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Assets or Liabilities: What does carbon accounts for on balance sheets?

Private organizations face increasing pressures related to environmental issues, medium to long-term cost forecasts for carbon are increasing. Whether due to carbon taxes, cap&trade systems or even voluntary carbon credit markets, carbon will be increasingly evident on the balance sheets of large corporations. Companies are doing already this and, as an opportunity, are transforming carbon from a liability to an asset. Estimates suggest a global carbon price is likely to be somewhere between $50-100 USD per ton. We can expect this to dramatically increase as "atmospheric real estate" for carbon dries up (Did you read our article about Indonesia and Papua New Guinea?). Carbon is a clear financial liability and firms that aren't yet factoring in the price of carbon or carbon credits to their balance sheets are "playing with fire". Some companies are hedging their bets by treating carbon as an asset class, and securing long-term carbon offset arrangements and power purchase agreements to combat carbon’s rising value. Credits aren't the only carbon assets available. Smart firms are also capitalizing on allowances, grants, and tax incentives for green business initiatives. All in all, conversations about decarbonization and carbon credits are increasingly moving from the domain of Chief Sustainability Officers over to Chief Finance Officers.


Click below for this fantastic article by Sylvera, including several great reference materials. Sylvera concludes by proposing three ways to turn carbon liability into carbon assets:

  1. set internal carbon prices (think ahead, take control before regulators and consumers)

  2. avoid, reduce, offset (mitigation hierarchy) and

  3. optimize for quality ( third-party verification)



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 CARBON CREDIT MARKETS

“Nothing in life is to be feared, it is only to be understood. Now is the time to understand more, so that we may fear less.”

“I am among those who think that science has great beauty”

Madame Marie Curie (1867 - 1934) Chemist & physicist. French, born Polish.

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