COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT
Date: 2012-06-21
Institutions: European Commission
Subjects: access to information, administrative check, atmospheric pollutant, audit, disclosure of information, environmental monitoring, environmental statistics, greenhouse gas, reduction of gas emissions, technical standard














EUR-Lex - 52012SC0177 - EN











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52012SC0177

COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT /* SWD/2012/0177 final */









COMMISSION STAFF WORKING PAPER
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

 TABLE
OF CONTENTS
1          Procedural issues and
consultation of interested Parties                               p.4
1.1       Introduction and policy
context                                                                       
p.4
1.2       Services involved and external
expertise                                                        p.5
1.3       Stakeholder consultation                                                                                 
p.6
1.4       Online consultation                                                                                         
 p.7
2          General approach                                                                                            
p.8
2.1       Problem definition                                                                                            
p.8
2.1.1    Monitoring and Reporting                                                                     
          p.8
2.1.2    Accreditation and Verification                                                                        
p.10
2.2       Simplification                                                                                        
p.10
2.3       Cost assumptions                                                                                             
p.10
2.3.1    Administrative burden                                                                                     
p.13
3          Monitoring and Reporting
Regulation                                                            p.14
3.1       General policy objectives                                                                                 p.14
3.2       Specific and operational
objectives                                                                 
p.14
3.3       Policy options                                                                                                   
p.16
3.3.1    Analysis and examples                                                                                    
p.17
3.3.2    Uncertainty Assessments                                                                                
p.19
3.3.3     Harmonised interpretation of
unreasonable costs                             p.20
3.3.4    Transfer of CO2                                                                                               
p.21
3.3.5    Treatment of solid and liquid
biomass, including sustainability criteria   p.22
3.3.6    Sampling Approach and Frequency                                                    
p.24
3.3.7    Reporting of production Related
Data                                                            p.25
3.3.8    Simplified Procedures and
Requirements                                                       p.26 
3.3.9    Application of the Improvement
Principle                                                       p.27
3.3.10  Information Technology                                                                                  
p.28
3.4       Compliance of favoured options
with objectives                                             p.30
4          Accreditation and
Verification Regulation                                                     
p.32
4.1       General policy objectives                                                                                 p.32
4.2       Specific and operational
objectives                                                                 
p.32
4.3       Policy options                                                                                                   
p.34
4.3.1    Analysis and examples                                                                                    
p.35
4.3.2    Accreditation of Verifiers                                                                                
p.36
4.3.3    Mutual Recognition of Verifiers                                                                     
p.37
4.3.4    Peer Evaluation of Accreditation
Bodies                                                         p.39
4.3.5    On-going Supervision of
Verifiers and Corrective Measures                        p.40
4.3.6    Risk Analysis                                                                                                   
p.42
4.3.7    Simplified Procedures and
Requirements                                                       p.43
4.3.8    Single Verifier Issue and
Independent Technical Review                              p.44
4.3.9    Content of the Verification
Report                                                                  p.46
4.4       Compliance of favoured options
with objectives                                             p.48
5          Conclusion                                                                                                        
p.50
Annex A: Minutes of meetings of IASG
Annex B: Summary results of online
public stakeholder consultation on public
consultation on a Regulation on Monitoring and Reporting of greenhouse gases
and a Regulation on Accreditation of verifiers and on Verification of annual
emission reports.
Annex C: Glossary
1.         Procedural issues and consultation of interested Parties
1.1.      Introduction and policy
context
Directive 2003/87/EC (EU ETS), as amended
by Directive 2009/29/EC (EU ETS Review), 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. Under the scheme installations must surrender one emission allowance or
project credit for each tonne of CO2 equivalent emitted.
Accurate monitoring and reporting of
emissions by companies, as well as third party verification of emission
reports, are of fundamental importance for the integrity of the carbon market
established by the EU ETS Directive. In the context of the wider harmonisation
in a number of areas as part of the ETS review the co-legislators have also
decided to substantially boost the degree of harmonisation in these areas by
means of mandating the Commission to adopt the following two regulations in
this area by end 2011:

 a regulation for the monitoring and reporting of emissions
     (M&R Regulation),
 a regulation for the verification of emission reports produced
     by companies and the accreditation and supervision of qualified verifiers
     (A&V Regulation).

