A lot of yesterday was spent on work I have been doing seeking to reconcile financial accounting as it is right now with the demands of climate change. The work has been done at the invitation of Rupert Read at the University of East Anglia and Aled Jones of Anglia Ruskin University. And, in a nutshell, I have not been able to achieve that reconciliation.
I will publish more on this next Thursday when I will be making a presentation on this issue at the Institute of Chartered Accountants in England and Wales. For now suffice to say that accounting as it now cannot survive if we are to bring the impact of climate change within it. Quite literally, IFRS accounting and accounting for climate change are at such odds with each other that only one can win, and it has to be the need to account for the consequences of climate change.
It’s actually very simple indeed. Stick on a carbon tax of the right social cost of carbon. All prices in the economy now reflect climate change, costs, benefits and risks. Thus all accounting done at market prices includes climate change.
This is rather the point of the carbon tax, that by the one change in market prices we’ve now incorporated climate change into every decision.