Carbon accounting

This chapter introduces carbon accounting as the measurement, tracking and reporting of greenhouse gas (GHG) emissions in carbon dioxide equivalent (CO₂-e). It highlights the rapid evolution of this area, the increasing expectations of accountants, and the use of standards such as the GHG Protocol and ISO 14064/14067.

Key terms

This section defines foundational concepts like carbon accounting, the GHG Protocol’s Scopes 1, 2, and 3, and distinctions between “net zero” and “carbon neutral.” It also explains the Paris Agreement and outlines credible, science-based approaches to emissions reduction using initiatives like SBTi and ISO standards.

Greenwashing

Greenwashing refers to overstating environmental sustainability claims. The chapter warns against misleading net zero commitments and emphasises ethical conduct aligned with APES 110 and NZICA codes. It also introduces “greenhushing,” where firms under-communicate climate goals, which can also mislead stakeholders. Regulators in Australia and New Zealand are increasingly scrutinising such practices.

GHG emissions accounting

This chapter covers methods for identifying and measuring GHG emissions, developing inventories, and managing emissions data. It outlines tools such as emissions calculators and explains data reliability, verification, and alignment with financial reporting standards. It also details new mandatory disclosure requirements in Australia (from 2024-25) and New Zealand (from 2023).

Carbon credit and offsets

Here, the difference between carbon credits (often regulatory) and carbon offsets (typically voluntary) is clarified. The chapter explains carbon markets, quality factors like additionality and co-benefits, and the importance of third-party verification. It also provides guidance on due diligence for purchases, including project validation and risk assessment.

Professional obligations and considerations

Accountants providing carbon-related services must meet ethical standards, maintain professional competence, and ensure appropriate licensing. This section outlines engagement prerequisites, including documentation, risk management, and professional indemnity insurance. Specific licensing may be needed under schemes like Australia’s Clean Energy Regulator programs.

Tax treatment

This chapter notes that tax rules for carbon credits and offsets are still developing. It highlights current guidance in Australia, including treatment under the Farm Management Deposit scheme and classification of credits as income or capital. In New Zealand, Inland Revenue has a pending work programme to issue guidance on emissions trading tax impacts.