Carbon trading reporting: The case of Spanish companies
Policy makers, scientists, industry leaders, and academicians regularly debate how to restrain global warming and reduce greenhouse gas (GHG) emissions. Three main methods are used for this purpose: command and control laws/regulations, carbon taxes, and cap and trade schemes.
Recognizing the consequences of global warming, Norway, Denmark, Sweden, and Finland introduced a carbon emissions tax in the 1990s. These nations also ratified the Kyoto Protocol that ran from 2005 through 2012. The European Union (EU) instituted a carbon trading scheme (the Emissions Trading System, or ETS) when Kyoto became operative in February 2005. Scandinavian EU members had two methods in place during the 2005-08 period to encourage GHG reduction: taxing and trading. Norway, not in the EU, used just taxes. The other EU members—including Spain—had only the carbon trading ETS scheme to effect compliance with the Kyoto Protocol.
The basic research issue addressed empirically here is this: Did publicly held firms headquartered in Spain adequately report their participation in the EU carbon emissions trading mechanism?
Data to answer this question are obtained from the 2011 and 2012 annual reports for domestic Spanish public companies that received tradable emissions permits. In addition to assessing investor-owned firms’ disclosure posture, the specific method of accounting for these carbon emissions permits—whether companies used, banked, or sold the permits granted by the government—also is developed in detail for analysis. This empirical research effort reports on a complete survey of all available data for the two most recent financial reporting periods.