Ernst & Young report: Carbon market readiness

This is one of the logical next steps - getting accountants involved so that they can do financial analysis and planning, among others. The report is here

New Ernst & Young LLP report examines greenhouse gas reporting practices as the SEC releases new climate change disclosure guidelines

The new report, Carbon market readiness: accounting, compliance, reporting and tax considerations under state and national carbon emissions programs, concludes that, while the timing and scope of climate change legislation in the US is uncertain, many countries around the globe (and many states) have some type of regulatory program to manage carbon emissions. With the strong likelihood that there will be more regulatory activity in the US, companies should consider carbon emissions requirements as part of their businesses and financial management strategies now, including establishing plans for measurement, monitoring, reporting and accounting.

“Being carbon market ready is logical business,” explains Steve Starbuck, the newly appointed Leader of Americas Climate Change and Sustainability Services for Ernst & Young LLP. Starbuck, a 30-year veteran of the Firm, coordinates climate change and sustainability services in the Americas and is a member of the climate change advisory board of the Global Ernst & Young organization. “The global carbon market is likely to grow significantly in the future. Preparing for and identifying related business risks and opportunities up-front, can better position an organization for growth and provide a competitive edge. Last week’s SEC action further highlights the increasing need for companies to have the systems and processes in place to keep their stakeholders informed,” Starbuck continued.

Ernst & Young’s report reveals that, in a survey of more than 1,000 US public registrants with revenues between $1 billion and $100 billion, just 29 companies disclosed an accounting policy related to emissions credits or allowances in notes to their financial statements. Additionally, far fewer than half of the approximately 1,000 corporate representatives participating in an Ernst & Young webcast on January 12, 2010 –- Climate change and carbon markets: what every business needs to know and why –- claimed to have a strategy in place to deal with carbon emissions regulations or markets.

Following various state and federal reporting frameworks, as well as the evolving accounting standards and tax regulations governing carbon emission management could pose many challenges. To stay ahead of the curve, companies should fully embed carbon-related considerations in their business strategies to address climate change issues effectively. They should review their risk management processes as well as day-to-day business operations, accounting and tax planning.