Carbon Pollution Reduction Scheme - Kyoto Protocol - Coursework Example

The rapid rise in global warming, sea level rising, the amount of consumable water depleting is a concern for all economy. Countries from all around the globe are working to see that carbon emission is controlled. Different rules and legislations have been passed for it and countries are now adhering to the Kyoto Protocol to reduce the emission level. It requires urgent steps to be taken else it will see massive destructions. The Australian government on their part has started with the Carbon Pollution Reduction Scheme with the aim to reduce emission. The government has set a cap and will work towards those and ensure that it’s below the limits. The government for this scheme has developed the overall initiative looking into different areas. The scheme will yield better results if recycling is also looked into seriously. The Australian government needs to ensure that the sub sector i.e. the recycling units for electronic goods work in line with the Carbon Pollution Reduction Scheme as it will help to achieve the goals set by the Australian government. The formation of this scheme ahs certain loopholes and needs to be fixed. The scheme will have deep impact on the financial decision which has also been looked into. The scheme will affect the ways decision and accounting and reporting is done as no standard and policies have been set. This will make companies alter their financial decisions and will also affect the way the company have planned financially. The Carbon Reduction Pollution Scheme started by the Australian government is an initiative to reduce carbon emission. “The scheme starts in 2011 with the prime mechanism to reduce greenhouse gas emissions”. (DAFF, 2010) The government to ensure that emission levels fall have taken “commitment to reduce it by 60% by 2050 of 2010 level”. (DAFF, 2010) The government for this is only looking towards the domestic sources. The government while devising the pollution scheme has looked into the fact that the terms of the Kyoto Protocol which is in favour of reducing carbons is taken care of. The Carbon Reduction Pollution Scheme as framed by the Australian Government has proposed “the cap and trade system to control green house gas emission “. (CRPS, 2010) The government in this scheme has “kept an upper limit to the amount of carbon the country will emit and will reduce it as years pass by on a rolling basis”. (CRPS, 2010) In this scheme “a cap has been placed and as the caps lower the emission level has to come down”. (CRPS, 2010) The scheme works as a cap has been put and trading in carbons will be allowed. For example suppose a cap has been put on 200 tones of carbon dioxide than it will be ensured that the emission is below limits. “The country has allowed for trading of carbons and the price will be determined on the basis of market price”. (CRPS, 2010) In this scheme suppose a company has a cap on its limits. If the company emits less carbon then the excess carbons the company has can be traded with others. The price will be determined by the market forces. This will change the working pattern of the finance department. This change in this will force companies to look into this while devising there financial policies. The company who has less of carbons can purchase it from others who have excess carbons. This will bring about a change in the way companies perform and will also affect the different industry and sector differently thereby affecting their decisions. The Carbon Reduction Pollution Scheme will have a widespread effect in Australia. The view of many industrialists that only the big companies and sectors will be affected doesn’t hold true. The scheme will affect the following as “the cost will rise as business units will look forward to control carbon emission”. (CRPS, 2010) The following will be affected by it Households will have to bear the brunt of Carbon Reduction Pollution Scheme as “goods and services will become expensive and the government is coming forward to save them”. (CRPS, 2010) This will reduce the burden and also track the emission. Industry will be the most affected by it. “The cost of production will increase indirectly and will affect around 1,000 industries”. (CRPS, 2010) The biggest fear is of the small scale industries. To protect them and withstand competition the government of Australia “is reducing the fuel taxes on a cent to cent basis so that they are able to meet the expenses”. (CRPS, 2010) This will create a boundary and will also bring about a change in financial decision as CRPS is finally taking the toll on revenues. The agriculture sector has been kept out of it. Despite the fact that “agriculture in Australia contributes about 16% in carbon emission it has been kept out of purview for the Carbon Reduction Pollution Scheme starting in 2011”. (CRPS, 2010) Industry and person will also get additional benefits who plant tree. “Reforestation will allow the company to be eligible for carbon emissions to a certain limit” (CRPS, 2010) which will see many companies moving in that direction as it will be work for the society and also earn them carbon emission cap. Thus, carbon reduction pollution scheme will bring about a change in a lot of things. The decision making as a result of this will get alter. Organisations will look to include the scheme while planning. The financial department will also see various changes with regards to recording, measuring, auditing and all financial related changes as carbon reduction pollution scheme will affect the planning. The emission arises most due to “landfills of organics which emit carbons and if a process