John Müller: Green Accounts (and Tales)



Carbon markets are one aspect of the so-called ecological transition that scientists look suspicious. In the next report of the UN panel of experts on climate change, the one dedicated to mitigation measures, severe criticism of its operation is expected. One of the problems has to do with how to measure the carbon released by different activities. There are two types of carbon markets, voluntary and regulated. The first grows driven by the reputational interest of companies. Instead, regulated markets are growing on political impulse. There are already them in the EU, South Africa, Colombia, California and in July the one in China was launched. These mechanisms

They are mandatory for certain predefined sectors (electricity, heavy industry, airlines) and will be extended to other areas of the economy.

The Spanish have known of its existence because one of the factors that has driven the rise in the price of electricity has been the spectacular rise of the European carbon market. Last week it exceeded the barrier of 60 euros per ton. In March 2020 it was below 20 euros. It seems that there are still basic issues, as scientists emphasize, that do not work in a transparent way. ‘The Wall Street Journal’ revealed that the account of carbon emissions that companies keep is as creative as the accounting of their books (“accounting is chewing gum,” said Francisco González, former president of BBVA).

The case of Microsoft is striking: in 2017 emissions of 22 million metric tons of carbon were attributed, but in 2020 the number was reduced by half due to “an improvement in the calculation systems”. The problem seems to lie with the accounts. Apparently calculating own emissions is not complex, but it is complex to estimate the emissions of the rest of the value chain (customers, suppliers, investments and assets) that have been defined since 2011 in a standard called Scope 3 (Scope 3). “Measuring, targeting and managing Scope 3 is a disaster,” Anant Sundaram, a finance professor at Dartmouth College’s Tuck School of Business, told the newspaper.

There is a wide range of uncertainty in measuring Scope 3 emissions … to the point where the figures can be absurdly wrong. Added to this is the discretion with which some are handling the ESG seal, acronyms that define a portfolio with investment criteria with social responsibility, respect for the environment and good corporate governance. The US SEC and the German Bafin, the regulators of their markets, Deutsche Bank fund manager DWS investigated because it would have wrongly assigned the category of sustainable funds to products that did not meet that requirement. Sometimes the accounts are stories. [email protected]

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