ACC5AAI Assignment: Analysis of Carbon Emission Accounting Practices

This report provides a comprehensive analysis of carbon emission accounting, focusing on the context of emission trading schemes in both developed and developing countries. It delves into the European Union Emissions Trading System (EU ETS) and other schemes, examining the impact of emission policies on the material industry. The report reviews literature on carbon emission accounting, including the analysis of carbon allowances and emission rights, and discusses the implications of positive accounting theory in the context of corporate accounting policy. It also examines the financial information and disclosure related to carbon emission allowances, particularly within the material industry, and provides an analysis of the annual reports of material industry organizations listed on the Australian Securities Exchange (ASX). The report further considers the role of carbon accounting in addressing environmental concerns such as greenhouse gas emissions and the effects of climate change. It emphasizes the importance of emission rights and carbon accounting in reducing the impact of pollution and emission gases released by business entities. Finally, it discusses the factors influencing corporate accounting policy, including the role of financial reporting and accounting standards. The report aims to provide insights into the accounting for carbon emissions and its implications for businesses and the environment.

Accounting for Carbon
Emission
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Contents
Accounting for Carbon Emission Contents.....................................................................................1
Introduction......................................................................................................................................3
Literature review..............................................................................................................................4
1. Analysing or describing the trading scheme of the developed and developing countries..4
2. Literature review on the accounting for carbon emission that allows rights to discuss the
emission rights that are consistent for participating in the emission trading scheme............6
3. Analysis of positive accounting theory for explaining the factors that impacts on corporate
accounting policy....................................................................................................................8
4. Financial information and disclosure related with carbon emission allowances of a material
industry.................................................................................................................................10
4.1 Accounting measurement of carbon emission allowances which are based in Europe11
4.2 Four material industry organization listed on the Australian Securities Exchange (ASX)
and analysis of their annual reports.................................................................................13
5. Context of the theoretical framework in the project.........................................................14
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
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Introduction
Emission trading can be defined as a market-based methodology for controlling the
contamination, harmful gases and toxics by formulating policies and rules for completing their
work effectively. All aspects related to emission is controlled and managed by the governmental
and central authority of the country. The main agenda to implement emission policies all over the
world is to ensure environmental safety. Government or authority which is controlling issue
regarding the emission give permits to all organizations. It works as permission for industry and
its corporations due to which they perform their operations under government rules and
regulations (Afionis and et al 2017). This report points out and discusses the material industry
and the scheme of emission under which the corporations complete their work effectively. The
present report is written to evaluate emission scheme of developed and developing countries.
Moreover, carbon emission that allows rights and emission rights about the companies. Positive
accounting theory will be cover in this report which helps to understand accounting policies
about carbon emission. In the last, annual reports will be considered of all corporation which is
engaged in the material industry.
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Literature review
1. Analysing or describing the trading scheme of the developed and developing countries
According to the Hashin H, 2015 Developing countries are those which majorly perform their
business in the agriculture sector and the main motive of them is to become more advance on
economic and social aspects. On the parallel side, developed countries are those which are
advance in infrastructure, industrialization, gross domestic production and many more. Hence,
there is a large difference between the policies which are formulated by them to complete their
work.
The European Union Emissions Trading System is one of the top and biggest gas emissions
trading schemes. It was established in the year 2005 for dealing with the concern of global
warming. After some modification in later years, EUETS works as a major pillar for the energy
policy. The main motive to implement an emission trading scheme in the material industry is to
develop and implement a positive approach for controlling pollution by providing economic
benefits to the corporation. So, it results in decreasing the pollution which is performed by them
to complete their operations (Ascui, 2014). The European Scheme of emission is delegated into
three different parts which are as territorial perspective, production perspective, and consumption
perspective. As per the view, Wong, 2015 All the developing countries which are involved in the
European Union must follow emission-related rules to complete their work under emission
policies. Moreover, it is favourable for them as it helps to perform their operations by creating
less pollution that ensures the safety of the environment.
 Territorial perspective- All the organization which are performing their work under the
country borders and on those areas, which are under control of jurisdiction will be
included in territorial perspective. It governs it is one of the most effective perspective
by which international authorities keep monitor the pollution level of a country.
 Production perspective- This included all the business firms whether small, large and
households which are producing goods and services in a country. It determines whether
the production is done at a small level. It will create pollution in the country so it is
mandatory for authorities to keep an eye on gases or toxics which is produced by them.
 Consumption perspective- Consumption refers to the emission of gases which is
released after consuming the product. It depends on the demand of goods so it is
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included in national boundaries irrespective of their geographical location. Whereas, if
the product is consumed at an international level then emission is included in the supply
and trade of goods.
