Pollution allowance is also called as emission rights. This concept is firstly introduced by John Davis in 1968 in the book "pollution, property and price" (Opschoor, Lohman and Vos, 1994). It refers to the emitters in environmental protection supervision and administration departments' quota allocation, and in the premise to ensure that the rights do not damage the other public environmental rights, shall enjoy the right to the discharge of pollutants (Gibson, 1996). In 1968, when the American economist Davis first proposed this concept, its connotation is the government as society's representative and the owner of the environmental resources sells the right of emission of pollutants to the highest bidders like securities (Gibson, 1996). Polluters can buy this kind of right from the government, or from the polluters who have the emission right. Polluters can also buy or transfer the possession of emission right.
1.2 feature of pollution allowances
Pollution allowances is a market based economy policy and economic stimulus method (Gainesand, 1991). It fully exerts the market mechanism's role in resource allocation. The characteristics of pollution allowances are mainly manifested in the following aspects:
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First, a pollution allowance is an economic policy and economic stimulus method. The United Nations economic organizations and development autonomy council in 1991 January proposed "proposal of using economic means in environmental policy" and suggested members more extensively and firmly to adopt economic measures, as other policies means complement or replacement (Aggie, 1995). This proposal put forward four types of economic methods for reference: the first is the fees and a tax, the second is a tradable permit; the third is deposit system; the fourth is financial subsidies (OECD, 1998). From the proposal can see pollution allowance is a kind of economic methods to protect the environment. In 1992 The United Nations conference on environment and development passed the Rio declaration, the principle 16 points out "considering polluters shall bear the cost of pollution in principle viewpoint, national authorities should make more efforts to promote the internalization of environment cost and utilization of economic means, and proper care of public interest, and do not distort international trade and investment." The meeting passed the agenda 21, in which chapter 8 stresses "need to make appropriate efforts, more efficient and more extensive use of economic means"; "Governments should consider accumulating means of economy and the market mechanism to establish the effective combination of economic means..., direct control method and the voluntary means (Lehman, 1996). This symbolizes that pollution allowance is completely different from other environmental economic policies.
Second, pollution allowance is a market-based pollution control mode. U.S. federal statutes provides a kind of "market control" mode to use market mechanism to prevent pollution and waste reduction targets (Milne, 1996). The cost of pollution exteriorization often causes social fairness and low economic efficiency, the market control mode is through pollution cost allocation change to improve efficiency and fairness, its starting point is to take the pollution cost as a cost of product, rather than let it impute to the society. The Clean Air Act 1990 in amendments proposed system of emission trade is a kind of typical market-based pollution control mode (OECD, 1993). Now this pattern more adapted to the development of market economy, so also increasingly used by governments.
Third, pollution allowance is by providing ways and means to improve the efficiency of the cost of governance pollution, application forms of economic levers to mobilize the enthusiasm of pollutant discharging enterprises, in order to realize the pollutants cuts for the purpose. It is a kind of specific and operating model, not directly reflected in its environmental objectives, but to achieve objectives and provide ways and means (Cook, 2009). Pollution-discharge right trade can use the total amount control make policy implementation conditions, give full play to the flexible economic stimulus function, make up and correct total amount control itself low efficiency problem because of "command - control" (Lohamann, 2009). Theoretical study and practice show that, compared with concentration control, total amount control, especially capacity amount control, is the effective measure to protect the environment capacity of resources.
2. Accounting treatment of pollution allowances
2.1 accounting treatment of pollution allowances
As environmental management changes from concentration control to total amount control, at present for environmental pollution fee also changes from originally pollutants exceeds charge to emission charges. Chemical and papermaking industries paid blowdown will increase more 30% - 80% than the original, thermal power industry's paid blowdown will improve nearly 10 times (Aggie, 1995). For pollution emission enterprises, environmental policy is an enterprise's important economic policy, implement a policy measures taken, and its related assets, liabilities, income and reflection control is also more and more by the government, the society and the enterprise concerned. At present in the enterprise accounting system still just at management expenses' detail project "pollution fees" check enterprises' paid blowdown. This practice defects are as follows, first, because the government is charged pollution fees according to "who pollute pay the fees" principle, such charge policy cannot effectively motivate enterprises to actively control pollution and reduce emissions, the whole society can not realize the sustainable development goals (Opschoor, Lohman and Vos, 1994). Second, because the environment's limited pollution accommodating ability and the scarcity nature of pollutants discharged power, enterprises actual pollution emission right shall be reflected as the enterprise resources in accounting statements, should not be used as fees. Third, from tradable emission in the world, some enterprises already join the sub projects or specific areas of pollution-discharge right trade plan, in the reality of pollution-discharge right trade for its relative lag of the accounting standard, and poor manoeuvrability, brings difficulty to the enterprises to reflect and control trading matters necessarily, and affect the accounting information decision usefulness.
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2.2 development of emission trading
Emission trading is a kind of method to manage and control pollution, is based on the market. The implementation of emission right generally is done by the environmental administrative departments under the selected restricted area or within departments, which design limited emissions and cap-and-trade program, to give emitters' quota (Gainesand, 1991). The competent departments according to the achieved reduction goals decrease quota year by year. This provides trading platform for emission right. Emission trade idea is derived from "Kose theorem", as long as the market transaction cost is zero, no matter what the initial property configuration status is, through the transaction can achieve the optimal allocation of resources (Aggie, 1995).
