Another student guest blogger.  See the comment thread for my own remark on this topic, which promises to be very interesting over the coming year.  –RJB

One of FASB’s current projects involves providing guidance to accounting issues such as accounting for Emissions Trading Schemes.  This project is important because many environmental and ecological accounting concepts are ambiguous in nature.  As societal demand grows for more corporate and political environmental accountability, accountants will require increasing guidance on how to account for accounting information associated with economic instruments such as cap and trade schemes.

Such environmental economic instruments have been better explored in the environmental economics literature compared to the environmental accounting literature. This is unfortunate because accounting academicians may be a valuable resource in the development of efficient, effective, and practical economic instruments that aim to address environmental issues.  In order to provide beneficial and tangible economic instruments, environmental economists will need to use economic theory that is consistently grounded in an ecological accounting reality.  This merging of economics and accounting will be more successful if accounting scholars take a more prominent role in analyzing and exploring environmental accounting information systems that yield viable economic results.

If it is acknowledged that accounting scholars are arriving tardy in addressing environmental issues, then it may be helpful for the literature to rigorously discuss accounting’s basic and fundamental role in understanding the accounting ramifications associated with the development of environmental economic instruments such as the cap and trade schemes.  One suggestion is to begin broadly comparing and contrasting accounting’s role in other environmental economic instruments, such as traditional command and control regulatory approaches.  Basic knowledge of different environmental economic instruments can be found in an introductory environmental economics textbook, such as Turner, Pearce, and Bateman’s Environmental Economics.  An older edition (1993) can be purchased cheaply on sites such as Amazon.

There are many research opportunities for accounting researchers to help inform the debate on how best to develop accounting standards aimed at addressing environmental economic instruments such as the cap and trade schemes.