4.3.1.     Initial recognition

The unpaid-carbon liability represents the theoretical value of an Unpaid-carbon Emission (either embedded or not) that has been emitted during the production, construction, demolition, or the operation of an asset, as well as during any other activities of the company as a result of its business operations. It thus represents the theoretical liability that a company would have to bear towards society for carbon usage to run its business if carbon had a price (externality).

An unpaid-carbon liability is always recognized when Unpaid-carbon Emission takes place and always represent the counter booking of either (i) an Embedded Carbon Asset(as per § 4.1.1) or (ii) a Carbon Expense in the Carbon Profit and Loss Statement (as per Carbon expenses recognition §7.1)

A distinction is made between:

• Unpaid-carbon liability used by the company; and
• Unpaid-carbon liability acquired by the company.

(a)        Unpaid-carbon liability used by the company

Regardless of the reason for the Unpaid-carbon Emission, an unpaid-carbon liability used by the company will be set up at the time of emission. The Unpaid-carbon liability used by the company, represent the value of the carbon that has been emitted by the company since the initiation of carbon accounting to produce its assets, or run its daily operations. It has an indefinite life and cannot be transferred to third party.  

For example, in case of a real estate business unpaid-carbon liability used by the company arises when a construction or refurbishment work is undergone on a building as well as during the operation of asset, for example as a result of heating, cooling or use of power by its occupants.

(b)        Unpaid-carbon liability acquired by the company

An unpaid-carbon liability acquired by the company is recognized when a company acquires an asset that already exists, in a transaction with a third party that does not in itself generate carbon emissions.

4.3.2    Initial Measurement

The initial measurement of the Unpaid-carbon Liability is always equal to the following counter booking:

• Unpaid-carbon liability acquired by the company.

In case of Unpaid Emission resulting from the any of the activities described in Embedded Carbon Asset § 4.1.1 (a) , the initial measurement represents the counter booking to the Embedded Carbon Asset at fair value which is booked in accordance with Embedded Carbon Asset § 4.1.2.1

• Unpaid-carbon Liability used by the company.

In case of Unpaid Emission resulting from the any of the activities described in Embedded Carbon Asset § 4.1.1 (b) or (c) the initial measurement represents the counter booking to the Embedded Carbon Asset as a result of the company’s activities which is booked in accordance with Embedded Carbon Asset § 4.1.2.2

In case of Unpaid Emission resulting from the operation of the company that does not lead to a carbon asset recognition, the Unpaid-carbon Liability used by the company booked is equal to the related Carbon Profit and Loss expenses §7.1

4.3.3     Subsequent Measurements

An Unpaid-carbon liability is not subsequently remeasured.

4.3.4     Derecognition

An Unpaid-carbon liability acquired by the company is derecognized when the related asset is transferred to a third party. The amount of Unpaid-carbon liability derecognized in this transaction is the counter booking to the derecognition of the Embedded Carbon Asset which is transferred.

An Unpaid-carbon liability used by the company is derecognized when a Green-Dividend is recognized. In that case, the amount of Unpaid-carbon liability used by the company which is derecognize is equant to the amount of Green-Dividend declared.