanism, and emissions trading (CPA Australia, 2008). Joint implementation and clean development mechanism are project-based mechanisms. Joint implementation enables industrialized countries to carry out joint implementation projects with other developed countries, while the clean development mechanism involves investment in sustainable development projects that reduce emissions in developing countries. An emission trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in carbon. Governments set a cap on the amount of a pollutant that may be emitted. The cap is allocated or sold to firms in the form of allowances or permits which represent the right to emit or

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discharge a specific volume of a specified pollutant. The total number of allowances for a company cannot exceed the cap, thus limiting total emissions to the pollutant by the company. Companies that increase their emission beyond the cap must buy allowances from those who require fewer allowances. The transfer of allowances is referred to as a trade. In effect, the buyer is pays a charge for polluting, while the seller is rewarded for reducing emissions. In other words, companies are encouraged to reduce emissions through trading of CEAs (Stavins, 2001).

There are several active emissions trading schemes around the world. The largest and most established of these is the European Union Emissions Trading Scheme EU ETS. It commenced operations in 2005. The emissions trading schemes require measurements and reporting of emissions for two important purposes. The first of these is for monitoring the actual emissions and the use and trading of emission allowances so regulators can ascertain whether or not companies are emitting within their stipulated caps. The second reason is for informing the investors who invest in the emitting companies. The presence, use and purchase/sales of emission allowances are economic activities that affect the financial performance and the net worth of companies. Carbon reduction and the lack of it can be a source of financial risk for the companies and, therefore, needs to be monitored by shareholders and debt providers of companies. In spite of its existence for several years now, the EU ETS still does not have any standards for the accounting of CEAs. There have been some attempts to give guidance on how to recognise and measure CEAs, but there is no universal scheme being developed (Elfrink and Ellison, 2009; KPMG, 2010). Hence, significant challenges remain in CEA accounting and reporting (Kerr & Sweet, 2008). In this regard, GHG Management Institute (2009) expresses the following concerns:

…carbon is rapidly emerging as a global commodity with massive market potential, diverse drivers and over-arching financial implications. All across the globe hundreds of organizations now develop market and/or sell offsets and emission allowances involving a wide range of participants, prices, transaction types and projects. With this in mind, there is now immediate need to ensure transparent and competent greenhouse gas accounting practices and standards... (p. 24).

In the absence of an accounting standard and guidance on accounting for CEA under an ETS, many companies are adopting IAS 8, which allows them to develop and implement their own accounting policy regarding CEAs (CPA Australia, 2008). However, this has led to diversity and inconsistencies between companies’ policies and practices regarding recognition and measurement of CEA. This hinders the comparability between companies’ financial statements. In the absence of authoritative accounting

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guidance on how to account for CEAs, various accounting treatments have evolved which are likely to lead to volatility and material and/or counter-intuitive effects on financial statements in matters such as timing of recognition of assets, liabilities, profits and losses (KPMG, 2008).

3. Proposals for CEA Accounting

With the inception of EU ETS, various accounting firms, academics and policy makers mooted theories and proposals on how carbon accounting should be conducted. We identify and examine three prominent proposals and three surveys on the recognition and measurement of CEAs which, we believe can influence CEA accounting and reporting. The most prominent proposal on this topic is IFRIC 3 (Emission Rights) of the International Accounting Standards Board (IASB). The other two proposals are that of PwC and KPMG. Although all of the Big 4 auditing firms have been debating CEA accounting, the PwC and KPMG proposals attend specifically to the issue of how to account for CEA. The three surveys are of CPA Australia members conducted by Macquarie University, and on large EU emitters undertaken by ACCA as well as by Peter Warwick and Chew Ng.

The three proposals and surveys are discussed below and are used for developing a scheme for identifying accounting practices in the key stages of the CEA lifecycle within the company (Table 1). This scheme is also used for identifying the measurement methods of revaluations, if revaluations are reported by the company. The main aim of this scheme is to make a factual determination of the manner in which accounting for CEA is conducted by the EU ETS companies.

3.1 IFRIC-3 - Emission Rights

Prior to the commencement of the European Union greenhouse gas emission trading scheme (EU ETS) (Cummings, Dyball & Pang, 2009), the International Accounting Standards Board (IASB) released IFRIC 3 (Emission rights) in December 2004 (Deloitte, 2010). The purpose of IFRIC 3 was to provide guidance on accounting for a cap and trade emission rights scheme (EFRAG, 2005). IFRIC 3 made the following recommendations:

 CEA are intangible assets irrespective of whether they have been purchased or provided free of cost by the government.

 Subsequent to initial recognition, CEA should be accounted for in accordance with IAS 38 (Intangible assets standard).

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 When a participant produces emissions, provisions for emissions-related liabilities should be recorded at market value in accordance with IAS 37 (Provisions, contingent liabilities and contingent assets standard).

Furthermore, IFRIC 3 recommended that where allowances are issued by governments for less than the fair value, the difference between the fair value and the amount paid, if any, is a government grant. Such a grant should be immediately recognised as a deferred income in the balance sheet and thereafter as income on a systematic basis. IFRIC 3 also recommended that changes in the value of revalued allowances (i.e. intangible assets) be recognised in equity, and movements on the provision for emissions be recognised in the income statement (KPMG, 2008; PricewaterhouseCoopers, 2007).

Within 6 months of being issued, the IASB withdrew IFRIC 3 in June 2005. This decision was made primarily because the European Financial Reporting Advisory Group (EFRAG) recommended that IFRIC 3 should not be endorsed for use in the European Union (Deloitte, 2010). Although the EFRAG agreed with the recommendations of IFRIC 3 (EFRAG, 2005), they pointed out that applying IFRIC 3 will not always reflect economic reality and provide relevant information. They also argued that the accounting requirements of IFRIC 3 will result in both measurement and reporting mismatches (EFRAG, 2005; Mackenzie, 2009). In particular, they pointed out a mismatch between the valuation of assets and the

valuation of liabilities, which would lead to income volatility. During its April 2009 meeting, The Financial Accounting Standards Board (FASB) discussed its joint project with the IASB on Emission Trading Schemes (KPMG, 2005). A FASB Exposure Draft was expected in the second quarter of 2010 and a final standard was to be issued in 2011. However, at the time of writing this paper, neither of these has been issued yet.

