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The EU Emission Trading Scheme

Aspects of Statehood, Regulation and Accounting


Stefan Veith

The emission trading scheme is the most recent instrument of the EU environmental policy. Its underlying mechanisms and economic consequences are yet less straightforward than policymakers initially had expected: As this study shows, the regulation probably yields unintended distributional effects and imposes additional risk on the regulated companies. Consequently, meaningful accounting for emission rights is not only a necessity for regulators and customers, who need transparency, but also for investors on capital markets, who bear the additional regulatory risk. This study empirically assesses the usefulness of various accounting alternatives and provides evidence that cost and fair value approaches dominate the widely used mixed models.


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List of Figures XI


List of Figures Figure 1: Research Questions 2  Figure 2: Emission Trade Calendar 27  Figure 3: Development of Allowance Prices 35  Figure 4: Causality Model Explaining Environmental Policy Choice 40  Figure 5: Assigning Emission Costs Using Activity-Based Costing 79  Figure 6: Emission Rights in Imputed and Full Cost Management Accounting 80  Figure 7: Graphical Illustration of Samples Used 124 

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