Update on the Treatment of
Emission Permits in the National
Accounts
OECD National Accounts Working Party Meeting
Paris October 2011
Contact: nadim.ahmad@oecd.org
Background
• 17.363 Governments are increasingly turning to the
issuing of emission permits as a means of controlling
total emissions. These permits do not involve the use
of a natural asset (there is no value placed on the
atmosphere so it cannot be considered to be an
economic asset) and are therefore classified as taxes
even though the permitted “activity” is one of creating
an externality. It is inherent in the concept that the
permits will be tradeable and that there will be an
active market in them. The permits therefore constitute
assets and should be valued at the market price for
which they can be sold.
• 2008 SNA Research Agenda, # A4.47
AEG November 2008
• Permits issued under cap-and-trade schemes should be
recorded as taxes.
• Favoured treating payments for permits as pre-paid
taxes, paid as emissions took place
• But did not reach a recommendation on:
– Whether taxes and subsidies should be imputed when permits
are issued without charge or at cost lower than the market price.
– How to record changes in the value of payments over time
– Treatment of other forms of emission permits.
• Agreed it would be useful to create a task force
Task Force
• Created in 2009
– Two physical meetings: July, November 2009
– Final report in October 2010
• Considered 4 Options
– Non-produced non-financial asset
– Financial asset
– Split asset
– Multinational treatment
Final Report
• Focuses on cap and trade schemes
• The majority of the Task Force preferred the
split-asset approach but a significant minority
preferred the financial asset.
• Both approaches recognised as having merit and consistent
with 2008 SNA principles.
• Both views took the position that taxes should be paid by the
emitter (tax on production)
• And both consistent with earlier AEG guidance that taxes
should be recorded at the time of emission.
• Recognising the two positions would not be
bridged, TF asked ISWGNA to make a
recommendation.
ISWGNA – February 2011
• ISWGNA recognised that
– both options had merits and weaknesses
– that if all permits were issued via auction the two
positions would be broadly similar
• ISWGNA preferred split-asset approach, reflecting
– impact on government accounts, especially because
currently most permits are issued for free
– advantage of minimising imputations
– And equivalence with permits issued under other
mechanisms, e.g. CDMs.
• SNA News and Notes: February 2011
UNSC – March 2011
• UNSC considered the issue an
interpretation and not clarification issue,
so, passed to the AEG.
AEG: July-October 2011
• July
– Large majority agreed with the split-asset
approach but emphasised
• Simplicity
• And the need to address presentational issues
related to the current account balance
• October
– ISWGNA modified its earlier guidance to
reflect these two concerns.
– Large majority again agreed with the splitasset approach
ISWGNA – October 2011
• Update to February 2011 News and Notes reflecting the
AEG consultation.
• Simplified approach is to treat permits issued under
(multinational) cap and trade schemes in the same way
(in practice) as if they were purely national schemes,
effectively assuming no flows of taxes to/from R.O.W
The tax recorded for any single permit surrendered
in relation to emissions in period t is equivalent to
the total stock of relevant other accounts payable
divided by the total number of active permits issued
and remaining in circulation) at time t.