of recycling is looked for especially for the electronic goods industry it will help to curb down emission”. (Gerard, 2010) The cost for each item should be decided on the amount of emission it does which will help to keep the goods disposed by household out of this purview. Recycling is a way to reduce emission. The recycling of electronic goods which emit the highest amount of green house gas emission will be curbed. The new scheme when used with the recycling units will help to provide a framework and will act as a tool to see that the cap proposed by the scheme is adhered to. Recycling will help to reduce the emission as seen from the fact that “recycling steel can have ensured that 1131 kg of iron ore, 633 kg of coal and 54 kg of limestone is saved for every tonne of steel recycled”. (Steel Recycling, 2005) This will preserve the valuable resources at the same time see that the emission cap put by the scheme helps the company to save on cost. The recycling of electronic equipments will help to reduce emission. The Carbon Pollution Reduction scheme in tandem with the recycling plant will help to curb emission. “Recycling of mobiles phone will ensure that new materials are processed from those as 90% of the materials used in mobiles can be used to recycle and make items like jewellery, steel products and plastic posts”. (Mobile Phone Recycling, 2008) this will help in the scheme as “2120 kg of mobile phones have been used as land fills and recycling those will curb emission and will allow the Australian government to ensure that the cap limit can be lowered every year”. (Mobile Phone Recycling, 2008) The recycling of electronic items will ensure that “less carbons are emitted as every ton of e-waste being recycled helps to save around 3-5 tonnes of gas emission”. (Garret, 2008) This will be a big step in the direction of reducing emission and the cap set in the Carbon Pollution Reduction Scheme will work. This will see that valuable items are made from the waste and at the same time emission is less. This will help the companies as the burden for this will be less. The recycling models will a great boon. The increase in the number of “cathode ray tube used in television being disposed due to television being operated on digital basis will see lead, mercury, cadmium and arsenic being emitted”. (Television Recycling, 2009) This recycling plant when working with the recent government scheme will help to ensure that carbons are reduced. It will also help companies to look for alternatives and will act as a guide for the globe. With millions of computers being dumped is adding to the worries of the government as green house gas emission is rising. It is estimated that “1.6 million computers is dumped every year which is giving rise to emission”. (Television Recycling, 2009) With the government looking forward to look ways to control recycling electronic equipments is a way out. Since, the electronic equipments are the biggest contributor so reducing those is a must. The Carbon Reduction Pollution Scheme to be successful has to integrate within it the recycling plant especially for electronic equipments. This will also give a push to use recycle goods. This will steady fast and help the scheme to work out and help the government to promote the usage of this methodology. This method will help in the successful implementation of Carbon Pollution Reduction Scheme and the recycling plant especially for electronic items will contribute significantly towards it. Despite, the sound progress and growth the usage of both this presents the Carbon Pollution Reduction Scheme will have deep financial repercussions on the financial decision. The financial decisions will get altered as the ways in which it will be affected is provided below. The financial department will face the issue of reporting. As, “there is no accounting standards defined and will be done by the International Accounting Standards Board shortly so there will be a problem to recognise which standards will reap the best results”. (CPA, 2008) The emission trading has already taken in European countries and they have shows different results. So, coming down to the accounting standards which fits all will be something which will effect the financial decision. The problem of reporting risk is also vague. “Measures need to be taken to identify how the AASB 7 financial instrument will affect risk and the way it will be encountered by companies”. (CPA, 2008) Since, nothing has been said in this direction so identifying this will be a hurdle. This will bring about a change in the way organisations perform as they will start to ensure that risk is properly recorded which will affect decision making. With unclear details on the way risk is to be considered will pose a huge problem. When we consider the electronic recycling industry the risk magnifies. The governing body needs to ensure that risk mitigation policies are there for the recycling industry. This will otherwise affect the working pattern and the decision based on this for the recycling industry won’t be sound. The financing decision will be altered as “considering forward contract in carbon emission will be a financial asset for the firm or intangible asset”. (CPA, 2008) Since both of this has different methods to be accounted for so it will affect the decision making and will alter the decisions taken by business units. The financial decision will also get affected as “there is no set methodology to calculate the cost involved in emissions”. (CPA, 2008) Using different methods give results. So inter firm comparison will get difficult. It will also become as firms may use methods to increase cost so that