3.2 PricewaterhouseCoopers

Two of PwC’s publications on the debate on climate change and emissions attend to the accounting of CEA (PwC, 2007; PwC 2008). The 2007 publication reports the results of a Europe wide survey of PwC in conjunction with the International Emissions Trading Association (IETA). It provides PwC’s view on acceptable approaches for accounting for CEAs in the EU ETS. The survey investigated the accounting approaches applied by major organisations that have been significantly affected by the EU ETS. The survey focused on the accounting for the EU ETS, but also covers the accounting for Certified Emission

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Reductions (CERs).1 The results of the majority of respondents’ answers to the survey are presented in the footnotes to Table 1. The 2008 publication relates to the New Zealand ETS. This publication sets out the key design features of the NZ ETS and examines some of the implications and obligations for both businesses and households. The main area of debate discussed in this publication is how to account for the emissions liability.

PwC presented three accounting approaches companies could use to account for CEA under the EU ETS (PwC, 2007). These two approaches are the full market value approach and the cost of settlement approach. Their recommendations as to which financial statement elements to recognise are the same under both approaches. In essence, it appears that PwC’s view on how to account for CEA in an ETS is similar to the recommendations of IFRIC 3.

3.3 KPMG

KPMG has provided guidance for accounting for CEA. Its most prominent document in this area is KPMG. (2008), Accounting for carbon – the impact of carbon trading on financial statements. Following is a summary of the key accounting recommendations of this document:

 Recognise CEAs as intangible assets when received for free and when purchased.

 Recognise a government grant of CEA when allowances are received for free.

 Measure the CEA received as a government grant at nominal value, i.e. cost (which may be nil), or at fair value (based on market price).

 Recognise the grant as deferred income and release to the income statement on a systematic basis over the compliance period to which it relates.

 Recognise purchased allowances at cost less impairment if applicable.

 Measure at cost or revaluation. When revalued, recognise the movement in value directly in equity.

 Do not amortise CEAs.

 Recognise a liability when emissions occur as an expense in the income statement, measured at the best estimate of the expenditure required to settle the obligation.

 Only commodity brokers / traders should revalue allowances when recognised as inventory. The difference between fair value less costs to sell should be recognised in the income statement.

Similar to PwC, it appears that KPMG has adopted the recommendations of IFRIC 3 in their approach.

      

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3.4 Macquarie University Survey

Macquarie University did a survey of the CPA members in 2008 (Cummings, Dyball & Pang, 2009) to ascertain CPA members’ preferred accounting treatment for carbon allowances for Australia’s emission trading scheme known as CPRS (i.e. Carbon Pollution Reduction Scheme). The survey investigated the initial and subsequent recognition and measurement of emission allowances, and the corresponding liability. The results show diversity in how CPA members believe CEAs should be recognised and measured. A majority of respondents prefer to recognise allowances as an intangible asset initially. What is interesting is that some prefer to recognise it as a current asset because they argue the allowances are tradable within one year. Others, however, prefer to recognise CEAs as a non-current asset as they argue the allowances will not be tradable until after one year. Most respondents indicate that if a company emits less than the allowances it holds, then the balance should be carried forward at either the initial value or a revalued amount. The responses of the majority of the respondents in the survey are shown in the footnotes to Table 1 at the end of the section.

3.5 ACCA

In its report ‘Accounting for Carbon’, ACCA (2010) attempted to investigate how large emitters in the EU ETS account for their emission allowances and why their accounting practices vary. For this, ACCA did a detailed survey of the financial statements of the largest greenhouse gas emitters (i.e. 26 companies) in the EU ETS, followed by telephone interviews with accountants at five of these 26 companies to investigate in detail why accounting practices differ. The findings produced by this research indicated that majority of the companies did not adopt IFRIC 3’s recommendation of accounting for granted emissions allowances at fair value. Instead, these companies treat both granted and purchased emissions allowances as intangible assets at cost. Interestingly, the findings also reveal that the companies measure their obligation to surrender allowances on a ‘cost with the balance at market value’ basis. In other words, the valuation is based on the carrying value of granted or purchased allowances, while valuing at the market value the allowances that are yet to be purchased in order to cover emissions. This practice is not supported by IFRIC 3 and is in contrast to its recommendation of treating assets (allowances) independently to the liabilities arising under the EU ETS.

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3.6 Warwick and Ng Study

Warwick and Ng (2012) attempt ‘to gain an initial understanding of how companies in the EU are accounting for carbon emission allowances’ (pg61). They employ content analysis and survey how EU companies recognize granted CEAs, both upon initial receipt as well as subsequently, and how EU companies recognize purchased emission allowances and liabilities for emissions. The findings of the study indicated that there is no uniformity in accounting for emission allowances, especially amongst large emitting companies operating in the EU ETS as they seem to adopt a diversity of accounting practices to account for their CEAs. Interestingly they reveal that these companies generally departed from IFRIC 3 and prefer to report granted CEAs as intangible assets, with a nil value recorded upon receipt (as compared to IFRIC 3’s recommendation of using fair value). This is also consistent with the findings of ACCA (2010) that was previously discussed. Purchased emissions allowances were initially reported by the companies at cost, without any clear trend for the subsequent reporting at the end of the reporting period. Finally, the obligation to deliver allowances were reported by the companies as a provision (or liability) at either the carrying amount or the purchase cost of allowances held at the end of the reporting period, and the amount outstanding at the market price at the end of the reporting period. This too, was in contrast to IFRIC 3’s recommendations of measuring the provision at the best estimate at the end of the reporting period.

