Why organisations should develop policy for carbon credit accounting

Carbon credits are instruments designed to encourage reductions in emissions by introducing a ‘carbon price’. The objective is for market forces to spur industrial and commercial processes towards low emissions or less carbon-intensive approaches than those used when there is no cost to emitting carbon dioxide and other greenhouse gases (GHGs) into the atmosphere.

Carbon credits are allocated or purchased by organisations and then traded among them depending on an organisation’s level of emissions.These kinds of trading schemes have existed in the European Union since 2005 but are becoming common in other territories. There is currently no accounting standard in IFRS (International Financial Reporting Standard) for carbon credit accounting.