普华永道-碳排放交易体系：未来的机遇（英文）-28页_7mb

Summary of "Emissions trading systems: The opportunities ahead"

Core Content

This report discusses the role of Emissions Trading Systems (ETS) in achieving global net zero emissions, with a particular focus on the European Union Emissions Trading System (EU ETS). It highlights the importance of standardised accounting for carbon allowances in financial statements and outlines the findings of a survey of 25 large companies in the EU ETS, conducted from September 2020 to January 2021.

Main Views

• The EU ETS as a Global Model: The EU ETS was the first of its kind, launched in 2005, and has been instrumental in reducing emissions in Europe. It currently covers 40% of European greenhouse gas emissions and is expected to expand to new sectors such as road transport and maritime. The system is seen as a template for global carbon pricing and trading.

• Carbon Pricing Trends: The price of carbon credits has risen significantly since 2018, surpassing €60 per tonne, and is projected to increase further. The reduction in the number of allowances issued annually is expected to drive this increase and push companies toward more ambitious emission reduction targets.

• Accounting Challenges: There is no internationally agreed standard for accounting for carbon allowances, leading to a lack of comparability and transparency. Companies use a variety of methods to account for carbon allowances, with some categorising them as intangible fixed assets, others as inventory, and some as other or debtors. Similarly, there are multiple ways to value these allowances, which can lead to inconsistencies in financial reporting.

• Survey Findings: The survey found that 45% of respondents expressed concern over the lack of standardised accounting for emissions credits. This lack of uniformity affects how companies report their progress and financial implications related to emissions, which is critical for investors and stakeholders.

• Global Context: The report notes the growing number of national and regional carbon trading systems, such as those in Canada, China, Japan, New Zealand, South Korea, the UK, and the US. The EU is also working with other countries to develop and align these systems.

• Voluntary Carbon Market (VCM): The VCM, which allows for the trading of carbon credits from projects that deliver verified emissions reductions, is expanding. However, it faces similar challenges to the EU ETS in terms of standardisation and quality control.

• Need for Standardisation: The report argues that standardised accounting for carbon allowances is essential for transparency, comparability, and informed decision-making. It suggests that the International Accounting Standards Board (IASB) should develop such standards, and companies should engage in the consultation process.

Key Information

• EU ETS Impact: The EU ETS has led to a 35% reduction in emissions from 2005 to 2019 and a further 12% in 2020. It is in its fourth phase, which will apply from 2021 to 2030, with a 43% reduction target compared to 2005 levels, potentially increasing to 61%.

• Accounting Methods: Companies use four different methods for balance sheet recognition of allowances and five for initial measurement. The most common are:

  • Intangible fixed assets
  • Inventory
  • Other
  • Debtors

• Valuation Methods: The most common valuation methods include:

  • Nil value
  • Fair value at the date of receipt
  • Relative contract price

• Survey Scope: The survey included 25 companies from industries such as oil and gas, cement, steel, chemicals, and aviation. Three companies were excluded because they only used allowances for trading, not for compliance.

• Global Implications: The report highlights the importance of global cooperation and standardisation in carbon pricing, especially in the context of COP26. It also mentions the EU's proposed Carbon Border Adjustment Mechanism (CBAM), which aims to level the playing field for EU producers by imposing levies on carbon-intensive imports.

• Call to Action: The report urges companies and investors to advocate for standardised accounting practices to ensure transparency, consistency, and better alignment with ESG goals. It also encourages participation in the IASB consultation on carbon accounting standards.

Conclusion

The EU ETS is a key player in the global effort to achieve net zero emissions. However, the lack of standardised accounting for carbon allowances remains a significant barrier to transparency and comparability. As the global carbon market evolves, standardisation is critical to support informed decision-making, investor confidence, and the overall effectiveness of emissions trading systems. The report calls for urgent action to develop and implement international financial reporting standards for carbon allowances.