In summary, the above discussion shows a variety of ways in which CEA can be recognised and measured during the different stages of it lifecycle. The discussion illustrates the difficulty of keeping track of which financial statement elements are affected from when CEA is acquired until it is used up. While the surveys undertaken by ACCA and Warwick and Ng focus on the CEA accounting practices of large EU emitters, the present study focuses on the CEA accounting practices of UK emitters in more depth, and also explores the CEA disclosure practices of the emitters. For taking measures, an additional step taken in this study is the attempt to identify the process of recognition of CEA prior to disclosure. The process of recognition sheds light into how CEAs are measured and recorded prior to their disclosure in annual reports. Table 1 attempts to identify the essential elements affected by the recognition process using the six documents discussed earlier. This is done by identifying the accounting double-entries for the different stages of a CEA lifecycle. More specifically, the stages are (1) receipt of free allowances, (2) purchase of allowances, (3) use of allowances (when emitting emissions) and (4) surrender of allowances (when used allowances are delivered). Different shades are used for the likely journal entries for the different transactions. Each entry shows which accounts are affected. Revaluation entries are also shaded in a similar manner.

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Table 1: Double entries for recognition of allowances at different stages under the cost model and subsequent revaluation Methods and Stages  (NOTE: Same shade means  accounts arising from the same journal entry) 

Cost model  Asset Recognition  Revenue recognition 

Stage  DR  CR  DR  CR 

Receipt of free allowance  Intangible asset2  Government grant (deferred  income)3,4

 

Purchase of allowance  Intangible asset5  Cash/Accounts Payable6   

Allowance used (emit emissions)7    Government grant (deferred income)  Income8  Used allowance 

delivered(surrendered) 

  Intangible asset  Loss (Diff between Allowance &  Liability to deliver) 

Profit (Diff between Allowance  & Liability to deliver) 

Liability recognition Expense recognition

DR  CR  DR  CR 

Allowance used(emit emissions)    Liability to deliver allowances9  Emissions expense  Used allowance delivered  (surrendered)  Liability to deliver  allowances    Revaluation model10  Asset Recognition    DR  CR 

Revaluation (Upward)  Intangible asset 

Revaluation (Downward)    Intangible asset  Use of Revalued amount    Intangible asset 

Equity recognition 

Revaluation (Upward)11    Equity (revaluation surplus)   

Revaluation (Downward)  Equity (revaluation surplus)   

Use of Revalued amount  Equity (revaluation surplus)          

2 Subject to impairment, but is not amortised. 86% of respondents in the PwC survey support this. Also the preferred recognition in Macquarie University survey. 3 65% of respondents in PwC survey supported this double entry.

4 Preferred recognition in Macquarie University survey is a provisional liability. 5 Preferred recognition in Macquarie University survey.

6 58% of respondents in PwC survey supported this double entry. Respondents in the Macquarie University survey preferred a provisional liability. 7 PwCs view is to amortise the intangible asset on a systematic and rational basis over the compliance period.

8 50% of respondents in PwC survey supported this double entry, although 1/3 say to credit revenue, 1/3 cost of sales, and 1/3 other.

9 70% of respondents in the PwC survey said an obligation should be recognised based on a pro-rating of the forecast shortfall for the compliance year on a per unit of production basis 10 The revaluation model is an extension of the cost model.

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4. Research Method

The EU ETS has been in operation since 2005 and is the longest operating and most established ETS in the world. It is therefore assumed that companies in countries captured under the EU ETS would have had a considerable length of time to develop and establish policies and practices regarding how to account for carbon emission allowances. Consequently, companies affected by the EU ETS were selected for this study.

4.1 Sample selection process

Since annual reports are a communication medium connecting the company with its stakeholders, it is expected that the companies may disclose information pertaining to their accounting practices regarding carbon allowances in their annual reports. Consequently, annual reports were chosen as the source of data. The research project commenced at the start of 2010. Therefore the annual reports for the 2008/2009 financial year were selected.

The carbonmarketdata.com database was used to select the company names for inclusion into the study. It was decided to only include companies from countries that prepare their annual reports in English. Likewise, the UK companies were included for the sample. The EU ETS section of the carbonmarketdata.com database provided a list of 911 installations in the UK affected under EU ETS, along with information on their sectors (Energy, Mineral, Metal and Other) and activity (Combustion, Refinery, Glass, Bricks & Ceramics, Cement & Lime, Iron & Steel and Paper). The carbonmarketdata.com list included the names of those installations’ account holders, their account status and information relating to the installations’ emissions. The account holders of the installations listed on the carbonmarketdata are either individuals or companies. Since the aim was to select annual reports of companies, it was decided to select installations having ‘companies’ as their account holders. Furthermore, during the selection process it was discovered that most of the account holder companies owned multiple installations, with some having 26 installations. The selected account holder companies were then searched in Google to access the links to their websites for obtaining their annual reports. In some cases, the websites could not be accessed whilst in other cases the annual reports were not accessible. Additionally, it was decided to include only those companies that provided the required data on carbon emission allowances in their annual reports. The sample size consequently reduced to 75 UK account holder companies with installations in different sectors and industries (See Appendix A for a list of the installations and their account holder company names).

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4.2 Research technique

The annual reports were examined to ascertain how companies account for carbon emission allowances under the EU ETS. The focus was on ascertaining how they recognise and measure CEA according to the Tables 1 information items.

The technique used to gather and record the data is content analysis. There are two distinct generic approaches to content analysis: “form oriented” and “meaning oriented” approaches (Steenkamp & Northcott, 2007). A form oriented analysis is referred to as an objective analysis that involves the routine counting of words, concepts or themes. A meaning oriented analysis is described as a subjective analysis, focusing on inferring the underlying meanings present in the texts being investigated. Hence, content analysis can entail counting the number of times something appears (hence recording the frequency of an occurrence) or just simply recording if something is disclosed (thus the presence of an occurrence). This study analysed and classified content in terms of predetermined categories and only recorded the presence of the issue in a particular category. Thus a form oriented approach was taken in recording information on accounting for CEA. No inferences were made about underlying meanings present in any content.

However, within the form oriented approach, some judgement had to be made to identify the process of accounting and the accounts that were affected by the accounting. To ascertain whether a company has debited or credited certain accounts and to identify the measurement method used, the data collector had to traverse through two or more segments of the annual report. In some cases, the identification of a practice was drawn from implication of a certain reporting method. So, if a company reported its CEA under the footnote on intangibles, it is likely that they had debited the intangibles account when the government grant was received. Again, if they had recorded the value at “nil” the measurement was likely to be at cost.

