1. Peter Rørmose Statistics Denmark
Tradable CO2 Emission Permits and Environmental Accounting. A Danish Perspective.
Peter Rørmose
Statistics Denmark

2. Background for this presentation
Report from project at Statistics Denmark:
Integrated Environmental and Economic Accounts for Tradable Carbon Dioxide Emission Permits. (by Thomas Olsen)
Funded by European Commission, Eurostat
Grant no , Action 3
Completed in December 2006.

3. Background for the project
Kyoto Protocol, February 16, 2005
EU member states must reduce CO2 emissions by 8 pct on average
Common European market for tradable CO2 emission permits, since January 2005
Now, transactions will occur in the market and we as statisticians can record them. Measure prices and quantities.
Purpose of this project was to establish economic environmental accounts for CO2 emission permits.

4. Status on how to treat tradable permits.
Ongoing discussion about how to treat it in the National Accounts. Should it be recorded as:
A tax
A volume change in other non-financial assets
Chapter 10, Capital Accounts, 1993 SNA rev. 1 section , actually defines CO2 emission permits as an asset.
SO2 allowances are treated as assets in the US
SEEA recommend to treat it as assets.
So this report sees it as an asset as well

5. Status on how to treat tradable permits.
Open for discussion – gray zone.
If government collects money and it is not a tax, there must be an “underlying asset”
The AEG group (revision the SNA) think that the atmosphere should not be considered an asset
Thus in the revised SNA tradable emission permits will be treated as a tax!
However, do not “throw away the baby with the bathwater”!
Statistics on permit trading is still valuable for environmental purposes!

6. How can we use it?
Since there is an obligation to collect data about the trade with and use of permits, lots of useful data will keep being produced.
The project establishes economic environmental accounting for emission permits.
In a satellite account both the physical and the monetary aspect of using emission permits are described.

7. Emissions Trading Scheme
Other Agents
Government
Foreign Economies
CDM / JI
Mechanisms
ECONOMY
Losses
Emissions Trading Scheme
The Tradeable CO2 Emissions Permits’ Flow Through the Economy
Grandfathering
Sold to residents
Trade
Investments
Used permits
Unused permits
Surrendered
Siderne i rapporten kan bruges til at sige noget om disse flows

8. Data source
CO2 allowance register. All market participants must set up an account with EPA
Registers transactions from sellers to buyers account (nothing about the economics of it)
The following information is recorded for each transaction

9. Transaction details in the register
The ID number of the transaction
ID number etc. about the seller
ID number etc. about the buyer
Other details
Number of permits, country of origin, type and period
The time and status of the transaction

10. Permit accounts
Combination of the ID-numbers in the register with ID-numbers in the Business register and an aggregation to national accounts level facilitates permit statistics by industry
Use of permits, trade with permits, emissions excessive of permits, comparison with actual emissions etc.
Asset accounts, balance sheets imports and exports etc.

11. Monetary accounts of permits
A lot of “market places” on the European allowance market e.g.

12. Nordpool allowance spot market price

13. Monetary permit accounts
The data in the physical accounts can be valued using various prices from the markets
Value of surrendered allowances, e.g. broken down by type of energy used by the companies surrendering them. How do the allowance prices affect behavior of companies?

14. Conclusion
The emission permit trading has a wealth of data produced that should be exploited in our accounts.
The most detailed data can be difficult to get like in the Danish case
Treatment in the NA as taxes creates problems with asymmetries and inconsistensies, so if that is the case work needs to be done on how to record them right