COMMISSION STAFF WORKING PAPER

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT

Accompanying the document

COMMISSION REGULATION (EU) No …/.. of XXX on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council COMMISSION REGULATION (EU) No …/.. of XXX on the verification of greenhouse gas emission reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council

1. PROBLEM DEFINITION

Problem definition has already been carried out in the context of the impact assessment accompanying the proposal for Directive 2003/87/EC of the European Parliament and the Council (EU ETS), as amended by Directive 2009/29/EC of the European Parliament and the Council (EU ETS Review), which establishes a scheme for greenhouse gas emission allowance trading within the Union in order to promote reduction of greenhouse gas emissions in a cost-effective and economically efficient manner.

Monitoring and Reporting

Installation level monitoring and reporting is one of the pillars of the emissions trading system, as required by Article 14 of the EU ETS Directive (Directive 2003/87/EC). Decision 2007/589/EC establishing guidelines for the monitoring and reporting of greenhouse gas emissions (hereafter MRG) contains standard requirements for the monitoring and reporting of greenhouse gas emissions for installations covered under the ETS Directive.

The analysis carried out in the impact assessment for the preparation of the draft EU ETS Review Directive[1], identified a range of different implementations and applications of monitoring and reporting requirements by Member States and Competent Authorities (CAs). The overall conclusion was that there was not a level playing field across the Union in terms of monitoring and reporting, resulting in different levels of accuracy. The absence of a level playing field and the resulting inaccuracies could jeopardise the environmental integrity and the credibility of the system and be likely to incur higher costs than necessary.

Furthermore, evaluation projects carried out on behalf of the Commission and several Member States had identified a lack of transparency, of information on quality and of consistency as possibly leading to mistrust, as well as to additional costs, as the main challenges for the further development of the EU ETS compliance process. In addition, the resulting/ existing system was found to be weaker due to varying monitoring and reporting regulations and responsibilities in the Member States.

Verification and Accreditation of verifiers

In the context of the verification and accreditation of verifiers similar problems were identified[2]. The verification of monitoring reports is important, otherwise, operators underestimating their emissions would not only benefit (surrendering less allowances than required), but would also undermine the environmental integrity of the system. The EU ETS Directive and Decision 2007/589/EC establishing guidelines for the monitoring and reporting of greenhouse gas emissions (hereafter MRG) only regulated some fundamental requirements and aspects of the verification process. For the remainder it was left to individual Member States to develop specific national verification guidance. The accreditation of verifiers showed a similar diverse picture with Member States adopting a wide range of standards for the accreditation of verifiers. These inconsistencies resulted in the absence of a level playing field and an ineffective internal market, resulting in higher costs or undue obstacles, especially for verifiers willing to provide their services in different Member States.

The role of accreditation will be aimed at improving the quality level of verification of annual emission reports and at the same time ensuring overall harmonisation within the system as regulated by Article 15 of the EU ETS Directive. In this context the draft Accreditation and Verification Regulation refers to the existing broader legal framework for accreditation provided by Council Regulation 2008/765/EC of 9 July 2008, and in particular to Article 4.1 where it states that " Each Member State shall appoint a single national accreditation Body" and Article 13 where it says that “The Commission shall ensure that sectoral schemes identify the technical specifications necessary to meet the level of competence required…..”. Such a regulation was covered by an impact assessment too[3].

Subsidiarity principle

Union action, as set in the two proposed Regulations, is justified and necessary in respect of the subsidiarity principle for the following reasons:

The transnational nature of climate change and the need to create a robust, comparable and coherent system of monitoring, reporting and verifying of emissions within the Union is an important element in determining the need for a Union action. National actions alone would not ensure effective compliance with the requested commitments and would also not suffice for the fulfilment of the objectives referred to in Directive 2003/87/EC and the achievement of the targets set in that Directive. Therefore it has been necessary to create the enabling framework at Union level. The two proposed implementing regulations are necessary to establish harmonised reporting methodologies, to the extent possible, concentrating on the most cost-effective requirements while creating the appropriate conditions for mutual recognition. Improvements to the reporting efficiency are a key element for achieving the GHG emissions reductions targets. The reduction of GHG emissions requires coordination across a full range of instruments, the definition of common criteria and common timeliness of reporting to allow the fair consolidation of Member States data at Union level. The coordination of twenty seven different systems would entail more costs than the creation of a single harmonised system.