Before the start of the third trading
period of the EU ETS in 2013, monitoring and reporting rules are specified in
Commission Guidelines (MRG), Decision No 2007/589/EC. The M&R Regulation
shall be based on the principles for monitoring and reporting set out in Annex
IV of Directive 2003/87/EC. This means that the main change with the adoption
of a Regulation is that the current M&R architecture is transformed with
limited changes from (non-binding) Guidelines into a (binding) Regulation. 
When it comes to accreditation, at this
stage there are not even guidelines in place and current practice is determined
by a mix of self-initiatives by existing accreditation bodies and national
rules. With respect to verification the reference is just a small section in
the MRG and a document developed by the European Cooperation for Accreditation,
the EA 6/03. The regulation for the verification of emission reports has to be
based on the principles set out in Annex V of the ETS Directive for the
accreditation and supervision of verifiers (A&V Regulation). The A&V Regulation
shall specify conditions for the accreditation and withdrawal of accreditation,
for mutual recognition and peer evaluation of accreditation bodies, as
appropriate.
The impacts, notably on costs, resulting
from the adoption of these two regulations, therefore need to be assessed in
the light of the fact that the co-legislators provided for more harmonised
rules in these areas and largely any additional costs arising from these
regulations originate from the reduced flexibility to divert from the existing
architecture encoded in the form of Commission Guidelines when transformed into
a Regulation. 
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

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 accreditation
     and verification 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.
1.2.      Services involved and external
expertise
This impact assessment was prepared by DG
CLIMA. From November 2010 on, DG CLIMA has held regular meetings with Member
States' experts to discuss the scope and content of the proposed regulations. 
In drafting this impact assessment DG CLIMA also relied on analyses that were
carried out by the consultants' consortia responsible for assisting on the
M&R Regulation and on the A&V Regulation and on previous evaluations of
the EU ETS Compliance Cycle[1]. Furthermore DG CLIMA
relied as well on the extensive expertise of the European cooperation for
Accreditation (EA). In addition, on 14 April 2011 and 9 June 2011, two
inter-service meetings were held to consult relevant Commission services
(notably ENV, ENTR, ENER, SG, LS …) on this draft impact assessment. 
1.3.      Stakeholder consultation
Starting in the autumn of 2010, DG CLIMA,
assisted by external consultants, has had regular meetings (bilateral and in
the form of technical working groups) with experts and representatives from the
Member States, industry and NGO representatives to discuss the scope and
content of the proposed regulations. These meetings were specifically designed
to discuss the relevant options presented in the successive drafts of the
regulations. This exercise has been very instrumental in defining those options
that would have broad support among the Member States and the industry.
On 3 (M&R Regulation) and 4 May
(A&V Regulation) DG CLIMA also organised two workshops with all relevant
experts and stakeholders from the Member States, industry and NGOs on each of
the two draft regulations.
Table 1 -  Process leading to
stakeholder consultation
   || M&R Regulation || A&V Regulation 
 Technical preparations ||   With respect to the technical preparation of the M&R Regulation DG CLIMA held five meetings of a technical working group composed by its consultants and interested technical experts coming from the European cooperation for Accreditation, environment/energy agencies; national and regional emissions trading authorities and national environment ministries. The meetings took place in the following dates: 15 November 2010; 13 December; 19 January 2011, 15 March, 18 May. In addition the main outcomes of the technical discussions we presented and reported to a Working Group of the Climate Change Committee in the following dates: 16 November 2010; 14 December; 20 January 2011; 16 March; 14 April; 19 May.   ||   With respect to the technical preparation of the A&V Regulation DG CLIMA held six meetings of a technical working group composed by its consultants and interested technical experts coming from the European cooperation for Accreditation, environment/energy agencies; emissions trading authorities and environment ministries. The meetings took place in the following dates: 15 November 2010; 13 December; 26 January 2011, 22 February, 22 March, 20 May. In addition the main outcomes of the technical discussions we presented and reported to a Working Group of the Climate Change Committee in the following dates: 16 November 2010; 14 December; 20 January 2011; 16 March; 14 April; 19 May.   
 Stakeholder workshop ||   On 3 May 2011 the M&R Regulation was presented and discussed in a stakeholder workshop in Brussels. The workshop was attended by more than 80 people. All the major industry associations covered by the EU ETS were attending the event. Few Member States participated to the meeting as well. The overall reaction to the draft was very positive. No real substance points were raised by the different industry representatives with respect to the content of the draft M&R Regulation. The regulation was welcomed by most of the participants as a clear tool for fostering harmonisation and building up a common level playing field among the different Member States.   || On 4 May 2011 the A&V Regulation was presented and discussed in a stakeholder workshop in Brussels. As for M&R the event was attended by more than 80 people, among which all the major industry associations were represented together with few Member States. In addition to that several verifiers and national Accreditation Bodies participated in the workshop. Again, no substantial problems were raised with respect to the content of the draft regulation and it was welcomed as an important clarification and harmonisation tool for the accreditation and verification market. 
1.4       Online consultation
From 15 April to 10 June 2011, DG CLIMA
also carried out an online stakeholder consultation. This stakeholder event was
specifically designed to allow the broader public that had not been involved in
the regular consultations the possibility to express their views on the
proposed regulations as well as more generally to raise public awareness on
Commission activities in those sectors of activities. 
The on-line questionnaire was accessible
through DG CLIMA's and the "Your Voice" website. The questionnaire
was made available in German, French and English languages and are was taken to
inform relevant stakeholders.
All the standards set in the “General
principles and minimum standards for consultation of interested parties by the
Commission” have been met. In particular, the public consultation was:

 open to all stakeholders for eight weeks and
     announced by a press release;
 accessible via the single access point on the
     internet; and
 followed-up with a summary of the responses.

The data collected through the online
stakeholder consultation suggest a keen interest of EU citizens in climate
change information and support the further improvement of reporting in this
area, in particular with regard to the comprehensiveness and transparency of
the information collected.
132 contributions were received, the
majority of which (56%) were from private companies and business associations.
Contributions originated in 11 out of the 27 Member States while 10
contributions from outside the EU were also received. 56 out of the 132 respondents
declared that they are very familiar with the MRG and 49 declared that they
were familiar. 85 of them have been "directly" (36) or
"indirectly" (49) involved in its implementation. 
Overall, respondents found that the two new
regulations could respond better to the need of having a more coordinate and
harmonised approach to monitoring, reporting and verification in the EU ETS.
The main issues raised were related to calls for even more coordination at the
national level to further reduce gaps and inconsistencies in the market. It
also underlined the on-going necessity to find the right balance between
accuracy of monitoring and reporting and cost efficiency. The issue of
promoting biofuels was specifically mentioned by the responses from the
aviation sector. The need of having a strong co-operation among national
Accreditation Bodies and Competent Authorities was stressed by the majority of
the responses to the Accreditation and Verification section. 75% of respondents
agreed to need of having emissions verified by accredited verifiers.
A summary of the opinions expressed is
presented in Annex I. The results of the consultation are also made available
on the Commission's website[2].
2.         General
Approach      
2.1.      Problem definition
The problem definition has already been
carried out in the context of the impact assessment accompanying the proposal
for Directive 2009/29/EC. 
2.1.1.   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). The MRG Decision 2007/589/EC
contains standard requirements for the monitoring and reporting of greenhouse
gas emissions for activities covered under the ETS  Directive. 
 The EU ETS: Some key factors   •         Worldwide largest emissions trading scheme started on 1 January 2005. It covers 50 % of EU CO2 emissions   •         It covers > 11,500 fixed installations covering CO2 emissions from electricity generators, heat & steam production, mineral oil refineries, ferrous metals production & processing, cement, lime glass, bricks and ceramics, pulp & paper, ammonia, chemicals, aluminium   •         From 2012 > 4,000 aviation operators (monitoring from 2010)   
Installations are required to have an
emission permit and an approved monitoring plan and to monitor and report their
emissions data during the year. The emissions data in the annual emissions
report must be verified by the 31st of March each year by an
accredited verification body. Once verified, operators must surrender the
equivalent number of allowances by the 30th of April. Furthermore,
according to Article 21 of the EU ETS Directive, Member States are required to
report to the Commission on the implementation of the system annually. This
annual procedure of monitoring, reporting and verification and all processes
connected to these activities is referred to as the “compliance cycle”. 
Table 2 - The Annual EU ETS Compliance
Cycle
With respect to the problem definition
regarding monitoring and reporting, the analysis carried out in the impact
assessment for the preparation of the draft EU ETS Review Directive[3],
identified further opportunity to reduce variation between Member States in the
way monitoring and reporting requirements are being implemented and, in doing
so, to promote an even more level playing field with correspondingly improved
environmental integrity and the credibility of the system. Greater
harmonisation and commonality of systems is also regarded as a way to reduce costs.
Other evaluation projects carried out on
behalf of the Commission and several Member States have identified further
opportunities to improve the transparency of information including in relation
to the quality and consistency of data, to lead to even more trust in the
scheme. As a result, it is relevant that the cost impact of the proposed
Regulations should be analysed by also taking into consideration the costs
associated with no action and maintaining of the status-quo. 
