## Emission Trading Schemes ## Source details **Canonical URL:** [Emission Trading Schemes](https://www.imf.org/-/media/files/data/statistics/bpm6/bptt/bptt-fifth-meeting-presentaton-emission-trading-schemes.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bpm6/bptt/bptt-fifth-meeting-presentaton-emission-trading-schemes.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bpm6/bptt/bptt-fifth-meeting-presentaton-emission-trading-schemes.pdf.json) --- ### Background — current treatment and ISWGNA recommendation - Under the 2008 SNA, emission permits (EP) are considered as "D29 other taxes on production" since EPs "do not involve the use of a natural 'asset'". - Tax revenue is recorded as sales of EPs at time of surrender. - The ISWGNA requested further guidance because the 2008 SNA treatment "does not fully articulate all the dimensions of tradeable emission permits". - An OECD/Eurostat Task Force produced guidance in the "Final Report October 2010". - The ISWGNA recommended the split asset approach (described in SNA News and Notes numbers 30/31 and 32/33). ### Practical challenges in implementing the split-asset approach - Classification of a prepaid tax: "Is the classification of a prepaid tax consistent with permit holders other than non-financial corporations?" - Cross-border trading: "How to deal with cross-border trading of permits and the resultant discrepancy between government revenue from auctions and the subsequent surrender of permits?" - Free allocation: "How to treat permits which are freely given away by governments?" - Valuation timing: "What is the value (tax) of the EP – at original issuance or surrender value?" - The SNA Wellbeing and Sustainability Task Team was asked to examine recommendations and propose alternatives balancing conceptual alignment, pragmatism, consistency, and visibility of transactions, other flows and stocks. ### Alternate recording treatments (enumerated options) - Option 1. Emission Permits as non-produced non-financial assets (contracts, leases and licenses right to use) - Option 2. Emission Permits recorded as a resource lease (financial asset), with resource rent recorded at surrender. - Option 3. Emission Permits recorded as Contracts, Leases, Licenses with taxes on Production recorded at Auction - Option 4a. Emission Permits recorded as Financial Assets with taxes on production recorded at surrender (issuance value) - Option 4b. Emission Permits recorded as Financial Assets with taxes on production recorded at surrender (market value) - Option 5. Emission Permits recorded as split assets, with taxes on production recorded at surrender (current task force recommendation) ### Outcome of AEG and BOPCOM consultation - General agreement favored Option 4, specifically Option 4a: - Classification as accounts receivable (pre-paid taxes) / accounts payable. - Taxes on production should be valued at the issuance price recorded at surrender. - BOPCOM consultation confirmed AEG preference for Option 4a; two members preferred Option 1. - Unresolved issues identified: - Treatment of changes in the market value of tradeable emission permits. - Treatment of emission permits issued freely. - Whether emission permits are best characterized as debt securities or other assets/liabilities. - Practical considerations for multi-country emission permit schemes. - Consensus that no ideal reflection exists in the standards; a compromise is needed. ### Editorial note and the Option 4(a)* alternative - Editorial Teams for BPM6 and the 2008 SNA prepared a short note examining feasibility of implementing the recommended option. - Option 4(a)* proposed to address consistency and recording issues: - With Option 4(a), transactions in emission permits at market prices would be immediately revalued back to issuance price in the revaluation account, creating inconsistencies with corporate recording. - Option 4(a)* instead creates a new non-produced non-financial asset when transaction price differs from issuance price via the other changes in volume account; this asset is extinguished upon surrender via the other changes in volume account (the split asset approach). - Both approaches have limitations; a final decision awaited a workshop to review conceptual and practical considerations. ### Workshop objectives, findings, and data challenges - Workshop objective: Discuss data sources and challenges for estimating emission permits and whether other practical and conceptual options could be implemented as outlined in the guidance note. - Workshop contributions: - Three country presentations, a joint presentation from Eurostat and ECB, and an IMF presentation on global consultation questionnaire results. - Presentations highlighted challenges for compilers due to data availability and diverse, changing emission schemes. - Key practical points for macroeconomic statistics: - Compilers need to adjust methodologies and assumptions for time of recording, alignment, valuation and other adjustments. - Permits are issued and bought on a particular date, but emissions occur later; countries try to implement an accrual adjustment to align government revenue with emissions. - Adjustments are also made to align corporate surplus (expenses) with government revenue. - Special treatment considerations for permits provided freely and other adjustments. ### Global consultation questionnaire — participation and data availability - Questionnaire consisted of 15 questions. - Total respondents: 70. - Respondents indicating estimates for emission permits are currently available in National Accounts or Balance of Payments programs: 50 respondents. - Data availability findings: - Government revenue at issuance cost is collected predominately from auctions; the issuance price is known in most cases, but post-issuance market price for a particular permit is a challenge. - The number of EPs issued freely and recipients is generally known. - Number of surrendered permits and the institutional sector surrendering the permit is available for 48 percent of respondents. - Issuance price and market value of the surrendered permit are not available from current data sources for many respondents. - Corporate financial statement information on purchases, sales and holdings of EPs is limited: "Only a third of respondents reported that they could collect information on the purchases and sales of EPs and of holdings (assets)." - Repository data is available for a limited number of economies. - Feasibility of experimental estimates: - For most respondents, producing experimental estimates in line with the recommended options is not possible due to data availability and resource constraints. - Denmark and New Zealand have produced estimates based on the proposed options. ### Summary and way forward - Data gaps create practical and conceptual measurement issues for EPs in macroeconomic statistics, especially for cross-border transactions. - Eurostat proposed an alternative recording treatment to overcome several BOP recording issues; the proposal "is by no means ideal, however, warrants further review." - The Eurostat proposal will be reviewed to ensure "sufficient justification, visibility and consistency." - Workshop organizers together with the SNA and BOP lead editors will summarize workshop findings for further consideration. --- _Source: https://www.imf.org/-/media/files/data/statistics/bpm6/bptt/bptt-fifth-meeting-presentaton-emission-trading-schemes.pdf_