As the overarching commitments are made at the Union level, it is also more effective to develop the required reporting instruments as well as the conditions for verification and for the accreditation of verifiers. Action at Union level would produce clear benefits compared with action at the level of Member States notably by reducing the risks of gaps, loopholes, leakage or double counting. Furthermore, action at the Union level is the best way to ensure a level playing field, thus allowing verifiers to provide high quality service across the whole of the Union

Proportionality principle

The proposal complies with the proportionality principle for the following reasons:

The two proposed Regulations do not go beyond what is necessary in order to achieve the objectives of improving climate change data quality and ensuring independent and impartial verification by accredited and competent verifiers in line with the requirements set out in Articles 14 and 15 of Directive 2003/87/EC.

Furthermore, the proposals contribute to the Union's overall objective of reaching the Union's Kyoto greenhouse gas emission reduction targets, the Union targets enshrined in the Climate change and Energy package, the Copenhagen Accord and Decision 1/CP.16 ("Cancun Agreements").

The proposals foresee a set of rules for the implementation of monitoring and reporting on ETS GHG emissions as well as for a verification and accreditation system for verifiers that is fully in line, as regards practices and procedures, with the needs and capacities of the installations, operators and aircraft operators, including a consistent set of provisions in favor of smaller installations.

The present Impact Assessment has been revised in accordance with the Opinion of the Impact Assessment Board, and the recommendations therein. The Opinion was delivered following a written procedure on 22 July 2011 subsequent to DG Climate Action's written reply to the initial Impact Assessment Quality Checklist (IAQC) issued by the Impact Assessment Board on 19 July 2011. Proper responses have been given to the issues raised by the IAQC especially with respect to: using illustrative examples to the problem definitions; defining examples of "SMART" objectives; better defining the policy options; trying to assess the cost and benefits of proposed changes; better compare options with overview tables; having a separate section on subsidiarity and proportionality. The revised IA will be published in accordance with Regulation (EC) No 1049/2001 of the European Parliament and of the Council. No part of the Impact Assessment is subject to confidentiality.

2. MONITORING AND REPORTING REGULATION

2.1. General policy objectives

The main objectives were identified already in the impact assessment accompanying the proposal for Directive 2009/29/EC. These are:

· Ensuring a common approach with respect to monitoring and reporting in order to guarantee environmental effectiveness and integrity of the system and improving cost-effectiveness;

· Seeking higher consistency and transparency, which, in the long-run, can lead to savings for all stakeholders involved;

· Improving cost effectiveness of monitoring and reporting standards, since they are assumed to enhance the trust in the reports to the market and would thereby positively albeit indirectly affect the efficiency of the market.

2.2. Policy options

2.2.1. Uncertainty Assessments

There is no common understanding among Competent Authorities, operators and verifiers of how to assess the uncertainty related to the measurement of existing equipment or analyses. Option 1: Maintain the existing requirements of the MRG with respect to "Uncertainty Assessment". ("No policy change")

Option 2: Make current approaches considerably more pragmatic and comparable. The result will be to put more focus on other quality criteria, such as: correct installation of equipment, maintenance and calibration of instruments. ("Comprehensive policy change")

The M&R Regulation clarifies to what extent proof of uncertainty assessment should be submitted in the Monitoring Plan, how it should be assessed by the Competent Authority and what needs to be reported in the Annual Emission Report. Scope for more straightforward approaches is accommodated for smaller emitters and simple installations, building on the basis already formulated in the MRG. Option 2 is retained.

2.2.2. Harmonised interpretation of unreasonable costs

The definition in section 2 MRG on unreasonable cost, is interpreted differently by MS.

Option 1: Maintain the requirements of the old definition of the MRG. ("No policy change")

Option 2: Clarify how to calculate and compare cost and benefit of a monitoring methodology. Costs have to include economic depreciation period. Benefit must be calculated as improvement factor multiplied by reference price. In order to demonstrate how reasonable or unreasonable the costs of implementing a measure(s) to meet the highest tiers[4] would be, an Operator should evaluate the costs of implementing measures to improve metering, sampling and/or analytical accuracy against the benefits obtained. ("Limited policy change"). Option 2 is retained.