Emission scheme in developed countries
Emission Trading Scheme (ETS) is performing their roles in all countries such as Australia, UK,
and other developed countries. This refers to all countries need to perform their work under
emission policies for completing their work in minimum cost and pollution. In the context of
developed countries such as Australia ETS was applicable in the year 2012 which works as per
the fixed prices which are decided by the government (Ball, Grubnic & Birchall, 2014). Further,
in the year it works as a motive by which corporations and the market decided the prices of their
product.
The majority of the developed countries implemented cap and trade scheme. Under this scheme,
the pollution which is related to business houses are recorded on an annual basis. Due to the
implementation of emission schemes in the country, it is easy for the government to monitor the
carbon which is released by the organization. This activity helps them to ensure that Australian
emission targets will be met for each year.
This gap helps the government to decide their work and gap for the industry. It results that this
helps them to allow a limited number of permits so the government can control the pollution
level (Buchholz and et al 2016). The method to allow the permits is presented in series either by
auction, in which they decide the prices that are paid by the corporation to the government. An
organization which is unable to get permits than they must reduce their emission, buy credits for
realization of carbon from authorities and the last to buy permit from valuable sources.
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2. Literature review on the accounting for carbon emission that allows rights to discuss the
emission rights that are consistent for participating in the emission trading scheme
According to the Butman, 2016 Carbon accounting refers to the process which is undertaken by
the organization to calculate or measure the amount of carbon which is emitted by the
corporation. This is utilized by the corporation and individuals for providing the certificate to
organization which represent the rights and limits which is used in to measure greenhouse gas. In
the context of the country carbon emission which is released by them depends on the size of its
residents and organizations. The majority of the rules, regulations, and policies that are covered
under emission schemes are focused on the emission gases that are released from buildings and
production units.
Emission rights are formulated by the government and authorities that state and allow the
industry and polluters to discharge specific gases that impacts on the environment. Example-
Permits which are purchased by the entities define their level of pollution (Butman and et. al,
2016). Rights of the emission are favourable for the corporation and country because it helps
them to develop a flexible environment. This activity helps them to complete their work by
polluting the environment in a minimum way. Along, with this, it is easy for the material
industry to match their work as per their targets and policies. Jindal industry is one of the largest
steel manufactures which operates and perform their operations in Asia, Africa, and Australian.
In the global world, there are various gases are released by the corporations which is related to
global warming and greenhouse.
As refer to the Handers, 2016Greenhouse gases and its impacts is one of the major concerns to
complete their work in minimum period. Carbon dioxide, methane, nitrous oxides are some of
the gases which are included is included in this report. This gas impact negatively on the
environment by generating heat that impact on the safe layer of earth by reducing their
temperature (Gan, Cheng & Chan, 2017).
 Majority of the operation emitted carbon dioxide in the environment, such as coal,
natural gas, oil, iron, and steel. Moreover, the most powerful greenhouse gas which is
released by the organization is carbon dioxide. Emission rights and carbon accounting
must develop the ways by which the impacts of carbon dioxide will be reduced.
 Methane is one of the major gas which impacts on decomposition of the plant and green
diversity of the earth. Although, it is also released from the cattle and wasteland. As
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compared to the carbon gas methane gas releases low emission but its molecule is not
favourable for the environment. Therefore, carbon accounting must consider this for
reducing the impact (Gibassier & Schaltegger, 2015).
Modern climate change is the result due to which organizations face challenges to complete their
work with more efficiency. This determines that most of the operations which are performed
must consist of all essential aspects that are related to the environment. Financial reporting
relates to different standards offers that are used to guide and communicate the economic values
of the organization. Financial reporting and accounting are one of the complex process for the
corporations (Han and et. al 2016). Along, with this, the environmental policy is also increasing
by the country and NGO due to which organizations face complexity in managing their reports
for completing their work effectively.
European Commission is one of the major emissions which are accepted and developed by ETS
in the organization. EUETS trades are primarily developed for European Union Allowance; it
considers that each union or country develops emission policies for managing the pollution in the
country which is released by the business firms for managing their operations. Example-
California scheme in California carbon allowances, New Zealand scheme in New Zealand units,
Australian scheme in Australian Units. Various schemes allow the organization for managing
their work in the minimum period by determining essential aspects to manage that ensures safety
for the environment. Liable entities which are engaged and participated in the EU ETS are
defined under the Kyoto protocol, although activities which are engaged in the organization are
to complete their work in minimum period (Liu, Liang, and Wang, 2015). In, the last it is
concluded that there is various emission is arranged to manage carbon emission and accounting
related to carbon emission for reducing the impact of pollution and emission gases that are
released by the business entities to complete their work in minimum period. Further, this leads
the organization to manage their scheme as per the trading scheme. There is various scheme are
formulated by the government and material industry corporation which emphasis on formulating
effective trading scheme for all countries in which Jindal steel operates their business.
