Rethinking Financial Accounting for Carbon

With a plethora of standards hampering progress in carbon accounting, a 2 day workshop was held on January 14-15 to follow up on Dr Heather Lovell’s 2010 paper on the Multiple Frames of Carbon Accounting* and discuss how to move forward with carbon financial accounting. Can we rely on existing standards or is there a need to start from the ground up?

Academics and representatives of the financial accounting and carbon market professions met for a 2 day workshop in January to discuss issues of carbon financial accounting. The workshop, held at the University of Edinburgh, initially began with an exploration of ‘Accounting’ and Standards’ focusing on their social constructions, objectives, mechanisms and existential consequences. It was concluded that new discoveries tend to be categorized based on pre-existing classifications, consequently impacting on new discoveries but also on previously classified items. Viewing Carbon Financial Accounting from this perspective brings forward the question whether it should be classified into existing standards, or whether new standards should be formed. 

The foundations of carbon accounting are formed upon a backdrop of growing concerns about the lack of clear guidance from authorities and standard setters. Numerous voluntary standards and frameworks have been created to accommodate for specific industries, creating confusion due to their lack of comparability. Solutions proposed to these issues included the “comply or explain” route and looking into previous accounting standard developments (such as Pension Benefit Accounting) as sources of inspiration.

Further key discussions included the role of major carbon pricing mechanisms and accounting for stranded assets. Given these are emerging issues, accountants and auditors will need training to account for climate change-related risks to financial performance.  Thus the workshop concluded that future training programs will require integrated training across multiple disciplines including climate change and other environmental impacts. 

Moving on from the workshops, the participants hope to create a space for standard setters (including IASB, FASB and IETA) to come together to discuss a common approach for accounting treatment. CDSB is looking to hear the views of interested parties, as well as any organisations interested in collaborating in this topic. To get in touch, email Sheng Ou Yong at

*To read the paper click here