Accounting for Carbon Offsets – Establishing the Foundation for Carbon-Trading Markets

Stanford Sustainable Finance Initiative Precourt Institute for Energy, February 2023

BSG Working Paper No. BSG-WP-2023/051

Harvard Business School Research Paper No. 23-050

16 Pages Posted: 28 Feb 2023 Last revised: 20 Feb 2024

See all articles by Robert S. Kaplan

Robert S. Kaplan

Harvard Business School

Karthik Ramanna

University of Oxford - Blavatnik School of Government

Marc Roston

Stanford University - Steyer-Taylor Center for Energy Policy and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: February 13, 2023

Abstract

Tackling climate change requires not only reducing GHG emissions but also removing GHG from the atmosphere. Carbon-offset producers purport to provide such removals. But existing carbon-offset markets have been criticized for poor measurement practices and inadequate controls, resulting in transaction of products that do not materially sequester carbon. To address these challenges, we apply basic financial-accounting principles to develop an accurate and auditable framework for offset accounting. The offset-accounting principles in this paper complement and extend the E-liability method of accounting for GHG emissions. Together, rigorous accounting for emissions and offsets can improve and expand markets for impactful decarbonization.

Suggested Citation

Kaplan, Robert S. and Ramanna, Karthik and Roston, Marc, Accounting for Carbon Offsets – Establishing the Foundation for Carbon-Trading Markets (February 13, 2023). Stanford Sustainable Finance Initiative Precourt Institute for Energy, February 2023, BSG Working Paper No. BSG-WP-2023/051 , Harvard Business School Research Paper No. 23-050, Available at SSRN: https://ssrn.com/abstract=4362921 or http://dx.doi.org/10.2139/ssrn.4362921

Robert S. Kaplan

Harvard Business School ( email )

Soldiers Field
Accounting & Control
Boston, MA 02163
United States
617-495-6150 (Phone)
617-496-7363 (Fax)

Karthik Ramanna (Contact Author)

University of Oxford - Blavatnik School of Government ( email )

Radcliffe Observatory Quarter
Oxford, Oxfordshire OX2 6GG
United Kingdom

Marc Roston

Stanford University - Steyer-Taylor Center for Energy Policy and Finance ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States

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