The accounting firm says taxation issues need to be clarified and factored into the development of an ETS and not considered an afterthought.

The white paper Climate Change - Current accounting and tax issues for Australian business leaders says many companies are undertaking voluntary climate change abatement activities ahead of the introduction of the ETS in 2010 but are finding the tax treatments are unclear and their actions do not qualify for tax concessions.

"In KPMG's view, the tax system itself can play a significant role to promote and instigate changes to corporate behaviour by influencing responses to climate change. It can do this through the development of appropriate tax incentives and complementary reforms to the current tax system," the report reads.

Possible tax concessions include providing a 10% deduction in the first year for the capital cost of infrastructure projects such as geosequestration ventures or extending the concessional treatment for capital expenditure incurred on abatement activities through an expanded definition of eligible R&D expenditure or activities.

The report recommends companies also step up efforts to communicate their climate change strategies to the market.

"Companies who wish to benefit most from this environment will not only be acting now, but also ensuring their actions are recognised by the markets," the report says.

"We believe it is a strategic imperative that companies provide clear and robust communications to their stakeholders, and that those communications are subject to independent assurance."

KPMG says there are already a number of accounting tools available for companies to calculate and manage their greenhouse emissions.

One of these tools is the Greenhouse Gas Protocol (GHG Protocol) developed by the World Resources Institute and the World Business Council for Sustainable Development.

Another is the Carbon Disclosure Project (CDP), a group of institutional investors with assets under management of US$57 trillion ($66 trillion). Every year the CDP asks the world's largest companies to participate in a questionnaire about their climate change strategies, with 3000 companies invited to take part this year.

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