2.2.3. Transfer of CO2

The current provisions in the MRG can lead to leakage of CO2 from the system and to inconsistencies with national inventories, as many activities cannot be mirrored there. A common understanding of the implementation of the provisions on transferred CO2 does not exist.

Option 1: Maintain the requirements of Section 5.7 of the MRG. ("No policy change")

Option 2: Provision to subtract transferred CO2 from reported emissions will only be allowed in the case of transfers to carbon capture and storage activities (where longer term retention is assured and remains controlled within EU ETS). Option 2 is retained.

2.2.4. Treatment of solid and liquid biomass, including sustainability criteria

The EU-ETS Directive already establishes that 'biomass' has an emission factor of zero; therefore, to result in zero reportable CO2 emissions. Biomass for the EU ETS purposes is currently only defined in the MRG. This definition needs to be updated to be better aligned with a more common European definition of biomass and with renewable energy policy. In particular to prevent continued use of certain biofuels and bioliquids which are now considered unsustainable. The renewable energy directive 2009/28/EC (RED) established sustainability criteria for biofuels and bioliquids, where renewable energy through biomass use is economically supported. Three options have been considered.

Option 1: Retain the MRG definition. ("No policy change") There will be no consistency with the RED. This option will continue to favour a limited approach to biomass and jeopardise the integrity of EU ETS.

Option 2: Change to a RED compatible definition but without commitment to sustainability criteria. This approach will retain the 0 rating for biomass but it will not open up to the sustainability criteria. ("RED definition only") This option will answer only partially the consistency issue with the RED and continue to jeopardise the integrity of EU ETS.

Option 3: Change to a RED compatible definition and requirement for biofuels and bioliquids to meet RED sustainability criteria in order to qualify for zero rating. This option will satisfy the RED and address sustainability criteria for biofuels and bioliquids, for which EU criteria have been developed. Economic incentives supporting the sustainability criteria will have a positive effect lowering the economic and administrative impact ("RED definition plus sustainability criteria for biofuels, bioliquids").

Any other additional option that could be developed will anticipate possible future policy changes that will go far beyond the scope of the present implementing measure. In particular introducing in the EU ETS the use of sustainability criteria for solid biomass is not a viable option at this stage due to the fact that are no mandatory European wide sustainability criteria and most supply is on a small and highly dispersed scale. Option 3 is retained as the basis to organise Monitoring and Reporting.

2.2.5. Sampling Approach and Frequency

The MRG contains pragmatic indications for requirements on sampling and how to set the sampling frequency where the characteristics of materials are to be determined by analysis (e.g. the carbon content). However, in practice there is no common understanding among different MS on how to implement the sampling requirements.

Option 1: Confirm the pragmatic approach of the MRG. ("No policy change").

Option 2: Clarify the sampling requirements and assess applicability of standards. Specifically, the operator shall submit a sampling plan to the Competent Authority for approval for each fuel or material. This approach will be preferable in the medium-long term but unfortunately, at the moment, it is not possible develop it in the framework of the preparation of the present M&R Regulation. This is due to lack of knowledge and time constraints. Further work in this sense could be carried out within the forthcoming guidance material accompanying the implementation of the M&R Regulation. Option 1 is retained.

2.2.6. Reporting of Production Related Data

According to Article 14(2) of the ETD: “The regulation […] may also specify requirements for operators to report on emissions associated with the production of goods produced by energy intensive industries which may be subject to international competition. That regulation may also specify requirements for this information to be verified independently. Those requirements may include reporting on levels of emissions from electricity generation covered by the Community scheme associated with the production of such goods.”

Option 1: Do not specify the monitoring requirements in the M&R Regulation. ("No policy change"). Option 1 will maintain the focus of the regulation on GHG emissions confirming the environmental integrity and effectiveness of the system.

Option 2: Implement the production related data monitoring requirements. Develop respective reporting requirements for production data and power consumption. Develop respective definitions. ("Comprehensive change") The M&R Regulation is looking at GHG annual emissions. Monitoring and reporting of production related data will be better placed in the context of the so called "benchmarking" Decision[5]. Option 1 is retained.

