Enron-Type Accounting Used to Calculate "Carbon Offsets"

Tue, 2007-02-20 08:05Ross Gelbspan
Ross Gelbspan's picture

Enron-Type Accounting Used to Calculate "Carbon Offsets"

The carbon offset industry is using the same sort of ‘future value accounting’ that caused the collapse of energy giant Enron, according to a watchdog group.

When companies like Climate Care and the Carbon Neutral Company sell the public carbon offsets, carbon savings expected to be made in the future are counted as savings made in the present. This is the same technique used by Enron to inflate its profits with such disastrous consequences.

Comments

perhaps, as he also had severe problems with discounting levels, future vs current savings/costs, etc. Btw, also of interest is the fact that Enron was a big Kyoto supporter. Which perhaps is indicative of the kind of stringent calculations and methods that seem entirely missing from the WC crowd.
Actually, Stern’s discount rate drives you to the opposite conclusion. He applies almost no discounting to future costs, which leads fairly easily to the idea that abatements should not be dramaticaly discounted either. This whole piece is a ludicrous slur, trying to tag Enron to the idea of future value accounting. It is absurd to think that we can face this challenge without a major realignment of our capital stock in sectors such as electrical generation, and that requires effective valuation of those assets including a carbon price. The idea of talking about hydro versus coal, for example, without using value of future power is simply a demonstration that the authors do not understand the issue set. What Enron did was first, to depart wildly from any reasonable standards, so much so that Skilling referred to it as hypothetical future value accounting, and second, conceal the nature of what they were doing. Transparency is a key difference here.