4.3 Categories for coding

For ease of recording the information presented in annual reports into accounts to be debited and credited during the different stages, a coding framework was developed. Tables 1 formed the basis of the coding framework and it was extended with alternative accounts suggested to be debited and credited found while doing the literature review. The coding framework also includes alternative measurement bases suggested in the literature. Table 2 presents the coding framework used in this study.

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Table 2: Coding Framework for recognition and measurement of CEA

Receipt for free  Purchased   Used  Used allowances delivered  

Recognition  Recognition  Recognition  Recognition 

Debit:  Debit:  Debit:  Debit: 

Inventory  Inventory  Cost of sales  Provisional Liability 

Financial  Instruments  Financial  Instruments  Expense     Intangible Assets  Intangible Assets           Cost of goods sold       

Credit:  Credit:  Credit:  Credit: 

Revenue  Cash / Bank  Provisional liability  Accumulated Amortisation 

Deferred Income           Government  grant  Provisional liability  Intangible Assets  Provisional  Liability  Derivatives         

Measurement  Measurement   Measurement   Measurement  

Fair value  Fair value  Fair value  Fair value  Cost (nil)  Cost (nil)  Cost (nil)  Cost (nil)  Market value  Market value  Market value  Market value 

The coding framework in Table 2 was used as a score sheet to record the information companies provide regarding how they recognise and measure their CEA during the different stages into different categories. The content of each annual report was carefully read and each company’s information was recorded on a separate sheet. If a company provided information about how they account for CEA in the different stages, then a 1 was recorded against the relevant category in their score sheet. If no information was disclosed about a particular scenario, a 0 was recorded against the particular category. Eventually, all results were accumulated in one sheet to determine aggregate results. While reading the annual reports and recording companies’ accounting practices, notes were also made on the score sheet on the kind of information, where and the form in which companies present this information in the annual reports. All scores were checked by a second data collector.

5. Findings

We start with a discussion on the sectors and industries to which the sample companies belong. Other information companies present about carbon emissions and allowances in their annual reports are

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discussed briefly along with examples of the forms of presentation. Then the results of how companies account for their CEA during the different stages are presented. Finally, the section in the annual reports where disclosure about accounting for CEA is made is presented.

5.1 Sectors and industries of the UK companies in the sample

Table 3 provides the distribution statistics for sample companies within sectors and industries.

Table 3: Sectors and industries of UK companies

Sectors Industries Number of account holder companies with installations per industry Number of account holder companies reporting on their accounting practices % of companies reporting12 Number of account holder companies listed on a stock exchange % of listed account holder companies that report their accounting for carbon allowances ENERGY Combustion 47 8 17% 7 88% Refinery 4 1 25% 1 100% MINERALS Bricks 5 3 60% 2 67% Glass 6 0 0% - - Cement 3 2 67% 2 100% METALS Steel 1 1 100% 1 100% OTHER Paper 9 3 33% 3 100% Total 75 18 24% 16 89%

As shown in Table 3, more than half of the account holder companies (51 out of 75) are from the Energy sector and a majority of them are in the Combustion industry. It was found that all 75 companies presented some information about carbon emissions and allowances in their annual reports. The most commonly disclosed are information about carbon emissions for the current and previous year and detailed information regarding carbon credits, decrease in their emissions over the years, how they plan to reduce their carbon emissions, and expenses that are likely to be incurred by the company in relation to carbon emissions. The most common forms of presenting these kinds of information are in tables, narratives and graphs. Examples of these forms of presentations are provided in Figures 1 to 3.

      

12 Some account holder companies provided information only on how they accounted for their allowances when received for free and when sold allowances, but not when purchased, surrendered and inventoried.

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Fi     So Fi S Fi Source: J Howeve how the profiles a Steel, C igure 1: Exa         ource: M-real C igure 2: Exa Source: Talisma igure 3: Exa Japan Tobacco r, as shown ey account fo are that 16 ( Cement and ample of pres Company’s Ann ample of pres an Energy Com ample of pres Company’s An in Table 3, or these allo (89%) are lis Bricks indus senting carbo   nual report 2009 senting CEA mpany’s Annual senting inform nnual report 200 only 18 (24 owances. So ted on a sto stries report on emission a 9, p. 93 (Paper information i report 2009, p mation on CE 09, p. 4 (Combu percent) of t ome interesti ck exchange their accou allowance inf  

& Pulp industry

n a narrative . 42 (Combustio EA in a graph ustion industry) the 75 comp ing observat e, and propo nting practic formation in a y) form on industry) h panies provid tions about t rtionately, mo ces than com

a table     ded informati these 18 co ore compani mpanies in t on about mpanies’ ies in the the other

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industries. Furthermore, the majority of these companies are audited by the big four auditing firms. Six are audited by KPMG, five audited by PricewaterhouseCoopers and five by Ernst & Young, and Deloitte audited two.13 Only one company was audited by a firm other than the big four auditing firms. Appendix B provides a profile of these 18 companies.

5.2 Accounting practices for different stages for carbon allowances

Although the 18 companies provided information about their accounting practices for CEA, not all of them provided information about all the different stages under investigation in this study. One possible explanation for this is because there is no mandatory accounting standard requiring companies to disclose their accounting practices and policies. Hence, firms simply do not disclose their accounting practices and policies. Another possibility is that these allowances are not material to these companies. The results of the 18 companies that do disclose their accounting practices are presented in the remainder of this sub-section.

5.2.1 Receipt of free allowances

Table 4 shows that the majority of the companies (13 or 72%) measure free carbon allowances at cost, which implies a “nil” value. Four companies measure free allowances at market value and only one at fair value. Of the seven companies that provided information on how they recognise receipt of free allowances, six companies recognise it as intangible assets and six (although not the same six) recognise the corresponding entry as a government grant. Only one company recognises it as a financial instrument and one reported the corresponding entry as a provision/liability.