2.2.7. Simplified Procedures and Requirements

Option 1: Maintain current simplified requirements of the MRG. ("No policy change") This option will not be sufficient in ensuring cost effectiveness for small emitters especially for its unequal implementation at the level of the Member States.

Option 2: Further simplified procedures and requirements will be developed. The main one is that the operator may submit a simplified monitoring plan to the Competent Authority. There will be an exemption concerning the improvement report for low emitting installations (less than 25,000 tonnes CO2 per year excluding biomass and before any subtraction of transferred CO2). The regulation will also make provision to allow simplified monitoring methodology for simple installations. This will determine lower costs for small emitters. Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

2.2.8. Application of the Improvement Principle

Option 1: Maintain the MRG current requirements on the application of the Improvement Principle. ("No policy change") This option results in uneven implementation of the improvement principle. In this way dynamic and qualitative development of the EU ETS monitoring and reporting will not be ensured.

Option 2: Enhance the application of the improvement principle introducing, as part of the verification process, clear proposals to account for recommendations for improvement of the monitoring methodology and outstanding non-conformities and misstatements. ("Limited change") Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

2.2.9. Information Technology

The legal basis for the use of IT / data exchange for MRV is the following text from the revised EU ETS Directive 2009/29/EC Article 14(4): “The Regulation referred to in paragraph 1 may include requirements on the use of automated systems and data exchange formats to harmonise communication on the monitoring plan, the annual emission report and the verification activities between the operator, the verifier and competent authorities.”

Option 1: No action is taken and the situation remains as it is in the MRG where an electronic protocol on the reporting of emissions has not been published. ("No policy change") This option will continue to promote an unequal approach to the use of IT in the framework of ETS MRV and it will hamper the process of comparability and exchange of best practices among operators.

Option 2: The Commission publishes standardised electronic templates or file format specifications for the purpose of submitting monitoring plans, annual emission reports and tonne-kilometre data report. The Commission activates appropriate quality control and procedures for the maintenance of the electronic templates and file format specifications it publishes. ("Limited policy change")

Best practices of IT systems and advanced templates with built-in, automated controls have the potential to substantially strengthen and improve the EU ETS compliance structure and practice.

Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

2.3. Assessment of cumulative impacts of preferred options

Ensuring a common approach in order to guarantee environmental effectiveness and integrity of the system and improving cost-effectiveness. Meeting this objective will lead to higher distributional equity among installations across the EU. The selected policy options should all contribute to less discretion for Competent Authorities in considering monitoring and reporting plans and therefore greater equity in the way operators are treated and requirements are imposed upon them.

Seeking higher consistency and transparency, which, in the long-run, can lead to savings for all the stakeholders involved. Under the status quo option for monitoring, inconsistent approaches developed under the MRG will continue to advantage installations in some Member States over similar installations in other Member States, potentially affecting their competitiveness. The broad range of approaches to permitting and compliance within different Member States has the potential to cause competitiveness concerns and a corresponding loss of confidence in the EU ETS. The favoured options should all provide greater certainty of requirements, leaving Member States, operators and verifiers less leeway for variations.

The simplification of the existing provisions will further enhance the transparency of the system.

Improving cost effectiveness of monitoring and reporting standards, since they are assumed to enhance the trust in the reports to the market and would thereby positively albeit indirectly affect the efficiency of the market. The selected policy options will deliver greater cost effectiveness and trust in the system by clarifying requirements associated with currently known areas of ambiguity and by confirming, where reasonable, allowed simplifications.

Finally we have to state that costs have been considered in isolation. Accumulated cost consideration would not be scientifically sound and would not particularly add value as we are looking to justify selection of a particular option within standalone operational objectives.

With respect to the 9 M&R topics below 5 categories have been developed in relation to perceived effects on necessary man-power and financial cost resources. The categories were validated through selected interviews with representatives from Competent Authorities, Verifiers and ETS Compliance Forum Secretariat.

