In economic accounting, there’s an issue of double-counting when a transaction is counted twice. It can lead to overestimation of costs or value of goods, etc. In particular, if we sum up the value of intermediate goods transactions and then final goods transactions, we might double-count and overestimate the value of economic production. So second-hand transactions cannot be included in national income accounting.

In the workplace, a boss may claim credit of the work of his staff while leaving the staff to also take full credit of the work. The warm glow and glory of the work gets multiplied though it is probably an happy affair.

There are cases when it is not happy. When it comes to the environment, there’s a risk of double-counting of the carbon emission reductions or avoidance when more than one party claim the same reductions. If someone is generating their own electricity using solar, registered for renewable energy certificates and then sell it for a stream of payment so that someone else is able to claim the green attributes, then the one generating the solar power can no longer claim his carbon footprint is reduced by his own solar panels. The de-coupling of actual generation from claiming the attribute is a mechanism to improve efficiency of the market but creates the double-counting problem.

This problem has been talked about since a really long time ago but there is no clear consensus on how to solve it. The worry is that countries are counting the same reductions towards their nationally determined contributions to carbon reduction. When does this really happen? Perhaps when companies take the carbon reductions they have in another country either through purchase of green electricity or renewable energy certificates and then claiming to have achieved carbon reduction in their facilities in a particular country.

Technically it should not matter if that is somewhat registered nationally and there’s a cross-border trade in that contribution but it is probably too complex for the nation’s own accounting. So as long as we don’t allow companies to make such claims and to deal with all their emissions with local abatement, that should work. But it creates some really round-about issues which is inherently a little inefficient such as the actual, physical electricity import into Singapore through sub sea cables. That’s for another day.