Table 4: Recognition and measurement when allowances are received for free

RECEIPT OF FREE ALLOWANCES

Recognition Measurement

No. of annual reports DEBIT CREDIT

Sector Industry

with info on carbon accounting Fin. Inst Int. Asset Revenue Gov. Grant Prov. Liability Cost Market Value Fair Value Energy Combustion 8 0 1 0 1 0 7 1 0 Refinery 1 0 0 0 0 0 1 0 0 Minerals Bricks 3 0 3 0 2 1 2 1 0 Glass 0 0 0 0 0 0 0 0 0 Cement 2 0 0 0 0 0 2 0 0 Metals Steel 1 0 0 0 0 0 1 0 0 Other Paper 3 1 2 0 3 0 0 2 1 TOTAL 18 1 6 0 6 1 13 4 1       

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5.2.2 Purchase of allowances

Only 8 of the 18 companies provided information as to how they recognise allowances when purchased. Seven of these eight companies recognise allowances as intangible assets and the other one as cost of sales when purchased. When the allowances are not purchased for cash, these companies recognise them as a provision/liability. Interestingly, although only 8 companies provided information about how they recognise purchased allowances, 11 companies mentioned how they measure purchased allowances. Seven measure it at cost, 2 at market value and 2 at fair value. These results are shown in Table 5.

Table 5: Recognition and measurement when allowances are purchased

PURCHASED CARBON ALLOWANCES

Recognition Measurement No. of annual

reports DEBIT CREDIT

Sector Industry with info on carbon accounting Fin. Inst Int. Asset Inv Cost of Sales Cash Prov

Liability Derivative Cost Market Value Fair Value Energy Combustion 8 0 1 0 0 1 0 0 4 1 0 Refinery 1 0 1 0 0 0 1 0 0 0 1 Minerals Bricks 3 0 2 0 0 2 0 0 1 1 0 Glass 0 0 0 0 0 0 0 0 0 0 0 Cement 2 0 1 0 1 0 2 0 1 0 0 Metals Steel 1 0 1 0 0 0 1 0 1 0 0 Other Paper 3 0 1 0 0 1 0 0 0 0 1 TOTAL 18 0 7 0 1 4 4 0 7 2 2

One explanation why only 8 of the 18 companies reported their recognition practices for purchased allowances might be that they received these allowances for free and thus have not purchased any allowances yet. An interesting observation is that although these companies recognise these allowances as intangible assets when received for free and purchased, no company provided information about the revaluation, amortisation and impairment of such intangible assets.

5.2.3 Use of allowances

Table 6 shows how companies report the accounting for allowances when they emit emissions. IFRIC 3, in this regard, suggests recognition of an expense and a corresponding liability or provision. Of the 14 companies reporting on this issue only 3 report the expense aspect with 2 stating it being recognised as cost of sales and 1 as a cost. On the corresponding side 9 companies record the full amount of the emissions (as per IFRIC 3) as a liability and 5 record only the excess of the carbon credits used over and above the allowance given as a liability. For the latter 5, the debit would be for this excess amount over and above the allowances granted. Since the carbon allowances granted by

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governments mostly have a nil value, the excess amount used (most likely purchased from the market) would be the main reason for the carbon allowance expenses for both types of firms, the ones that recognised the full amount and the ones that recognised partially. None of the firms discussed the measurement aspect. Once again, the government grant part is likely to be valued at nil value and the excess amount at market purchase price, i.e., the cost at the time the excess was acquired from the market.

Table 6: Recognition and measurement when allowances are used

USE OF CARBON ALLOWANCES

Recognition Measurement

No. of annual reports DEBIT CREDIT

Sector Industry

with info on carbon

accounting Cost of Sales Cost

Provisional Liability for full amount of carbon credits used Prov or Liability of excess of actual over Govt Grant Cost Market Value Energy Combustion 8 0 0 4 1 0 0 Refinery 1 0 0 1 0 0 0 Minerals Bricks 3 0 0 1 1 0 0 Glass 0 0 0 0 0 0 0 Cement 2 1 0 1 1 0 0 Metals Steel 1 1 0 0 1 0 0 Other Paper 3 0 1 2 1 0 0 TOTAL 18 2 1 9 5 0 0

5.2.4 Delivery of used allowances (surrendering allowances)

Table 7 shows only 6 of the 18 companies mentioned their accounting practices when they surrender allowances. All six companies reported that when used allowances are delivered, they account for them as a provisional liability and an intangible asset.

Table 7: Recognition and measurement when used allowances are delivered

SURRENDERED CARBON ALLOWANCES

Recognition Measurement

No. of annual reports DEBIT CREDIT

Sector Industry

with info on carbon accounting Provisional Liability Acc. Amm Intangible Asset Cos t Market Value Energy Combustio n 8 2 0 2 0 0 Refinery 1 0 0 0 0 0 Mineral s Bricks 3 1 0 1 0 0 Glass 0 0 0 0 0 0 Cement 2 0 0 0 0 0 Metals Steel 1 1 0 1 0 0 Other Paper 3 2 0 2 0 0 TOTAL 18 6 0 6 0 0

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Table 7 shows that none of the companies provided information about the measurement base used when carbon allowances are surrendered.

In conclusion, the findings show a majority of the companies in the sample are applying the guidelines and recommendations provided in IFRIC 3, even though it was withdrawn.

5.3 Other information provided

Although the selling of allowances was not one of the stages specifically coded for in the study, it was noted early in the coding process that a few companies provided information about their accounting practices when allowances are sold. Hence, this information was recorded and is presented in Table 8.

Table 8: Recognition and measurement when allowances are sold

Eight companies provided information about their practices when they sell allowances. All 8 companies recognise income and 6 recognise the sale against a provisional liability account and the other 2 state a government grant is recognised. Only 3 of these 8 companies that provide information on selling allowances state the value at which allowances are measured when sold. One company values the allowance at market value while the other two value it at fair value.

5.4 Section in annual reports where information is provided

While recording information about the accounting of CEA, notes were made as to where in the annual reports the information was reported. Table 9 shows that all except one company provide information about how they account for their carbon allowances in their accounting policies notes.