Emission trading is firstly used by the us federal bureau in air pollution and river pollution management, especially since in 1990 it was used in total SO2 emissions control, has achieved the unprecedented success, has achieved great economic benefits and social benefits. According to the total U.S. accounting firm estimates, American emissions are obviously controlled, at the same time, the cost of managing pollution is saved by about 2 billion dollars (Lehman, 1996). Germany, Australia, UK and other countries successively conduct emission share trade policies and practices.
Already formally effective Kyoto protocol also proposes that from 2008, countries can conduct emission trading goals. The European Union has launched "waste gas emission trading system", trying to use market economic means, use the "invisible hand" to push European enterprises to participate in the process of greenhouse gas emission reduction. The EU's "exhaust emission trading market" is the first international emission trading market. The European commission according to "the total control, divide the burden" principle first identified each member carbon emissions, again by each member assigned to the respective national enterprises. As for allocation way, each member government should allocate at least 95% of quotas free to enterprises; the remaining 5% quota can be adopted bidding mode (IASB, 2010).
3. Accounting issue of pollution allowances
3.1 confirmation of pollution allowance
Emission right as a production factor is scarce and valuable, also has the possibility of appreciation income (Milne, 1996). According to the accepted accounting practices, assets are defined as a result of past events and formed by enterprise control, and is expected to generate economic benefits to the enterprise resources. International accounting standard 38 "intangible assets" defines emission right is granted by the government, and it is a specific form of the franchise right. As for the confirm range problem of intangible assets of pollution-discharge right, how to fairly and justly grant the initial emission quotas to enterprises is a difficulty. Western countries in practice the initial emission rights' allocation methods usually include bide, distribute freely and fixed price sell these 3 kinds. In view of the differences of practice, in order to reliably measure emission trade value, accounting only confirms the emission rights through agreement manner transferred or purchased. When the active pollution-discharge right trade market is gradually formed, government freely distributed pollution-discharge right can be also confirmed as intangible assets in the booking.
3.2 measurement of pollution allowance
"Quota emissions and cap-and-trade plan" will configure the participating subject (participants) emissions and cut their emission quota to a certain level (namely quota) goals (Cook, 2009). Generally the quota granted by competent government departments to the participants is equal to the number of the limit. "A limit emissions and cap-and-trade plan" set the operation time is a year, and an implementation of quotas usually is granted during the period to participants (Lohmann, 2009), generally after the implementation verify the actual emissions. Participants can freely buy or sell emission quotas, therefore, the participants have three choices: can limit its emissions; can reduce their emissions below the quota and sell part of them; can produce more than its limit emissions, in this case they must purchase the exceeded part emissions quota and bear the punishment. Participating enterprises should in the beginning of each plan confirm achieved emission. After the implementation of plans, the participants are asked to pay the actual emission quotas. If the participants can not deliver the enough quotas, then must withstand higher punishment. Participants held emission quotas shall be entered an item in an account as intangible assets, and the evidencing value is the actual payment. When participants' emission occurs, the already happened emissions quota obligation is recognised as a liability. Should pay attention, emission quotas' obtain do not create net assets or net liabilities.
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3.3 disclosure of emission trading
About emission trading financial position, operating results and cash flows information, participants should first report emission quotas in the balance sheet (Aggie, 1995). Due to participate in emission plan, causing some assets expected generated cash flow reduce, and the impairment of information shall be disclosed. Secondly, more information is disclosed in off-balance-sheet, including corporate disclosure of the purchase and sale of pollution-discharge right trade volume and the quantity. At the same time reflecting emission of the market price changes, and enterprises' emission trading fluctuant circumstance, this information for building a successful effective pollution-discharge right trade market is very necessary. Held emission quotas may be further subdivided into initial awarded quotas and later in the trading market purchase quota, according to the different kinds of pollution index segmentation. If a company held emission quotas is more than initial allocation quantity, this explains enterprises in emission market buy emission right.
4. Significance of pollution allowance
Since Emission trade is put forward in 1960s, especially in 1990 it is used in SO2 field, has won great economic benefits and social benefits. But as for the current emission trade effect and meaning even the most successful American in practice there have different opinions. In the United States, such as New Mexico senator Minnixi calls it as "1980s the most promising scenario" (Aggie, 1995). China's many scholars also think, compared with traditional environmental management mode, the wide application of market idea, will be more effective to reduce pollution emissions. And some scholars but think this kind of environmental management means is not as perfect as imagination. For example the American natural resources protection association of lawyers, the federal bureau of air pollution's former director in 1986 conversation regarded this policy as a "scam" to allow companies to increase pollution. At the same time emissions' trading in China is also criticized by many scholars, they think this policy is just to copy the western law, in China it has not completely the possibility to succeed. I think that sufficient and reasonable setting and construction of pollution-discharge right trade market system can promote China's air pollution and water pollution prevention and control work and it is an important way of sustainable development. In the future whether China's air and water environment protection can get more progress depends on whether form the real meaning of pollution-discharge right trade market, it not only has economic value, more greatly environmental value. In Summary, the significance of emission trading mainly include the following aspects: to cut the whole social cost, effectively improve the efficiency of managing pollution; to promote companies' innovation, improve pollution technology; to coordinate economic development and environment protection to enhance international competitiveness; to improve the quality of environment enforcement.
In the conclusion that pollution allowances represent assets that should be reported on the balance sheets of companies entitled to such allowances. Emission trade development makes the research on emission trade accounting issue has important realistic significance. This paper analyzes emission of initial recognition and measurement, and final disclosure and so on a series of accounting problems.