Nowadays, climate change has drawn many attention due to the increasing awareness of sustainability. Kyoto Protocol has been signed by 192 parties and it comes to be mandatory for 37 developed nations (UN, 2014). Under Kyoto Protocol, Emission Trading Scheme has been set up for the purpose of reducing greenhouse gases. It allows emission rights to be traded between countries to help governments meeting the gas emissions reduction target (Evans, 2012). However, how to report the value of emission rights held by public and private sectors has been a stubborn question to accounting regulation setting board. This article consists of three parts, in the first part, Emission Trading Scheme will be simply explained. The second part explores the reason why accounting regulation are required in this area by referring to the joint project of International Public Sector Accounting Standards Board and International Accounting Standard Board. Lastly, the questions about whether “the development of accounting requirements can enhance the global consistency and comparability of resources and obligations related to Emission Trading Scheme in the financial statements of public sector entities” or not will be critically analyzed. Emission Trading Schemes:
To complying Kyoto Protocol, Emission Trading Schemes (ETS) is designed to reduce pollution by introducing market mechanisms (Carmona, Fehr, Hinz and Porchet, 2010). According to the meeting of International Public Sector Accounting Standards Board (IPSASB0, two main types of ETS are identified, which are cap and trade schemes and baseline and credit schemes (IPSASB, 2013, pg 1 ). The first scheme uses the method of setting overall cap on total amount of emission and distributing tradable "emission allowances" to participants (IPSASB, 2013, pg 1). In a baseline and credit scheme, the form of baseline has been used to set up the emission cap and tradable credit has been adopted (IPSASA, 2013, pg 2). Currently,...
References: Carmona, R., Fehr, M., Hinz, J. & Prochet, A., 2010, Market Design for Emission Trading Schemes, SIAM Review, Vol. 52, No. 3, pp. 403-452
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