SOLD CARBON ALLOWANCES

Recognition Measurement

No. of annual reports with info. on carbon accounting

DEBIT CREDIT

Sector Industry Government Grant Provisional Liability Income Cost

Market Value Fair Value Energy Combustion 8 0 3 3 0 0 1 Refinery 1 0 0 0 0 0 0 Minerals Bricks 3 0 1 1 0 0 0 Glass 0 0 0 0 0 0 0 Cement 2 0 0 0 0 0 0 Metals Steel 1 0 1 1 0 0 0 Other Paper 3 2 1 3 0 1 1 TOTAL 18 2 6 8 0 1 2

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Ta For insig example Figure 4: Source: Figure 5: Source: able 9: Sect Sector Energy Minerals Metals Other TOT ghts into the es are presen First example o 2009 Annua Second examp 2009 Annua ion in annua Industry Combustion Refinery Bricks Glass Cement Steel Paper TAL kind of infor nted in figure of accounting p al report of Ab ple of accountin al report of Ou al report wh No. of a a rmation these s 4 and 5. policy note berdeen Com ng policy note utokumpu St here informa annual report analysed 8 1 3 0 2 1 3 18 e companies mpressor Sta tainless Stee ation is prov ts Secti Note F/S 8 1 2 0 2 1 3 17 s provide in t tion l ided

ion where info provide s to S Other pR 7 he accountin formation is ed parts in Annual Reports 0 0 1 0 0 0 0 1

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6. Conclusion, limitations and future research

The purpose of this research is to investigate how to account for CEA from the stage of acquisition to the point of surrendering it. The findings of this study would be useful to standard setters and policy makers when developing an accounting standard or guidelines regarding CEA accounting. The findings can also be useful to companies when developing accounting policies regarding recognition and measurement of CEAs in an ETS. In the absence of a generally accepted accounting standard and/or comprehensive guidelines on accounting for CEA, proposals on how CEA accounting should or could be done is investigated first. It is found that whilst leading auditing firms and the accounting profession appear to have adopted IFRIC 3’s recommendations on accounting for CEA, large emitting companies in EU seem to depart from the IFRIC-3 recommendations. Second, an empirical study on the 2008/2009 annual reports of UK companies with installations affected by the EU ETS is conducted and their accounting practices and policies identified.

The results show that companies disclose some information about carbon emissions and allowances in their annual reports, mostly by way of tables, narratives and graphs. However, the study reveals that only 18 (24%) of the 75 UK companies affected under the EU ETS are reporting information in their annual reports regarding accounting for carbon emission allowances. The findings of the empirical study reveal that the 18 companies

1. Recognise allowances received for free as intangible assets and as a government grant, and measure it at cost.

2. Recognise allowances purchased as intangible assets and if not paid for cash, create a provision/liability at cost.

3. Recognise allowances surrendered against a provision/liability and intangible assets.

4. Recognise cost in the income statement and create a provision/liability when emissions are emitted.

5. Recognise allowances sold as income and reverse the provision/liability. 6. Disclose accounting practices about CEA in the accounting policy notes.

Another observation from the empirical study of this research is that 17 of the 18 companies that do report their practices have a Big-4 auditing firm as their auditor. PwC and KPMG are auditors for 11 of the 18 companies that do report their accounting practices. It is therefore possible that the auditors’ view about how to account for CEA is a major driving force or influence for these companies’ accounting practices. In sum, the findings of the study show that even though IFRIC 3 has been

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withdrawn, its recommendations and suggestions are generally applied in practice. Such recommendations are being used and/or reported in a wide variety of ways. This is contradictory to the findings of the surveys undertaken by ACCA as well as Warwick and Ng, wherein large EU emitters seemed to depart from IFRIC 3’s recommendations.

Since CEAs are likely to be major transactional items for companies around the world in the future and have financial implications for the capital markets, it is of significant importance that the accounting profession and its policy makers provide adequate guidance on how to account and report for CEAs. To ensure consistency and comparability, it is reasonable to expect accounting standard setters to provide guidelines as to how to recognise, measure and disclose allowances. It is better for standard setters to provide companies with something than with nothing. Even though that something many not be perfect, it is still better that firms can follow it and at least present comparable information, than providing nothing and be clueless as to what firms are doing. The study supports claims that it is time for standard setters to not debate and discuss this topic any longer but to issue guidelines and recommendations without any further delay.

Another contribution of the current study is that the accounting entries for recognition of assets, revenue, liabilities and expenses, suggested in the proposals and inferred in companies’ accounting policies, are summarized. These are presented as double-entries in a comprehensive table. Different colours are used to show in one glance which accounts are affected during a particular stage. This table will be useful especially to the tertiary education industry when the accounting for CEA is included in accounting curricula. Presenting the accounting of CEA for the different stages in one glance, makes the table ideal for inclusion in accounting textbooks.

A limitation of this study is that it examines only UK companies with installations affected under the EU ETS, and covers only one year’s annual reports. Also, only 18 of the 75 UK companies’ annual reports were covered. Hence, the sample size is small and the results cannot be generalised. Another limitation of this study is that not all of the 18 companies provide information on the accounting practices clearly and in one place. To ascertain whether a company has debited or credited certain accounts and to identify the measurement method used, we had to navigate through two or more segments of the annual reports. In some cases the identification of a practice was drawn from the implications of a disclosure rather than a clear statement. For some practices in some annual reports, drawing inferences through implications is also not possible because of lack of clear information. Nevertheless, being an early study, it provides some initial evidence which may be useful to standard setters, policy

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makers and other companies looking for guidance on how to account for CEAs, and in which form to disclose information relating to carbon emissions and CEAs.

Future research can extend the study to include a larger sample of EU ETS companies. Another area for future research is to replicate the current study and include certain characteristics of firms (such as for example the debt to equity ratios and current ratios) and to examine if there is a relationship between such characteristics and companies’ carbon allowances accounting practices. Also, to get a more complete picture of accounting practices, future studies can involve interviewing of accounting staff in companies that are reporting accounting for CEAs. Finally, future research may replicate the study to examine companies’ that have been affected by ETS other than the EU ETS. It will be interesting to compare the accounting practices of different ETSs. Such a comparison may provide useful information for developing an international accounting standard on CEAs.