I. Significant reduction in costs and necessary resources.

II. Some reduction in costs and necessary resources

III. No expected change in costs and necessary resources

IV. Some increase in costs and necessary resources

V. Significant increase in costs and necessary resources

Overview table

Policy options || No Policy Change || Change || Costs/savings

Uncertainty Assessments || Maintain MRG || Pragmatic change * || Category I

Unreasonable costs || Maintain MRG || Clarify how to calculate * || Category II

Transfer of CO2 || Maintain MRG || Regulate transfer * || Category III

Solid and liquid biomass || Maintain MRG || Update biomass definition including sustainability criteria* || Category IV

Sampling Approach and Frequency || Maintain MRG* || Clarify the sampling requirements || Category III - Category IV

Reporting production related data || Maintain MRG * || Add production data requirements || Category III

Simplified Procedures and Requirements || Maintain MRG || Further simplification* || Categories II and I

Application of the Improvement Principle || Maintain MRG || Enhance improvement principle * || Category II

Information Technology || No action taken || IT/data exchange for ETS MRV * || Categories II and I

* Preferred options

3. ACCREDITATION AND VERIFICATION REGULATION

3.1. General policy objectives

The specific objectives for verification and accreditation were as well previously identified in the impact assessment accompanying the proposal for Directive 2009/29/EC. These are: establishing a consistent and comparable level of verification and accreditation; harmonising internal market for verification and accreditation services; improving cost-effectiveness.

The MRG lays down the basic approach for verification activities in line with the criteria for verification defined in Annex V of the EU ETS Directive. Based on the steps outlined in Annex V, combined with relevant auditing experience in other domains, especially in financial auditing, the European cooperation for Accreditation (EA) has developed detailed guidance on the assessment and accreditation of verifiers and verification bodies for EU ETS (EA document EA 6/03). In 2007 this guidance was formally recognised in the new MRG and now forms the basis for EU ETS verification and accreditation in most MS.

3.2. Policy options

3.2.1. Accreditation and certification of Verifiers

Article 15 of Directive 2009/29/EC gives a clear indication with respect to accreditation of verifiers "the Commission shall adopt a regulation for […] the accreditation and supervision of verifiers."

Option 1: Confirmation of verifiers is limited solely to Accreditation Bodies. Option 1 is the option explicitly mentioned in Article 15 of Directive 2009/29/EC. Option 1 is fully in line with the original requirements set-up by the IA of Directive 2009/29.

Option 2: Confirmation of verifiers is extended also to national certification bodies to accommodate the historic arrangements affecting a small number of Member States. This option complies fully with Article 15 of Directive 2009/29/EC and with Article 5.2 of Council Regulation 765/2008/EC, the framework legislation related to accreditation. This will improve the system opening up to certification of verifiers, as natural persons, a parallel and equivalent approach to accreditation. Option 2 is retained.

3.2.2. Mutual Recognition of Verifiers

Option 1: Mutual recognition of verifiers is not linked to accreditation. This option is not taking into account the requirements set-up by the Directive 2009/29/EC: "The Commission […] shall specify conditions […] for mutual recognition

Option 2: Mutual recognition of verifiers is taking place if they are accredited by Accreditation Bodies or certified by national authorities who have been subject to successful peer evaluation. According to the Council Regulation, 2008/765/EC verifiers who have been accredited by a successfully peer reviewed Accreditation Body must be mutually accepted across all Member States. The Accreditation Bodies develops feedback loops on performance of verifiers. This option will facilitate free movement of verifiers of comparable level of quality. In contrast to Option 1, this option will promote overall harmonisation with respect to the quality of verifiers and the verifications carried out.

Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

3.2.3. Peer Evaluation of Accreditation Bodies

The Council Regulation 2008/765 (AR) requires all national Accreditation Bodies to subject themselves to peer evaluation as organised by the body recognized under Article 14 of the Regulation. The body which is currently recognised is the EA.[6]

Option 1: The Peer Evaluation exercise of Accreditation Bodies is an exclusive matter of the EA. The EA is by default running peer evaluation exercises among its members on a regular basis. Leaving it to its routine exercise could risk not taking into account relevant input from Competent Authorities on specific requirements related to the EU ETS.

Option 2: Specific requirements under the EU ETS should be developed within the Peer Evaluation exercise of Accreditation Bodies. This option will allow the EA to implement more appropriate peer evaluation criteria in accordance with EU ETS requirements Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

3.2.4. On-going Supervision of Verifiers and Corrective Measures

Option 1: Competent Authorities should be entitled to evaluate the quality of audits and to make further investigation if underperforming verifiers are detected. This option could result in overlapping responsibilities between the different institutions involved. This will affect the overall efficiency of the system.

