The capital budgeting process and the energy trilemma - A strategic conduct analysis

• Published in: The British accounting review Vol. 50; no. 5; pp. 481 - 496
• Main Authors: Warren, Liz, Jack, Lisa
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01.09.2018
• Subjects: Capital budgeting; Environmental regulation; Investment appraisal; Knowledgeable agency; Large combustion plant directive; Strategic conduct; Uncertainty; Uncertainty; Knowledgeable agency; Capital budgeting; Investment appraisal; Strategic conduct; Environmental regulation; Large combustion plant directive
• ISSN: 0890-8389; 1095-8347
• DOI: 10.1016/j.bar.2018.04.005

This paper examines capital budgeting and its role in the ‘energy trilemma’. The key focus is on the role of knowledgeable agency in the analysis of strategic conduct. In particular, this study demonstrates how accounting tools can be used by executive managers, who, whilst dominant in their own organisations, are themselves subordinate to government in the United Kingdom and at the European level. The strategic conduct of actors is examined in a narrative, theorised case study setting spanning an 11-year period from 2006 to 2017. The principal contribution to knowledge from this study is the extent to which strategic investment accounting has played a role in changing regulatory and government policy in a privatised industry. Government and regulators were forced to take the generators' concerns seriously, because the generators (based on knowledge derived from capital budgets) restricted their capital expenditure rather than mobilising their resources. The generators highlighted that not only was this a problem of environmental sustainability and price for consumers, but also one of long-term supply. They argued that the government had to address all aspects of the trilemma when creating policy.