2.1.2.   Accreditation and Verification
of verifiers
With respect to problem definition related
to accreditation of verifiers and verification of annual emissions reports
similar opportunities to the situation related to monitoring and reporting have
been identified[4]. The verification of
emission reports by companies covered by the EU ETS is important to confirm
confidence that the system continues to work honestly and effectively, in
particular that emissions are not being underestimated and too few allowances
surrendered which would clearly undermine the environmental integrity of the EU
ETS. The EU ETS Directive and Decision 2007/589/EC establishing guidelines for
the monitoring and reporting of greenhouse gas emissions (hereafter MRG) only
sets out the fundamental requirements of the verification process. Further to
this Member States have developed their own specific national verification
guidance.  Most but not all have followed EU ETS guidance published by the
European cooperation for Accreditation. Similar flexibility exists in relation
to Member State approaches to the accreditation of verifiers. Opportunity
exists to reduce differences in Member State requirements and approaches,
thereby further promoting confidence in the level playing field and reducing
barriers regarding the internal market, costs and to verifiers wishing to
provide their services in different Member States.
The role of accreditation also provides
opportunity to underpin the quality of verification of annual emission reports
and at the same time ensure 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[5].
Moreover with respect to accreditation the
draft A&V Regulation refers to two specific standards ISO 14065 for
verifiers and ISO 17011 for accreditation. The latter one related to
accreditation is a European Harmonised Standard since 2004, where the first one
is in the process of becoming a European Harmonised Standard possibly by spring
2012. Both standards are widely used by practitioners since many years. ISO
17011 is also at the basis of the general accreditation framework developed by
Council Regulation 765/2008/EC. Within this context it has been logical to
refer to these two existing standards complementing them with the necessary
specific measures relevant for the EU ETS. In this way both the articles and
the annexes of the Regulation refer only in general terms to existing
standardisation measures. Therefore, Commission services use in the best
possible and efficient way existing standardisation measures not duplicating or
overlapping already existing practices. 
2.2.      Simplification
One of the main drivers in the
policy-making of both regulations has been further simplification of EU ETS
monitoring and reporting on one side and introduction of clear and
user-friendly rules for accreditation and verification on the other. These
elements are very factual.
For example, the present MRG, following a
positive vote in the Climate Change Committee of December 2010, is a 184 pages
document consisting of twenty-four sectoral annexes. The final draft of the
M&R Regulation is, at the moment, a 120 page document inclusive of nine
annexes. Great effort has been put into making the draft regulation more
user-friendly in order to provide a clearer structure and considerably reduce
repetition. 
The final draft of the A&V Regulation
is expected to be of ca. 90 pages, inclusive of four annexes. Specific care has
been put into making a document with clear definition of specific
responsibilities for the different players. 
In both regulations, special attention is
given to clarifying existing grey areas with respect to EU ETS MRV that at the
moment are resulting in inefficient and time-consuming discussions between
operators and Competent Authorities. With respect to verification, the clear
procedures that are resulting from the draft A&V Regulation will bring much
more control to the costs that verifiers are imposing to operators.
In this way both documents can be easily
used by Competent Authorities, Operators, Verifiers and Accreditation Bodies
resulting, with respect to the present system, in an overall saving of money,
time and resources.
Particularly in the context of
simplification, objectives have been defined as much as possible taking into account
the SMART criteria (Specific, Measurable, Achievable, Realistic,
Time-dependent). This is especially relevant for small emitters in the
framework of the EU ETS.
This approach has not always been possible
to implement due sometimes to a lack of data or to the completely new approach
that was about to be developed. However some non-exhaustive are the following
ones.