Option 2: Supervision of verifiers is limited to Accreditation Bodies. The standard ISO 17011, which requires Accreditation Bodies to carry out surveillance, leaves room for interpretation on the frequency of surveillance and how surveillance is carried out. The lack of input from CAs could result in failure to secure useful additional insight from them and insufficient quality of verification. This option will not address sufficiently the effectiveness of the M&R Regulation due to the fact that Accreditation Bodies are not completely aware about the EU ETS.

Option 3: With respect to supervision of verifiers, an effective system for exchange of views between the Accreditation Bodies and the Competent Authorities should be established. Therefore, the A&V Regulation will set requirements for information exchange between CAs and Accreditation Bodies. This option will improve communication on transparency and status of accreditation of verifiers, setting clear requirements for all Member States. It will also maximise useful exchange of information between Accreditation Bodies and CAs in a cost efficient manner and without duplication of roles. Option 3 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 3 is retained.

3.2.5. Risk Analysis

Option 1: Maintain the generic requirements stated in the MRG Section 10.4.2 (b). ("No policy change") An effective risk analysis exercise is important for the overall planning of the verification exercise. A risk analysis process that does not properly take into account strategic analysis and the risk assessment of the operator could result in either a flawed verification opinion or an incomplete verification exercise requiring need to repeat part of the process and additional costs for the operator.

Option 2: Develop more specific requirements related to the strategic analysis, and to the risk assessment of the operator including recommendations for improvement. This option will set clarified requirements for both the verifier's Strategic Analysis and Risk Analysis in line with EA 6/03. It will describe and how the Strategic Analysis and Risk Analysis relate and feed into the subsequently required verification activities (controls and data testing). This option is already used by a majority of Member States with an acceptable level of impact. Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

3.2.6. Simplified Procedures and Requirements

Option 1: Member States may allow verifiers to use simplified verification plans and procedures for operators and aircraft operators if certain conditions to be confirmed (by the Commission) are met. This option will offer considerable scope for reduction of verification costs. It provides possibility for allowing greater waive of site visits under certain conditions for small and simple installations (still based on risk analysis). Option 1 is fully in line with the original requirements set-up by the IA of Directive 2009/29.

Option 2: Simplified verification is not allowed. This option will continue to impose significant and disproportionate costs on small emitters, resulting in a considerable low efficiency of the system and no real added-value. Option 1 is retained.

3.2.7. Single Verifier Issue and Independent Technical Review

Option 1: Single verifiers (as physical person) are allowed to perform verification and no Independent Technical Review is required. This option will result in lowering considerably the effectiveness of the verification exercise.

Option 2: Single verifiers (as legal person or natural person) are allowed to perform verification and an Independent Technical Review is required. Regulation 765/2008 covers the accreditation of conformity assessment bodies. Conformity assessment body means a body that performs conformity assessment activities including calibration, testing, certification and inspection.[7] This seems to imply that persons performing conformity assessment activities are not allowed under the new accreditation framework. However, if single verifier were to organize themselves as a body by becoming a legal entity, common understanding could lead to the interpretation that a conformity assessment body under the accreditation regulation may also be an individual. Section 3.3.3 of ISO 14065 even explicitly mentions that a verification body can be a person.

Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

3.2.8. Content of the Verification Report

Option 1: Maintain the generic requirements stated in the MRG Section 10.4.2 (e). ("No policy change"). This option results in lack of consistencies and non transparencies with respect to the verification exercise. This will have an impact on the effectiveness and efficiency of the system as well as on the mutual recognition of accredited verifiers

Option 2: Develop a more detailed list of requirements related to the content of the Verification Report. A set of common requirements is developed in the A&V Regulation.

The main elements and additional information will be related to site visits, verification team, technical reviewer, confirmation of principles, list of fuels and recommendations for improvement. The impact will be a consistent content of report. In the beginning, it is likely to result in a slight increase in verification costs, but these will be balanced by greater transparency of the verification exercise. There will also allow more insight at CA level on verification quality.

Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained.

3.3. Assessment of cumulative impacts of preferred options

Consistent and comparable level of verification and accreditation: The A&V Regulation will provide a much higher level of certainty regarding the uniformity of implementation at Member State level. A common approach to verification will enhance transparency, clarify requirements and should improve the consistency with which verification is performed across the EU. This in turn will improve the environmental integrity of the System and trust in the verification process itself.

