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A green finance report explores the voluntary carbon market challenges

By Newcastle University
Wind turbines in a green field

A green finance report examines the voluntary carbon market challenges. Dr. Marwa Elnahass, co-author of the report, explains how the lack of harmonised financial reporting framework becomes an obstacle to the carbon market growth. 

How is the green finance report relevant to COP26?

The "Voluntary Carbon Markets in ASEAN: Challenges and Opportunities for Scaling Up" report is part of an overarching project, developed in collaboration with the COP26 Universities Network and the British High Commission.
This collaboration was the first of its kind. The network brought together top researchers and academics from the UK and Singapore to publish a series of four reports.
The aim was to support policy development and the UK’s international COP26 objectives in Singapore and across Southeast Asia.

What is the green finance report about?

We wrote the green finance report with the support of industry partners.
We examined the rationale for trading carbon credits across the Association of Southeast Asian Nations (ASEAN). We also assessed the role of institutional investors and regulators in developing a regional voluntary carbon market (VCM).
As a co-author, I led the main section and the discussions about carbon accounting and financial reporting. I addressed one of the critical existing gaps in current international standards - carbon accounting for VCMs.

What did the report help you learn and what more are you hoping to achieve in the context of climate change? 

There is an absence of a harmonised financial reporting framework for emission allowances and voluntary offsets, and a lack of discourse on the assessment of underlying assets. This is hampering the growth of VCMs in ASEAN.
There is some discourse on how best to report the income statement (profit and loss) effects of carbon trading. However, there has been no discussion on how to value the underlying assets that produce or use carbon credits on the balance sheet.
Having worked on this strategic project, I observed that the global voluntary carbon market is unregulated and lacks transparency. Accountants, auditors, and users of financial statements expect a standardised system for carbon accounting measures and financial disclosure.
In this report, I bring this issue to the attention of regulators. I also raise plausible calls for policy makers to respond to users’ needs for high quality information on carbon accounting.
There is a wide-ranging use of financial reports by multiple stakeholders. Therefore, policy makers and COP26 representatives need to consider the following aspects of carbon accounting and disclosure:
  • Valuation and reporting of carbon credits;
  • Valuation and reporting of the intangible assets capable of creating carbon credits
  • Developing global carbon accounting standards which offer consistent guidance for the monitoring, reporting and verification of the actual carbon sequestration or reductions in all relevant carbon pools. The aim is to ensure that the effects are real, permanent, and measurable.

Read the "Voluntary Carbon Markets in ASEAN: Challenges and Opportunities for Scaling Up" report to learn how trading carbon credits could help us deliver a sustainable future. Or alternatively, check out our COP26 blog series to find out more about climate change-related projects and research taking place at Newcastle University.


Tags: One Planet, COP26, Research Excellence