 With respect to the M&R Regulation a positive example of
     using SMART objectives are the issues "harmonised interpretation of
     unreasonable costs" (3.3.3) where an effort has been made in the
     sense of defining a common guidance to the interpretation of the concept
     "unreasonable cost" also linked to economic depreciation.
     Another example is related to “simplified procedures and requirements” (3.3.8),
     where simplified monitoring plan templates have been developed. On the
     other hand, SMART objectives are very difficult to define in the case for
     example of “application of the improvement principle” where a common
     approach, apart from few single selected cases, has still to be developed.
 With respect to the A&V Regulation examples related to
     SMART objectives could be identified in all the issues related to the
     "Establishment of the accreditation requirements", mainly 4.3.2;
     4.3.3; 4.3.4 and 4.3.5. In fact all these specific operational objectives
     are framed in the overall implementation of Council Regulation 765/2008/EC
     and are related to establishing an effective partnership with the EA
     (European cooperation for Accreditation). The same can be said with
     respect to "simplified procedures and requirements" (4.3.7) for
     verification, due to the fact that specific simplified verification plans
     and procedures have to be developed for small emitters and simple
     installations. In the case of the A&V Regulation there also cases
     where SMART objectives are not completely possible, especially regarding
     the measurement side, for example with respect to "Risk
     Analysis" (4.3.6) and its link to strategic analysis.

The defined objectives for the M&R
Regulation (under 3.2) and for the A&V Regulation (under 4.2) are as well
considering aspects related to competitiveness and to social and health issues.
This is specifically due to the fact that the monitoring and reporting of
emissions and the accreditation of verifiers and the verification of annual
emissions reports are important tools within the EU ETS, that is by definition
a market based instrument.
2.3.      Cost assumptions 
The aim of minimising costs for Competent
Authorities and operators has always been one of the main elements of the EU
ETS MRV. This is particularly important for the making of the M&R and
A&V Regulations. A full-fledged quantitative assessment of costs of the
different policy options cannot be carried out due to the difficulty of
collecting information at national level. Equally difficult is the
quantification of costs due to the nature of constant consultation between
operators and Competent Authorities and the dynamic element of passing through
different tiers for the monitoring and reporting. 
However, two elements are to be underlined
as drivers for the approach chosen:

 On one hand, cost minimisation has always been taken as a
     fundament for the option chosen though dealt through a qualitative
     assessment. This is particularly relevant in the clarification of the
     existing "grey areas" for example in relation to uncertainty and
     to sampling and testing. Clearer and more transparent requirements are
     important for the economic planning of operators. Moreover the overall
     system behind monitoring, reporting, accreditation and verification is
     organised in such a way to ensure a governance system in which legislation
     and policy implementation play an important role following the
     "better regulation" approach. 
 On the other hand, it is assumed that the two regulations are
     intrinsically part of the implementation of the EU ETS and covered as such
     by Recital 17 of Directive 2009/29/EC that states that "Member States
     will need to make substantial investments to reduce the carbon intensity
     of their economies by 2020."

In fact, as a result, the provisions of the
two regulations are to be seen also as fundaments within a wider process
intended to create a sort of Open Method of coordination further developing EU
ETS compliance. In that regard, the already existing Compliance Forum composed
of all the major national and local ETS Competent Authorities and the
Commission and established in 2008, appears to be the ideal organisation for
continuing to share best practices, to finding common solutions and to
minimising costs wherever possible. It is meant to meet on a yearly basis and
has confirmed over the past four years that both the quality of the attendance
and of the outcomes are likely to help deliver important contributions for the
reasonable and accurate management of the provisions under discussion including
on costs  The Compliance Forum will also play an important role in the next
months in the implementation of the two draft regulations because it will be
active together with the Commission in developing, starting from September
2011, quite a number of  guidance materials, Frequently Asked Questions, user
manuals. 
Finally with respect to verification costs,
original 2006 estimates[6] that see the average cost
in the order of € 800 and € 1000, are still justified. Equally the average
verification time for the more than 11,500 installations is confirmed as a 3-4
days process. At the moment 200 Verification Bodies are estimated to be active
in the EU ETS system with a total number of verifiers estimated in the order of
1200 individuals. 
Furthermore it is important to consider
three different things:

 The aim of minimising costs on competent authorities and
     operators is at the fore-front of thinking in selecting all the options
     proposed in the IA.
 A complete quantitative assessment of costs concerning the
     different policy options is not realistic due to the difficulty of
     collecting truly representative information at the national level and the
     fact that many options have yet to be put into practice.  Therefore, a
     semi-quantitative approach has been applied, aimed at erring on the side
     of conservative estimate (under-estimation of savings and over-estimation
     of additional costs as appropriate for the recommended options)
 Independent views on costs associated with the various proposed
     options for each operational objective have been drawn from authoritative
     sources representative of competent authority, verifier and general EU ETS
     interests.