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3. Analysis of positive accounting theory for explaining the factors that impacts on corporate
accounting policy
Positive accounting theory executes by the corporations to predict and evaluate all those acts by
which accounting policy deals with accounting standards. The theory of positive accounting
helps the organization to reconcile essential aspects of security and market on an economical
basis. There are various factors exist in the micro and macro environment that impacts the
business and its accounting policy. Moreover, positive accounting theory leads the management
to predict and analyse all events and translate them on economic aspects for evaluating based on
accounting. It helps to decide those actions by which the management decided policy to reacts to
the standards of the accounting (Henders & Ostwald, 2014).
Organization has different choices that are related to the transaction accounting system and
positive accounting theory. Financial department of the organization are major areas which are
impacted due to the changes in accounting policy it refers that it considered all those points by
aspects which are related with monetary data. Therefore, there are various factors are mention as
below which impacts on corporate accounting policy.
 Business process- The major benefit of positive accounting theory is to generate and
store essential information at a single place or in a central location. It determines that
the majority of the business are performing their work at the global level. Therefore, a
business must keep essential information at a central place. So, it is easy for them to
make an effective decision that increases the productivity of the organization.
Example- positive accounting theory leads them to manage their corporate accounting
in an organized manner by evaluating their essential actions.
 System cost- It is one of the major factors which impacts on the budget of the
organization. There is various aspect need to be undertaken by the organization such as
cost for purchasing resources, supply and trade charges. Most of the corporation which
are operating their business in the material industry manage their corporate accounting
policy by evaluating essential aspects of cost which is not too effective for completing
the work inappropriate cost. So positive accounting theory helps them to make
effective decisions to complete their work at minimum cost.
 Data access- There are various system are present in an organization which are related
with accounting information. Positive accounting theory, ensure more security and
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allow management to monitor all operations which are performed by them. It helps
them to complete their work in a minimum time by offering flexible accessibility of
data to the employees (Liu and et. al 2015).
 Resistance to change- All the organization start their business at a small level,
therefore accounting system which is developed by them is not integrated in an
organized manner. Further, due to intense competition in the material industry, it is
complex for the organization to make essential changes in their operations. With the
implementation of this activity, it is easy for Jindal industries to implement current
practices in the organization to complete their work in minimum time.
Positive accounting theory and corporate accounting policy are essential for organizations as
well as industry. It represents that with the implementation of the financial factors management
of Jindal industries make crucial decisions which lead the organization to complete their work
efficiently. Moreover, it is favourable as it leads the business operations at the top position in the
market. Hence, the organizations manage and perform their financial aspects in an organized
manner to complete their work cost-effectively.
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4. Financial information and disclosure related with carbon emission allowances of a material
industry
The term financial information is considered to be one of the most important and essential part of
the business. The financial information of the company includes the essential information of the
company which includes the annual and the sustainable report of the company. through this the
companies are able to show the profitability that they have and the revenue and cash flow that
they are generating for this purpose. the government of the country has made various standards
for this purpose so that the companies that are working in this industry are able to showcase the
carbon credits and that they have in the balance sheet of the company. it is seen that the
accounting standard for this purpose includes the valuation that is done through the intangible
asset where the carbon credits that are available with the company are valued as the intangible
assets or the liabilities of the company. here this is seen that the company has various objectives
where they are required to provide the accurate information that is related to the carbon credits
that they have. The inventory valuation is also used by the company for the purpose of making
the valuation of the assets where the carbon credits are available with the company.
It is seen that the carbon credits that are available with the company in the balance sheet are
either valued at the market price of the asset or at the fair value that is dependent on the asset
type and the method of purchase that has been done. it is seen that now a days the carbon credits
that are available with the company are valued at the market price so as to showcase the accurate
disclosure as this is seen that the price of the carbon credits has decreased tremendously and due
to this they are not able to generate profits (Liu & Andres, 2015).