higher prices can be charged. This will largely affect the way decisions are taken and will create uncertainty. This will have a huge role in recycling industry. Different companies in the electronic recycling will develop their own methods. This might result in over or under estimating the cost. This will thereby put undue pressure on the recycling industry as they will look for methods to bring down the cost so that the feasibility of recycling rises. Firms planning process will change due to changes in financial decision. As firms “need to calculate their emission for the present year and future years so that planning will be based on it and the rate will be determined by demand and supply” (CPA, 2008) so the planning wont be sound. This will affect decision making as business might have planned in a different way but actual results come different thereby making the financial decision go wrong. This will have a bearing on the electronic recycling plant. They won’t be able to develop their future strategies. This will make it tough for them to prepare their future actions. The electronic industry not being able to estimate the future will have to change their financial decisions very quickly thereby affecting their plan and also making their decision go wrong. The financial decision will get altered as “calculating the discounting factor for the future emission to bring it into present value will be difficult”. (CPA, 2008) Business units looking for new projects like the recycling of metal to reduce emission will find it difficult to find the discount rate. As the carbon cap will decrease as years pass by and the rate will be determined by the market demand so making a forecast and deciding the feasibility of a project will be tough. This might hamper the important financial decisions a business takes. Presently it is viewed that “carbons will only be traded but there is a chance that it might be used as futures in the forward markets other financial instruments will emerge as more of carbon trading takes place”. (CPA, 2008) This will alter the way financial decisions are taken and usage of such instruments will make it difficult. It will also be seen that business find it difficult as certain instruments develop in the course of the period and accounting for those will alter the way financial decision are taken. The financial decision will be affected as “business will look for options to determine how the permits will be purchased”. (CPA, 2008) This will make business resort to different ways and techniques. It will also affect the decision as different business units will look for different ways to purchase the permit thereby altering the financial decisions. Business will also have to look into “cash flow and permitting from purchase of permits and the ways they will account it will create a problem for business”. (CPA, 2008) Since, there is no tested way and business units looking to use it have to ensure that the cash flow methods matches the methods they use will bring a change in the financial decision. It will alter the way business units plan their cash flows thereby affecting their business financial decisions. The financial decision will get affected as “business units will have to look for ways to see that proper training is provided to the staff and measures are taken to ensure that the data collection method for emission is sound”. (CPA, 2008) Business not adhering to the requirement of the training needs will find it difficult and including these changes will affect their financial aspect. This will affect the way recycling industry works. Shortage of training methods to ensure that the data collection process for the scheme will yield positive results for the recycling industry will be defeated. The industry won’t be able to determine correctly what steps need to be taken. Lack of proper guidelines will defeat the purpose based on which the electronic recycling plant is set. The major problem for business will be “the taxation aspect as different schemes will have different tax so business will have to identify various markets and pricing scenario to understand the aspect of taxation”. (CPA, 2007) This could alter the financial decision as business units prepare the tax structure early and ensure that they work in such a way those benefits can be taken. Since, carbon trading is a new concept and with no set standards and pricing mechanism business will find it difficult to match the taxation structure and this will alter their financial planning as certain new things might have to be accounted. The carbon reduction pollution scheme of trading in carbons will affect their “valuation of assets as impairment cost will have to be accounted for”. (CPA, 2008) This will change the financial decision as “suppose a business entity has considered using cash flows on expected basis so the business units will have to adjust it so that the impact on the scheme gets reduced and proper valuation is done”. (CPA, 2008) This will force many business units to change the valuation method during the course and this will have an affect on the financial planning. The electronic recycling industry will face the difficulty to value their inventories. Since emission will be valued at market price which will be determined by the market demand so the recycling industry will have to face this hurdle. Their valuation will be either over estimated or under. Since, the cash basis will also not be suitable for electronic recycling as their input cost will be the cost of emission and it will be difficult to find those as there are multiple ways. This will make affect the financial decision taken by the electronic recycling