Abstract
Policy makers, scientists, industry leaders, and academicians all have debated how to restrain global warming and reduce greenhouse gas (GHG) emissions. Three main methods are used: command and control laws and regulations, carbon taxes, and cap and trade schemes. Recognizing the consequences of global warming, all Scandinavian countries introduced a carbon emissions tax in the 1990s. They also ratified the Kyoto Protocol that ran from 2005 through 2012. The European Union (EU) instituted a carbon trading scheme (Emissions Trading System (ETS)) in February 2005 when Kyoto became operative. The three Scandinavian EU members had two methods in place during the 2005–08 period to encourage GHG reduction: taxing and trading. Norway, not in the EU, used just taxes. The other EU members, including Spain, applied just the carbon trading ETS scheme to encourage compliance with the Kyoto Protocol. The fundamental issue addressed is this one: Did publicly held firms headquartered in Spain adequately report participation in the EU carbon emissions trading mechanism? Data to answer this question were obtained from the 2011 and 2012 annual reports for domestic Spanish public companies that received tradable emissions permits. In addition to assessing investor-owned firms’ disclosure posture, the specific method of reporting about carbon emissions permits, whether companies used, banked, or sold the permits granted by the government, also is reviewed. This empirical research effort reports on a complete survey of all available data for the two financial reporting periods that concluded the second phase of the Kyoto Protocol.
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Notes
This research is concerned nearly exclusively with published financial statement disclosure. The important, and rather controversial, matters of recordation and accounting for acquisition, holding, use, and disposition of emission allowances or permits is not taken up here. Interested readers will want to review, as background for the accounting issues involved with intangible tradable emissions rights, International Accounting Standards (IAS) 38 (1998), “Intangible Assets,” and the unimplemented International Financial Reporting Standards Interpretations Committee (IFRIC) “Interpretation 3: Emissions Rights” (2003–2005), withdrawn by the IFRIC in July 2005
Scientific interest centers on six major greenhouse gases: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. Water vapor is an important GHG, but human activity does not have a direct effect on its atmospheric concentration. Because all these gases absorb and emit radiation within the thermal infrared range, they are said to be climate-altering in one way or another.
Of course, firms could also hedge and speculate: Those that did not need additional permits in a year, but thought the value of permits would increase, could buy them for future sale. Likewise, firms that believed their own future needs would not be satisfied through the yearly allocation process could acquire permits and “bank” them for use later.
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Stagliano, A.J. Carbon Trading Reporting: The Case of Spanish Companies. Int Adv Econ Res 23, 231–243 (2017). https://doi.org/10.1007/s11294-017-9634-z
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DOI: https://doi.org/10.1007/s11294-017-9634-z