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
16 Pages Posted: 28 Feb 2023
There are 2 versions of this paper
Accounting for Carbon Offsets – Establishing the Foundation for Carbon-Trading Markets
Accounting for Carbon Offsets – Establishing the Foundation for Carbon-Trading Markets
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.
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