EU greenhouse gas regulations
The European Union's Greenhouse Gas Emissions Trading Scheme (EU ETS) came into force on 1 January 2005. It is the world's largest international and multi-sector greenhouse gas grading scheme, covering more than 12,000 energy-producing and energy-intensive plants.
EU member states will constrain their greenhouse gas emissions by allocating emissions allowances. Companies that do not use all their allowances will be able to sell them to companies that have difficulties keeping their emissions within the allocated allowances. Emissions trading takes advantage of market forces and aims at cutting emissions as cheaply as possible, thus helping the EU to achieve its Kyoto targets at the least possible cost.
The financial reporting and auditing issues which will impact on the financial statements arising from the new scheme have been discussed in a European Federation of Accountants' (FEE) publication entitled: 'FEE alert: emissions trading'.
According to Lars-Olle Larsson, chair of the FEE Sustainability Assurance Group: 'The EU ETS foresees the use of third party verifiers who are engaged by the company to report on annual emissions data supplied to government. Early and effective liaison between the company, its verifier and its auditor is important to ensure that the verification and necessary assurance required to audit the financial statements are achieved in the most efficient and effective way.'
The report is available free-of-charge from the FEE website: www.fee.be
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