Stephen Penman

Columbia University

Accounting for Carbon

Monday, March 24, 2025 –05:15 – 06:30 PM (CET)

This session will be held as a hybrid event. To join in person, you can come to room O 131 (i.e., room 131 on level 1 of the east wing of the castle). To join virtually, please register in advance using this link. 

Seminar Abstract
This paper designs accounting that reports an entity’s progress in reducing carbon emissions (or not). In the same form as financial accounting, it reports a balance sheet where assets that reduce carbon are offset by liabilities for carbon emissions, with the difference reporting an entity’s net position in carbon and its progress in reaching milestones such as a net-zero carbon goal. The quasi-income statement reports the periodic emissions that add to the balance sheet’s net position. By recognizing assets in a balance sheet, an entity gets credit for efforts to reduce carbon that are realized only later, thus dealing with the timing problem between investing in carbon reduction and its effect. The responsibility accounting has attractive incentive and monitoring features. It provides a framework for pro forma (budgeting) of carbon reducing strategies, setting benchmarks against which actual results of strategies can be evaluated. It facilitates consolidation across entities to report on carbon for specific groups such as industries. Mirroring financial accounting, it facilitates “double materiality” assessments with the comparison of carbon metrics and financial metrics to evaluate trade-offs and “sustainability” more generally.

Speaker Bio
Stephen Penman is the George O. May Professor in the Graduate School of Business, Columbia University where he is also co-director of the Center for Excellence in Accounting and Security Analysis and director of the Masters Program in Accounting and Fundamental Analysis.

Professor Penman received a first-class honors degree in Commerce from the University of Queensland, Australia, and M.B.A. and Ph.D. degrees from the University of Chicago. His research deals with the valuation of equity and the role of accounting information in security analysis, and a number of his papers deal with accounting policy issues. He has published widely in finance and accounting journals and has conducted seminars on accounting and analysis for academic and professional audiences.

Stephen Penman is a founding editor of the Review of Accounting Studies and served as managing editor from 2002–2006. In 2019, Penman was elected to the Accounting Hall of Fame. In 2020, he was elected to the Australian Accounting Hall of Fame.

Admission information
The seminar is open to the public. To receive invitations for upcoming seminar talks, please sign up for the mailing list via this form.