Accounting
Paper proposes blockchain to track Scope 3 carbon emissions
Accounting researchers say they have uncovered a theoretically possible solution to simplify the tracking of Scope 3 greenhouse gas emissions up and down the value chain using
Under certain regulations in the European Union, California and other jurisdictions, entities need to report direct emissions from a company’s facilities and vehicles (Scope 1), indirect emissions from the energy used to run its operations (Scope 2), and emissions from upstream suppliers and downstream end users that buy a company’s products (Scope 3), which are generally understood to be the most complex and difficult to track. The accounting researchers—from Auburn University and John Carroll University—believe they have found a technological solution that, theoretically, could make this process easier.
The theoretical solution, outlined in the Accounting Review paper
Bartek Sadowski/Bloomberg
More specifically, each component of a tangible asset would have an associated NFT minted by a self-executing smart contract once that component enters the value chain as a blockchain input. This NFT is assigned data showing Scope 1 emissions associated with creating the component; a separate NFT is then minted for the Scope 2 emissions generated to create the component. As these components move through the physical value chain, the corresponding NFTs move between the same firms on the blockchain. When components are combined in manufacturing, smart contracts would “burn” the associated NFTs and mint new ones that represent the updated in-process assets and their aggregated emissions to that point in the value chain. Each one of these updates is recorded onto the blockchain ledger, which the researchers said would be collectively maintained and approved by consortium members.
“This system creates a near real-time cradle-to-grave provenance for tangible assets and their associated emissions as they move through the value chain and allows all emissions to be counted and claimed. Furthermore, all value chain participants can use this system to determine the total emissions associated with a product and their classification as Scope 1, 2, or 3 from their reporting vantage point,” said the paper.
Their system also has the ability to turn on and off different levels of privacy to protect each company’s proprietary information. Participants also can view just the upstream and downstream Scope 3 emissions by categories such as purchased goods or services, transportation and distribution and end-of-life treatment for sold products. When their system is fully built out, according to the paper, any company with authorized access can query the blockchain ledger to see the value of each of their products’ total emissions along all three scopes.
This is in contrast to current practices, which is generally seen as a complex and arduous affair that relies heavily on manual processes.
“In the process of conducting our research, we interviewed one [individual] who works for a large retail company, and he manually enters data from about 4,000 vendors into a spreadsheet and then performs calculations,” said Jenkins, noting that this method is time-intensive and could result in data entry errors and the double-counting of emissions,” said Greg Jenkins, one of the study’s authors.
The paper, however, did not say this technique was a slam dunk. It noted there are many practical hurdles to overcome before such a system could be fully implemented, as well as many risks that must be accounted for. While technologically feasible, experts the researchers ran the concept past pointed to, one, a need for governance and coordination, two, a lack of trust in the blockchain, and, three, blockchain latency. This is on top of other anticipated difficulties such as the challenge of obtaining accurate emissions data to enter into the blockchain in the first place, differences in reporting calendars potentially disrupting coordination, potential exposure of confidential information, and other risks that the technology is meant to address. However, the researchers believe that these challenges can be overcome, and that it will be worth it once they are.
“Notwithstanding the need for future research and refinement, our proposed solution and the prototype we demonstrate can improve the tracking and reporting of value chain emissions. If implemented, it would enable a cradle-tograve provenance for emissions tracking. With its ‘hand-off’ of emissions between firms, the ecosystem allows for tracking emissions as they move between parties, thus alleviating concerns about having to use secondary data sources to estimate upstream and downstream Scope 3 emissions. It would also alleviate concerns around the timing of emissions reporting, by making emissions data available to all value chain participants in near real-time. Finally, the complete and linear provenance of emissions recorded in a verified and secure ledger should help provide a path to higher levels of assurance on emissions disclosures (i.e., reasonable rather than limited assurance),” said the paper’s conclusion.
The emissions tracking technology is protected by a U.S.
While blockchains have the potential to be very energy intensive themselves, thus creating significant greenhouse gases, Mark Sheldon, another of the study’s authors, noted that specific applications do not necessarily have to be.
“Blockchains use different consensus mechanisms to ensure the various nodes (computers) agree on updates to the underlying ledger. Proof-of-stake, an option to use with our solution, is very energy efficient when compared to proof-of-work which is the one everyone hears about with Bitcoin. In fact, the Ethereum blockchain recently changed from proof-of-work to proof-of-stake and reports to be 99% more energy efficient. There are other factors that also come into play with our specific model, but this is the big one for energy efficiency,” he said in an email.
The House unanimously passed four bipartisan bills Tuesday concerning taxes and the Internal Revenue Service that were all
- H.R. 1152, the Electronic Filing and Payment Fairness Act, sponsored by Rep. Darin LaHood, R-Illinois, Suzan Delbene, D-Washington, Randy Feenstra, R-Iowa, Brad Schneider, D-Illinois, Brian Fitzpatrick, R-Pennsylvania and Jimmy Panetta, D-California. The bill would apply the “mailbox rule” to electronically submitted tax returns and payments to allow the IRS to record payments and documents submitted to the IRS electronically on the day the payments or documents are submitted instead of when they are received or reviewed at a later date. The AICPA believes this would offer clarity and simplification to the payment and document submission process while protecting taxpayers from undue penalties.