Harmonised internal market for verification and accreditation services: The A&V Regulation will impose direct requirements on relevant individuals (verifiers, verification bodies, Accreditation Bodies, Competent Authorities, etc) without being interpreted at least 27 times and applied differently in at least 27 national legislations.

More consistent accreditation will reduce Member States concerns that verifiers in some Member States do not meet the same standards as those accredited by their own accreditation body. This will in turn free up the market and allow for verifiers to operator throughout the EU (subject to language requirements).

Improving cost-effectiveness: The development of one set of EU wide rules on verification and accreditation will have significant cost savings for Member States after an initial period of adjustment. Cost savings for Competent Authorities may come from the regulation applying directly to the verifier and other parties named. There would be no need to amend national legislation if the regulation is amended since it applies directly. There would also be no delays in achieving improved harmonisation of requirements since they would apply immediately.

With respect to the 8 A&V topics below 5 categories have been developed in relation to perceived effects on necessary man-power and financial cost resources. The categories were validated through selected interviews with representatives from Competent Authorities, Verifiers and ETS Compliance Forum Secretariat.

I. Significant reduction in costs and necessary resources.

II. Some reduction in costs and necessary resources

III. No expected change in costs and necessary resources

IV. Some increase in costs and necessary resources

V. Significant increase in costs and necessary resources

Due to the new approach related to accreditation and verification a “real baseline” cannot be mentioned in most of the options of the following table.

Overview table

Policy options || Option 1 || Option 2 || Costs/savings

Accreditation and certification of verifiers || Confirmation limited to Accreditation Bodies || Extended also to national certification bodies* || Category IV

Mutual recognition of verifiers || Mutual recognition not linked to accreditation || Mutual recognition linked to accreditation * || Category II

Peer evaluation of AB || Peer evaluation only by EA || Specific criteria for ETS * || Category III

Supervision of verifiers || CAs only responsible || Effective exchange of information * || Category II – Category I

Risk analysis || Maintain MRG || Develop specific requirements * || Category I

Simplified Procedures and Requirements || Simplified verification is allowed * || Simplified verification is not allowed || Categories II and I

Single verifier and independent review || Single verifiers (as physical person) no review || Single verifiers (as legal person ) and review * || Category II and I

Content verification report || Maintain MRG || More specific requirements * || Categories III and II

* Preferred options

4. CONCLUSION

1. All the proposed measures are in line with the requirements set out in the Directive 2009/29 and foreseen in its Impact Assessment, as well as in the Council Regulation 2008/765 on accreditation and related Impact Assessment. Those pieces of legislation predefine the objectives to be met in the proposed two regulations under scrutiny.

2. All the retained options, strictly linked to the M&R and A&V elements of the EU ETS, are tailored to the capacity of the installations concerned including specific provisions for small emitters, in order to maintain a proper cost-efficiency.

3. The need to enhance transparency, comparability, coherence and continuity, deriving from requirements as set at international level, as well as to introducing an element of simplification and greater user-friendliness of the legal texts has strongly guided the choice of options.

4. As such costs are very difficult to identify separately from the completion of the activity itself. Moreover frequency, which is a variable allowing flexibility, is itself predetermined by the calendar of reporting under the EU ETS. It is mostly to be underlined that the present regulations aim at improving the system without unduly extending the obligations for reporting, keeping them, thus, within a pre-established acceptable framework.

[1] COM/2008/16 of 23.01.2008 , Commission Staff Working Document accompanying document to the proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the EU greenhouse gas emission allowance trading system, pp. 62-3, leading to Directive 2009/29/EC.

[2] COM/2008/16 of 23.01.2008 , p. 71

[3] SEC(2007) 174

[4] The tier system provides a set of building blocks to determine the appropriate monitoring methodology for each installation. The tier system defines a hierarchy of different ambition levels for activity data, emission factors and oxidation or conversion factors. These levels are the so-called “tiers”. The higher the number of the tier chosen, the higher the level of accuracy / the more site-specific the monitoring system becomes.

[5] 2011/278/EU: Commission Decision of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council

[6] Article 10 (1) Proposed accreditation regulation.

[7] Article 2 (16) AR