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References

ACCA. (2010). Accounting for Carbon. Retrieved June 2, 2012 from

http://www.ieta.org/index.php?option=com_content&view=article&id=174:accounting-for-carbon&catid=26:reports&Itemid=93

Bebbington, J., and Larrinaga-Gonzalez, C. (2008). Carbon Trading: Accounting and Reporting Issues. European Accounting Review, 17(4), 697-717.

Carney, T.F. (1972). Content Analysis-A technique for systematic inference from communications. Canada: University of Manitoba.

Cook, A. (2009). Emission rights: From costless activity to market operations. Accounting organizations and society, 34(3/4), 456-468.

CPA Australia. (2008). Emissions trading and other related policy initiatives. Retrieved February 10, 2010 from

http://www.cpaaustralia.com.au/cps/rde/xbcr/SID-3F57FECB-F2557699/cpa/Emissions_Trading.pdf

Cummings, L., Dyball, M.C., & Pang, Y. (2009). Accounting for carbon. Intheblack, 79(7), 49-51. Deloitte. (2007). Accounting for emission rights. Retrieved April 29, 2010 from

http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/Deloitte_Accounting_Emissionright_Feb07.pdf Deloitte. (2009). Carbon accounting challenges: Are you ready? Retrieved February 8, 2010 from

http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/Energy _us_er/us_er_NewChallengesinCarbonAccounting_1009.pdf

Deloitte (2010). IASB Agenda Project. Retrieved May 5, 2010 from

http://www.iasplus.com/agenda/emissiontrading.htm 13th April 2010

EFRAG – European Financial Reporting Advisory Group. (2005).Adoption of IFRIC 3 Emission Rights. Retrieved April 13, 2010 from http://www.iasplus.com/efrag/0505ifric3endorsementadvice.pdf Elfrink, J., and Ellison, M. (February 2009). Accounting for Emission Allowances: An issue in need of

standards. The CPA Journal, 79(2), 30-33.

GHG Management Institute. (2009). The 2009 greenhouse gas & climate change workforce needs assessment survey report. Retrieved February 10, 2010 from

http://www.sequencestaffing.com/ssi/default.html

IFRIC 3 (2004), Emission Rights. International Financial Reporting Interpretations Committee, International Accounting Standards Board.

Ramakrishnan, J. EU ETS, The International Environmental Science Center, Retrieved March 13, 2012 from http://www.internationalprofs.org/iesc/index.php?option=com_content&view=article&id=118: eu-ets&catid=908:eu-ets&Itemid=88.

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Japan Tobacco Company. (2009). Annual report 2008-2009. Retrieved October 7, 2010 from http://www.jti.com/documents/annualreports/annurep2009

Jee Hoon, L. (2010). Post-Kyoto Protocol and emissions trading. SERI Quarterly Journal, 3(1), 22-27. Kerr, S., & Sweet, A. (2008). Inclusion of agriculture in a domestic emission trading scheme: New

Zealand’s experience to date. Farm Policy Journal, 5(4), 19-29.

KPMG. (2005). IFRS briefing sheet: Publication of IFRIC-3 Emission Rights. Retrieved February 8, 2010 from http://www.kpmg.com.cn/en/virtual_library/Audit/IFRS_briefingsheet/IFRSBS0516.pdf on 12th April 2010.

KPMG. (2008). Accounting for carbon – the impact of carbon trading on financial statements. Retrieved February 8, 2010 from

http://www.kpmg.com/BE/en/IssuesAndInsights/ArticlesPublications/Pages/Accounting_for_carb on.aspx

KPMG. (2010). Technical accounting considerations for cap and trade. Retrieved March 4, 2010 from http://www.kpmginstitutes.com/global-energy-institute/insights/2009/pdf/technical-accounting-cap-and-trade.pdf

MacKenzie, D. (2009). Making things the same: Gases, emission rights and the politics of carbon markets. Accounting, Organizations and Society, 34, 440–455.

Milne, M.G. and Adler, R.W. (1999). Exploring the reliability of social and environmental disclosures content analysis. Accounting, Auditing & Accountability Journal. 12(2), 237-256.

M-Real Company. (2009). Annual report 2008-2009. Retrieved October 7, 2010 from

http://tools.euroland.com/arinhtml/sf-mes/2009/ar_eng_2009/DownloadFile/ar_eng_2009.pdf PricewaterhouseCoopers. (2007).Trouble-entry accounting revisited. Retrieved February 8, 2010 from

http://www.ieta.org/ieta/www/pages/getfile.php?docID=2535  

PricewaterhouseCoopers. (2008). Emission critical. Retrieved on March 5, 2010 from http://www.pwc.com/en_NZ/nz/climate-change/emissioncriticalsept08.pdf

Stavins, Robert N. (November 2001). Experience with Market-Based Environmental Policy Instruments. Discussion Paper 01-58 (Washington, D.C.: Resources for the Future). Retrieved on March 5, 2012 from http://www.rff.org/documents/RFF-DP-01-58.pdf.

Steenkamp, N. and Northcott, D. (2007). Content analysis in accounting research: the practical challenges, Australian Accounting Review, 43(17), 12-25.

Talisman Energy Company. (2009). Annual report 2008-2009. Retrieved October 7, 2010 from http://www.talisman-energy.com/upload/ir_briefcase/131/02/talisman_ar_from_mi5.pdf Warwick, P., & Ng, C. (2012). The ‘Cost’ of climate change: How carbon emissions allowances are

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Appendix A: List of selected installations and their account holder companies

List

 

of

 

all

 

75

 

UK

 

Companies

 

  