industry. The finance department will have to consider whether “the increase in cost is passed on to the customers partially or fully and the mechanism through which this will be encountered will have to make the management think upon”. (CPA, 2008) This mechanism for pricing will have a bearing on the decision taken by the business. It will make the business units to bring about a change in the financial decision. The financial department will also have to look “into corporate governance issue of how the scheme of carbon reduction pollution scheme works”. (CPA, 2008) This will make the financial decision to change as corporate governance will be looked as a major issue and to account for the changes it has necessary changes will have to be made in the financial decisions. Another major obstacle for financial department is “the changes in accounting policies and reporting”. (Wilson, 2009) Since, there are no policies which will work so the decision of the financial department will change as they need to include certain factors and at the same time ensure that reporting is true. Another change the financial aspect will see that “business units will have to surrender their permits before the year end to get a deduction in the income”. (Wilson, 2009) This will affect the way financial decision are taken as the department will try to see that steps are taken to get benefits using this method and working on this will make them alter their decision depending on the deductions the business will get. A change that will change the financial decision is “that there is no limit on the quantity of international permits allowed in Australia which will ensure that different financial instruments are derived” (Wilson, 2009) so business units will have to ensure that the financial decision gets altered as this will effect their growth prospect. The financial decisions will get affected as “the goods and service tax has not been clarified”. (BCA, 2008) This will put additional pressure on the financing decisions as the changes in the goods and service tax will affect the production rate and price to be charged which will in turn have a bearing on the financial decisions. The scheme hasn’t provided the details of “penalties regarding the scheme if the obligations are not met”. (KPMG, 2008) This will have heavy repercussions as companies not adhering to the scheme might have to pay huge penalties. This will effect the financial planning and decisions might have to be altered midway. This will effect the electronic recycling industry decision as they will be unable to judge the price to be set for the goods. Due to unavailability of information on the penalties due to difference in the process and timing will alter the decision taken by the recycling industry. The difference in “accounting practices within the same industry who are part of the Carbon Pollution Reduction Scheme will bring subtle differences as so specific guidelines has been developed which will make financial decisions come under scanner”. (KPMG, 2008) As the complexities increases the decision will prove futile. This will hinder the growth trajectory as business will look for ways to reduce the cost associated with it thereby using malpractices. Thus, we see that the introduction of Carbon Pollution Reduction Scheme will affect every segment. The most difficult will be the financial segment as every decision will be affected by a slight change. Business units will find it tough to accommodate those changes especially the electronic recycling industry. The crux for this industry lies in the cost emission has for the company and the ways through recycling it will be able to reduce it. The Carbon Pollution Reduction Scheme being unclear on various aspect will make it difficult for the management. The toughest part is the changes in taxation and accounting guidelines which will follow. Due to untested procedures and methods companies using it will also be in a dilemma. Also the use of trading will develop future tools for trading like hedging, forwards will affect the decision taken by a unit. The recycling industry needs to look at various avenues and ways through which they account the carbon trading cost for emission and develop a method which helps them price the recycled product. This will help to ensure that emissions level fall and will see the successful implementation of the scheme. References BCA, “British Council of Australia: Carbon Pollution Reduction Scheme Green Paper Submission”, 2008 CRPS, “Carbon Reduction Pollution Scheme”, Government of Australia Undertaking, 2010 retrieved on April 10, 2010 from http://sites.thomsonreuters.com.au/carbon/ CPA, “Carbon Pollution Reduction Scheme: What will be the business impact”, CPA Australia Ltd, 2008, retrieved on April 10, 2010 from http://www.cpaaustralia.com.au DAFF, “Carbon Reduction Pollution Scheme”, Department of Agriculture, Fisheries and Forestry, 2010, retrieved on April 10, 2010 from http://www.daff.gov.au/climatechange/carbon_pollution_reduction_scheme Gerard V, “Recycling in a carbon constrained environment”, Westwick-Farrow Pty Ltd, 2010 Garret P, “Automated e-waste recycling plant”, Westwick-Farrow Pty Ltd, 2008 KPMG, “Carbon Reduction Pollution Scheme”, Governments Green Paper, 2008 Mobile Phone Recycling, “Mobile Phone Recycling now easier in Canberra”, Westwick-Farrow Pty Ltd, 2008 Steel Recycling, “Steel can recycling at Coles Supermarket”, Westwick-Farrow Pty Ltd, 2005 Television Recycling, “Television and computer monitor recycling plant for Australia”, Westwick-Farrow Pty Ltd, 2009 Wilson C, “Carbon Pollution Reduction Scheme”, Business Community Intelligence, Issue 15, 2009 Read More