Finally, unless it is explicitly mentioned,
most of the costs have to be considered as per annum and per installations.
2.3.1.   Administrative
burden 
There is
a potential for increasing the cost efficiency with respect to administrative
procedures. In particular there exists in all Member States a clear potential
for the reduction of effort in the notification of changes and the subsequent
approval of changes and updating of permits and monitoring plans. There are two
types of measures that would reduce the administrative burdens to the Competent
Authorities:
–      A first measure would be to install IT systems supporting data
delivery (e.g. reporting in web-based application), review of data (e.g.
through automated checks) and data management (easier updating of documents,
storage and tracking of data). Currently at least 10 Member States[7]
have such IT systems and even with these systems some – yet smaller – room for
improvement exists. An IT based common reporting format could have the
potential to successfully achieve the objectives and ensure better
comparability of the reports. This will help to increase transparency and to
identify inconsistencies. IT based reporting formats may incur high one-off
costs, but in the longer term may turn out to incur considerably less costs.
–      The second measure to reduce the administrative burden is to
redesign, streamline and simplify administrative procedures. This is as well
another objective of the two draft Regulations. 
Moreover, some
of the installation GHG permits and M&R Plans may need to be reviewed and
modified to deal with additional requirements in any new regulations not
currently implemented by MSs. "Assuming permit variations cost
operators (or in some cases the CA) around € 600 each (costs
involved in applying for the variation, checking the application and reissuing
the permit) then the costs of reissuing permits could potentially reach up to a
maximum € 6 million,"[8]
Specifically
with respect to the A&V Regulation, the overall cost to verifications
should be more uniform. In administrative terms the regulation will means
potential costs for Member States when the legal basis will require them to
change already established regulations and processes. However, given that many
of the existing organisations, especially active in accreditation, already play
a significant role in many of the Member States, costs of formalising their
involvement should not be great. For operators the costs are likely to be
relatively minor since many verifiers already adhere to relevant ISO standards
and to guidance developed by the European Cooperation for Accreditation (EA).
Therefore the overall costs of verifications are not likely to change
significantly.
With that
respect it is worthwhile to recall here that the Impact Assessment accompanying
the revision of the ETS Directive mentioned general estimates on cost
assumptions at the level of Member States with respect to implementation of new
legislation on verification in the case of adapting the existing MRG to the new
framework dictated by the revision of the EU ETS and the starting of the third
trading period in 2013. "Assuming it takes roughly around 30 to 40 working days for a MS
to make changes to existing legislation/guidance, this would equate to around
800 to 1000 days (€0.5-€0.6m) across the 27 MS". [9] These costs will be avoided
in the case of having a Regulation in place which will imply no changes in
terms of adapting national legislation.
On the other hand the Member States having to
deal with a regulation will have to face costs at national level for repealing
legislation, "assuming it takes 10 to 20 working days to repeal legislation
(as opposed to amending or developing it), this would equate to between 250 -
500
days over the 27 MS (around €0.15 to €0.3
million). Therefore total costs to the 27 MS and CAs of this option would be in
the vicinity of € 0.3 to 1m."[10]
3.         Monitoring
and Reporting Regulation
3.1.      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 leads in the
medium term 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.
3.2.      Specific
and operational objectives
Enhance the
current monitoring requirements
Operational objectives:
§        
Uncertainty assessment;
§        
Harmonise
interpretation of unreasonable costs;
§        
Transfer of CO2;
§        
Biomass sustainability criteria.
Enhance the
current reporting requirements
Operational objectives
§        
Production related data;
§        
Sampling approach and frequency
§        
Simplified procedures and requirements;
§        
Application of the improvement principle;
§        
Information technology.
(i)                 
All of the operational
objectives covered seek to address the issues discussed in section 2.1 (problem
definition) of the IA. All of the proposed options can be considered to address
these problems as well as all of the general policy objectives set for M&R
in section 3.1., such as:
1.a reduction of variation between Member States policies on
monitoring and reporting;
2.     
building up an even more
level playing field; 
3.     
reaching improved environmental
integrity.
This will result in greater harmonisation and commonality
of systems to reduce costs and achieve transparency in relation to quality and
consistency of data to provide even more trust in EU ETS. 
Table 3 –
Links between problems and operational objectives and options
   || OPERATIONAL OBJECTIVES 
 Monitory requirements || Reporting requirements 
 GENERAL POLICY PROBLEMS || Reducing variation reduction between MSs policies || Uncertainty assessment, that results in reaching a common understanding  of how to assess the uncertainty related to the measurement of existing equipment or analyses || With respect to sampling approach and frequency the link with the identified problems is guaranteed through a common understanding is ensured in this field of reporting. The fulfilment of this general policy objective will be respected also through the contribute of the developing of an effective information technology within the monitoring requirements. 
 Improving level playing field || Harmonised interpretation of unreasonable costs, with respect to the relation between operators and Competent Authorities, will result in better predictability for the operator and longer term planning. || The link with simplified procedures and requirements is exemplified by the fact of having common procedures developed among different national and regional competent authorities. 
 Improving environmental integrity || The transfer of CO2 objective avoids leakages and loophole in the system, at the same time ensuring a level playing field among the Member States. Regarding the definition of biomass and the possible mentioning and introduction of the biomass sustainability criteria this will contribute as well to address the problem, since will ensure that biofuels and bioliquids are indeed complying with criteria linked to sustainable development. || Production related data where reporting of allocation-related data will not improve the environmental integrity of the system in fact this will result in an additional burden for operators not necessarily improving transparency. In relation to the operational objective of application of the improvement principle this respond to the specific problem of reaching improved environmental integrity activating a dynamic mechanism of continuous improvement following the verifier’s recommendations. 
The operational objectives covered represent the known
relevant issues, based on stakeholder feedback, and were established following the
on-line consultation. Omissions would beg a question as to why an issue deemed
relevant in these related circumstances is then ignored in the IA. The number
of options concerning each operational objective has usually been restricted to
the minimum of two; the nearest thing to a status quo baseline position and
then next most applicable or optimal alternative. Section 2.1 of the IA points
out the relevance of considering the status quo position.   The regular
references to particular options (the selected ones) being "fully in line
with the original requirements set-up by the IA of Directive 2009/29/EU"
should be read as fully compliant with the general policy objectives specified
for the M&R Regulation.  
(ii)        The options for operational objectives
considered the most significant likely impact are already preceded by more
lengthy introductory text to establish the particular concern. 
(iii)       The options discussed all propose to meet the
stated requirements of Article 14 of Directive 2003/87/EC (and its
corresponding Annex IV).    
3.3.      Policy options
Policy options are presented for the operational
objectives outlined in section 3.2. In most areas there exist only two generic
policy options. This is due to the fact that in practice existing rules are
"elevated" to the status of a regulation and hence the two options at
hand are continuation of the status quo with differing ways of implementing
existing "soft" law across 27 Member States and a harmonised and
binding rule. Assessing the impacts in a great degree of detail is impossible
due to data constraints of gaining a complete picture how the current
guidelines are implemented.
The range of presented policy options is
proportionate to an already well understood position based on:

