Putting carbon markets into practice: a case study of financial accounting in Europe

H. Lovell, J. Bebbington, C. Larrinaga, T.R.S. de Aguiar

Research output: Contribution to journalArticlepeer-review

37 Citations (Scopus)


In this paper we explore how carbon markets have entered the world of financial accounting. The advent of the European Union Emissions Trading System (EU ETS) in 2005 provided the opportunity for global climate change concerns to be translated from policy into something that could, and should, be recognised within financial accounting. That is, the EU ETS provided a mechanism whereby greenhouse gas emission allowances acquired a financial value, simultaneously creating an obligation (or liability) on certain European organisations when they emit greenhouse gases. Prima facie, this process created the need for financial accounts of companies covered by the EU ETS to reflect the new commodity of carbon. Disagreement amongst accountants about how to treat emission allowances has arisen, with the initial international accounting guidance issued in late 2004 subsequently being withdrawn, and not yet replaced. Taking this absence of guidance as a starting point, we undertake an empirical project (through a survey, consultation analysis, and interviews) to establish what financial reporting practices are being adopted by participants in the EU ETS, and the level of momentum for standardisation. We draw on sociological theories about accounting, measurement, and markets.
Original languageEnglish
Pages (from-to)741-757
Number of pages17
JournalEnvironment and Planning C: Government and Policy
Issue number4
Early online dateJan 2013
Publication statusPublished - Aug 2013


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