From: Environmental Finance
Published February 6, 2009 09:35 AM

Skills shortage poses "Enron risk" for carbon market

Environmental Finance, 5 February 2009 - The rapidly growing industry to manage greenhouse gas (GHG) emissions is suffering from a profound skills shortage, according to a global survey of those involved in the sector.

Moreover, that shortage of skilled GHG accounting and verification professionals exposes carbon markets to the sorts of scandals that brought down Enron, Tyco and Worldcom, the study says.

The study garnered 700 responses, predominantly from North America (59%) and Europe (13%). It was carried out by the Greenhouse Gas Management Institute, a US-based not-for-profit which offers training in GHG accounting, auditing and management, and by Sequence Staff, an executive recruitment firm based in California.

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Two-thirds of respondents said that their organisations had hired a GHG expert in the past six months, and a similar number said they expected to in the coming 12 months.

Almost 84% of respondents agreed that there is a shortage of qualified GHG staff and experts to undertake current needs and planned initiatives — and 87% expected that shortage to persist as new emissions trading schemes and other emission reduction initiatives are implemented.

This skill shortage opens companies to accounting risks similar to those which allowed Enron to defraud its investors and ultimately go bankrupt, many respondents believe. 
Some 30% believe there is a “high risk” that carbon markets will “suffer from problems similar to those symbolised by the Enron, WorldCom and Tyco accounting scandals”. A further 54% see a moderate risk.

The report suggests that the introduction of standard quality assurance mechanisms for carbon offsets, greater regulatory oversight and more rigorous disclosure would help to reduce these risks. But it adds: "Even once quality assurance mechanisms are in place, they will still be highly dependent on the ethics, competency, and availabil ity of qualified experts and professionals to implement them."

“In a field that is technical and open to accounting mistakes, it is crucial that there are trained professionals capable of supporting a cap-and-trade programme or carbon tax system,” said Michael Gillenwater, dean of the GHG Management Institute.

“Our survey indicates that experts believe there is a serious risk of carbon markets and policies being discredited in the future by scandals like we saw with Enron and in the mortgage markets. To avoid this, we will need professionals with the skills and ethics to account, audit, and manage GHG emissions,” he added.

This article is reproduced with kind permission of Environmental Finance magazine. 
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