- H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, sponsored by Rep. Randy Feenstra, R-Iowa, and Brad Schneider, D-Illinois, which would require notices describing a mathematical or clerical error to be made in plain language, and require the Treasury to provide additional procedures for requesting an abatement of a math or clerical error adjustment, including by telephone or in person, among other provisions.
- H.R. 517, the Filing Relief for Natural Disasters Act, sponsored by Rep. David Kustoff, R-Tennessee, and Judy Chu, D-California. The process of receiving tax relief from the IRS following a natural disaster typically must follow a federal disaster declaration, which can often come weeks after a state disaster declaration. The bill would provide the IRS with authority to grant tax relief once the governor of a state declares either a disaster or a state of emergency and expand the mandatory federal filing extension under Section 7508(d) of the Tax Code from 60 days to 120 days, providing taxpayers with more time to file tax returns after a disaster.
- H.R. 1491, the Disaster related Extension of Deadlines Act, sponsored by Rep. Gregory Murphy, R-North Carolina, and Jimmy Panetta, D-California, would extend the amount of time disaster victims would have to file for a tax refund or credit (i.e., the lookback period) by the amount of time afforded pursuant to a disaster relief postponement period for taxpayers affected by major disasters. This legislative solution would place taxpayers on equal footing as taxpayers not impacted by major disasters and would afford greater clarity and certainty to taxpayers and tax practitioners regarding this lookback period.
“The AICPA has long supported these proposals and will continue to work to advance comprehensive legislation that enhances IRS operations and improves the taxpayer experience,” said Melanie Lauridsen, vice president of tax policy and advocacy for the AICPA, in a statement Tuesday. “We are pleased to work closely with each of these Representatives on common-sense reforms that will benefit taxpayers, tax practitioners and tax administration and we’re encouraged by their passage in the House. We look forward to continuing to work with Congress to improve the taxpayer experience.”
The bills were also included in a recent Senate
The House also passed two other tax-related bills Tuesday that weren’t endorsed in the recent AICPA letter.
- H.R. 1155, Recovery of Stolen Checks Act, sponsored by Rep. Nicole Malliotakis, R-New York, would require the IRS to create a process for taxpayers to request a replacement via direct deposit for a stolen paper check. If a check is determined to be stolen or lost, and not cashed, a taxpayer will receive a replacement check once the original check is cancelled, but many taxpayers are having their replacement checks stolen as well. Taxpayers who have a check stolen are then unable to request that the replacement check be sent via direct deposit. The bill would require the Treasury to establish processes and procedures under which taxpayers, who are otherwise eligible to receive an amount by paper check in replacement of a lost or stolen paper check, may elect to receive such amount by direct deposit.
- H.R. 997, National Taxpayer Advocate Enhancement Act, sponsored by Rep. Randy Feenstra, R-Iowa, would prevent IRS interference with National Taxpayer Advocate personnel by granting the NTA responsibility for its attorneys. In advocating for taxpayer rights, the National Taxpayer Advocate often requires independent legal advice. But currently, the staff members hired by the National Taxpayer Advocate are accountable to internal IRS counsel, not the Taxpayer Advocate, creating a potential conflict of interest to the detriment of taxpayers. The bill would authorize the National Taxpayer Advocate to hire attorneys who report directly to her, helping establish independence from the IRS.
House Ways and Means Committee Chairman Jason Smith, R-Missouri, applauded the bipartisan House passage of the various bills, which had been unanimously passed by the committee.
“President Trump was elected on the promise of finally making the government work better for working people,” Smith said in a statement Tuesday. “This bipartisan legislation helps fulfill that mandate and makes improvements to tax administration that will make it easier for the American people to file their taxes. Those who are rebuilding after a natural disaster particularly need help filing taxes, which is why this set of bills lightens the load for taxpayers in communities struck by a hurricane, tornado or some other disaster. With Tax Day just a few days away, we must look for common-sense, bipartisan ways to make filing taxes less of a hassle.”
By streamlining tasks such as risk assessment, control testing, and reporting, gen AI has the potential to increase efficiency across the entire SOX lifecycle.
ADP jobs report March 2025:
Stocks making the biggest moves premarket: Tesla, Newsmax, nCino and more
How to spring clean your finances
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Economics5 days agoPCE inflation February 2025:
-
Personal Finance7 days agoStudent loans could be managed by the Small Business Administration
-
Economics6 days agoYoung Americans are losing confidence in economy, and it shows online
-
Economics7 days agoWhite House denials over the Signal snafu ring hollow
-
Accounting5 days agoIRS sets new initiative with banks to uncover fraud
-
Personal Finance7 days agoMillions of student loan borrowers past-due after bills restarted: Fed
-
Economics5 days agoConsumer sentiment worsens as inflation fears grow, University of Michigan survey shows
-
Economics6 days agoTexas troopers are in more and more lethal car chases