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

17 Pages Posted: 10 Mar 2023

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

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Date Written: February 13, 2023

Abstract

Tackling climate change requires reductions in current and future greenhouse gas (GHG) emissions as well as the removal of existing GHG from the atmosphere. Carbon-offset producers purport to provide such removals. But poor measurement practices and inadequate controls have led to extensive trading of instruments that do not materially reduce the supply of atmospheric GHG. To address these challenges, we apply basic financial-accounting principles to develop an accurate and auditable set of offset accounting principles. These principles complement and extend the E-liability method of accounting for GHG emissions. Having rigorous accounting for both emissions and offsets will expand market forces for impactful decarbonization.

Keywords: Carbon Offsetting; Climate Change; Environmental Regulation; Corporate Accountability

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). Harvard Business School Accounting & Management Unit Working Paper No. 23-050, Available at SSRN: https://ssrn.com/abstract=4383510 or http://dx.doi.org/10.2139/ssrn.4383510

Robert S. Kaplan (Contact Author)

Harvard Business School ( email )

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

Karthik Ramanna

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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