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4.1 Measurement of the carbon emission in terms of accounting which are based in Europe
Carbon emission allowances are favourable for countries as it ensures the safety of the
environment by managing as well as formulating policies for completing the operations with
more efficiency. Material industry undertakes four different houses which are beneficial for
material industry to manage their carbon emission. So, it is to measure the accounting of carbon
emission which is released by the corporations in a particular year (Miner and et. al2014). The
essential details about them are mention below:
Outokumpu is the largest company that is performing its business in material industry. Along,
with this management of the Outokumpu is one of the biggest manufactures of Stainless steel.
The major benefit which is provided in their sustainable steel is that it is durable, sustainable and
creative in design. In the context of carbon emission, the environmental control measures are
integrated in all operations and activities which are accomplished by the departments of
corporation. Further, the emission released by the organization needs to engage appropriately
(Plevin and et. al 2015). 3% per year is released by the Outokumpu per year. To implement this
effective management of Outokumpu formulates a code of conduct and memorandum to make
effective results. Example- Production units of the organization perform their work according to
the guidelines of carbon emission and ISO.
Arcelor Mittal is the biggest organizations in steel mining. They work to achieve the aim of
producing sustainable and innocuous steel that is used in automation, construction, household
appliance and many more. All the operation which is performed by the organization generates
minimum gas impact that is 2% in terms of overall industry. Global emission is a major concern
all over the world. Therefore, the management focuses on generating more value in their
products by impacting factors which boost organizational performance. The main motive to
implement the model of value creation in their operations is to reduce down the impact of
harmful gases. Moreover, to implement value creation model easily in the organization
management bring innovation in their products (Steininger and et. al, 2016).
The Spanish manufactures Acerinox that produce steel and works as a conglomerate steel in
material industry. The profit making of the organization is increasing day to day, therefore the
profits earned by them is to increase their profits. For managing the emission of its operations,
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management focuses on implementing plans of 360. This helps them to monitor and regulate
their plans for reducing the negative impact of greenhouse gases.
Salzgitter AG is one of the largest steel organizations which operate their business in the material
industry. There are the largest producers of safe steel in all the Europe. This determines that most
of the steel is delivered by Salzgitter in most of the European countries. Hence, they must
produce effective policies that reduces the emission form their operations.
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4.2 Organizations that are listed on ASX and their annual report analysis
Management of Blue Scope is operating there business in material industry and they play an
essential role for the economic conditions and environment of a country. Moreover, various
opportunities are present in the market. Example- government and industry corporation are
supporting the new industries by providing subsidiaries to material firms. (Tao & Huang,2014).
They are a major concern for reducing emission impacts.
Legacy is one of the well-known organizations in material industry. It is originated from Perth
and performs its operations in the Australian exploration company which are the major dealer of
Gold and Iron. Along, with this, it helps the management to complete their under the emission
control of 12%. It ensures the safety for the environment of the country in which the corporation
is performing their operations.
Kogi iron-limited is the listed organization on ASX which is well-known to build the productions
units of coal. The management of Legacy iron ore is used to increase its number of products.
Moreover, the board and management of material industry organization follow a high standard of
corporate governance practices to complete its functions in effectual manner.
Flinders' mines limited which is the organization that performs their work in material industry
that produces their products by monitoring the essential aspects of emission which is needed to
keep in control for business. In the context of emission, it helps them to manage their operation
as per guidelines of emission committee and International GRI guidelines to manage the work in
an organized manner (Usubiaga, & Acosta-Fernández, 2015).
From the above mention annual reports of all organizations, it is analysed that it is mandatory for
all business houses to perform their work with generating low emission. This factor is also stated
by the management of material industry for completing their work by managing factors and
departures according to corporate governance and EUETS guidelines.
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5. Context of the theoretical framework in the project
According to the Kerstine Appunn, 2018 there are various goals are presented by the
organization for reducing the emission allowances in there manufacturing units. ELUETS is one
of the world’s leading material industry face the issue of structural deficiencies. It all results due
to the inappropriate delegation of the permits which is essential for the organization to perform
its operations.
According to James Width, greenhouse gas produces unfavourable results for the organization
works as a project which is beneficial to save the environment by reducing gases and increase in
policies which ensures positive results through performing their work with an systematic
approach.
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Conclusion
In the end, from the above report it is concluded that the emission trading scheme helps
corporations to expand their business in different countries among overall the world. Carbon
emission rights and allowances relates with the organization to perform their all operations under
the discharge committee of emission gases which decided the limits of releasing greenhouses per
year. Carbon trading emission is the crucial parts for the organization and it relates to
organizational policy as well as corporate policy. Positive accounting theory is also covered in
this report for better understanding of the carbon emission. Moreover in the last, learning from
the EUETS relates to various emission schemes which enhance the performance of the material
industry for reducing greenhouse gas impact.
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