No. Installations Name Account Holders' Name

1 Aarhuskarlshamn UK Ltd Aarhus United UK Ltd

2 Aberdeen Compressor Station National Grid Gas Plc

3 Aberthaw Power Station RWE Npower Plc

4 Alderley Park AstraZeneca UK Limited

5 Archer Daniels Midland Erith Ltd Archer Daniels Midland Erith Ltd

6 BAE Land Systems - Birtley BAE Systems (Munitions & Ordnance) Limited

7 Bayer CropScience Limited Bayer CropScience Limited

8 Brigghouse Bay Compressor Station BGE (UK) Ltd

9 Bristol Energy Limited Rolls Royce Power Development Limited

10 Britannia Britannia Operator Limited

11 Nexen Petroleum UK Limited Nexen Petroleum UK Limited

12 Captain FPSO Chevron Texaco Upstream Europe

13 Case New Holland Boilerhouse Elyo Industrial Ltd

14 Dalefarm Limited Dale Farm Ltd

15 Dairycrest Limited Severnside Dairycrest Limited

16 Atkins Limited

17 Derby Hospitals NHS Foundation Trust Derby Hospitals NHS Foundations Trust

18 Diageo Runcorn Packaging Diageo Great Britain Limited

19 DSM Dalry DSM Nutritional Products (UK) Ltd

20 Dunston Brewery Heineken UK Limited

21 East Brae Marathonoil UK Ltd

22 Enfield Energy Centre Limited E.ON UK Plc

23 Flotta Oil Terminal Talisman Energy (UK) Limited

24 Ford Motor Company Dunton Technical Centre Ford Motor company Limited

25 Gallaher Ltd Gallaher Ltd

26 GE Plastics ABS Ltd GE Plastics ABS Ltd

27 GlaxoSmithKline Ware Glaxo Smithkline R&D Ltd

28 Hydro Polymers Ltd Hydro Polymers Ltd

29 Inbev Samlesbury AB Inbev UK Ltd

30 Kodak Ltd - Harrow Kodak Ltd

31 Langeled Receiving Facilities Gassco AS

32 Marston's Brewery Marstons' Plc

33 Nestlé York CHP Cofely Limited

34 Novartis Grimsby Limited Novartis Grimsby Limited

35 Oil Storage Installation (OSI) BHP Billiton Petroleum Limited

36 Polimeri Europa UK Ltd Polimeri Europa UK Ltd

37 Premier Foods Histon Premier Foods Group Limited

38 Shasun Pharma Solutions Ltd Shasun Pharma Solutions Ltd

39 Shell UK Ltd St Fergus Gas Plant Shell UK Ltd

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41 Smurfit Kappa SSK Smurfit Kappa UK Ltd

42 Solutia UK Limited - Newport Solutia UK Limited

43 The Cheese Company (previously Glanbia Foods) The Cheese Company Ltd

44 Tate and Lyle Sugars T&L Sugars Limited

45 The University of Birmingham The University of Birmingham

46 Total E&P UK PLC St Fergus Total E&P UK Plc

47 Unilever Bestfoods UK Ltd Unilever UK Limited

48 Murco Petroleum Milford Haven Refinery Murco Petroleum Limited

49 Nynas UK AB Dundee Nynas UK AB

50 Petroplus Refining and Marketing Ltd Petroplus Refining and Marketing Ltd

51 Texaco Limited

52 Outokumpu Stainless Ltd Outokumpu Stainless Ltd

53 Speciality Minerals Lifford Minteq UK Ltd

54 Rugby Works Cemex UK Cement Limited

55 Lafarge Cement UK Lafarge Cement UK Plc

56 O-I Alloa Plant O-I Manufacturing UK Ltd

57 PPG Industries (UK) Ltd PPG Industries (UK) Ltd

58 PUKL Cowley Hill Pilkington United Kingdom Limited

59 Rockwool Bridgend Rockwool Limited

60 Saint-Gobain Glass UK Ltd Saint-Gobain Glass UK Ltd

61 Superglass Insulation Superglass Insulation Ltd

62 Blockleys Brickworks Blockleys Brick Ltd

63 Cheadle Brickworks Wienerberger Limited

64 Hanson - Accrington Hanson Building Products Ltd

65 Hazlehead Hepworth Building Products Ltd

66 Herreschoff Kiln no.3 Imerys Minerals Ltd

67 Barrow Mill Kimberly-Clark Ltd

68 Billerud Beetham Limited Billerud Beetham Ltd

69 De La Rue International Ltd De La Rue Internation Limited

70 Huhtamaki (Lurgan) Ltd Huhtamaki (Lurgan) Ltd

71 Kemsley M-real New Thames Ltd

72 Lydney Paper Mill Glatfelter Lydney Ltd

73 Sonoco Cores and Paper Ltd Sonoco Cores and Paper Ltd

74 Procter & Gamble Product Supply (UK) Ltd

75 UPM-Kymmene (UK) Ltd UPM-Kymmene (UK) Limited

           

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Appendix B: Profile of 18 companies analysed 

Profile

 

of

 

18

 

companies

 

analysed

 

  

No. Account Holders' Name Stock Exchange listed Industry Sector Auditor

1 National Grid Gas Plc London Stock Exchange Combustion Energy PwC

2 RWE Npower Plc Not listed Combustion Energy PwC

3 DSM Nutritional Products (UK) Ltd Euronext Amsterdam Combustion Energy Ernst & Young

4 Heineken UK Limited Euronext Amsterdam Combustion Energy KPMG

5 Hydro Polymers Ltd Oslo & London Stock

Exchange Combustion Energy Deloitte

6 Inbev UK Ltd New York Stock Exchange Combustion Energy KPMG

7 Slough Heat and Power limited London Stock Exchange Combustion Energy KPMG

8 Smurfit Kappa UK Ltd ISE, Dublin Combustion Energy PwC

9 Petroplus Refining and Marketing

Ltd SIX Swiss Exchange Refinery Energy Ernst & Young

10 Outokumpu Stainless Ltd NASDAQ OMX Helsinki Iron & Steel Metals KPMG 11 Cemex UK Cement Limited Mexican Stock Exchange Cement & Lime Mineral KPMG

12 Lafarge Cement UK Plc NYSE Euronext (Paris) Cement & Lime Mineral Deloitte AND Ernst & Young

13 Blockleys Brick Ltd Not listed Ceramics & Brick Mineral Other

14 Wienerberger Limited WIE Ceramics & Brick Mineral KPMG

15 Hanson Building Products Ltd Frankfurt Stock Exchange Ceramics & Brick Mineral Ernst & Young

16 Billerud Beetham Ltd NASDAQ OMX Stockholm Paper Other Ernst & Young

17 M-real New Thames Ltd NASDAQ OMX Helsinki Paper Other PwC

18 UPM-Kymmene (UK) Limited NASDAQ OMX Helsinki Paper Other PwC

 

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