 The requirements for monitoring and reporting (MR) and for accreditation
     and verification (AV), set out in Articles 14 and 15 respectively of
     Directive 2003/87/EC;
 Six years of operational stakeholder experience with the EU
     ETS, including in relation to the requirements of Commission Decision No 2007/589/EC
     (the EU ETS M&R Guidelines) and its predecessor;
 Information reported in conclusion to Commission reviews
     concerning implementation of EU ETS MRVA and compliance cycle requirements
     (most pertinently last year's Support to the Commission for the Review of
     Permits, Monitoring Plans and Verification Reports in the EU ETS at the
     level of Member States for the 2008-2009 Compliance Cycle), ref: section
     1.2 of the IA;
 Technical Working Group stakeholder (including other relevant
     Commission DG) consultation during the drafting of the two Regulations and
     feedback from the wider technical consultations held in conjunction with
     the Stakeholder Workshops  (M&R Regulation on 3 May, A&V
     Regulation 4 May), ref: section 1.3 of the IA;
 Response to the on-line consultation, ref: section 1.4 of the
     IA. 

Section 3.3 of the IA explains that only
two options are generally presented for each of the identified operational
objectives.  Especially for the M&R Regulation this reflects on the one
hand the current requirement under Commission Decision No 2007/589/EC (the status
quo baseline) and on the other the next most applicable or optimal
alternative.  The current requirement provides the logical starting point
bearing in mind the already established maturity of EU ETS.  The alternative
options are entirely based on items (1) to (5) above. 
 Absence of an equivalent to Commission
Decision No 2007/598/EC for A&V makes selection of a baseline position less
clear-cut, but it has nevertheless been possible to present one option to
reflect the majority position and at least one other to represent the next most
applicable or optimal alternative.  Again, this provides a logical approach to
the starting point and alternatives. Options are entirely based on items (i) to
(v) above.
No options favoured by the majority of
stakeholders are discarded, as this would tend to exacerbate potential problems
regarding achievement of greater consistency, harmonisation and
cost-effectiveness. 
3.3.1.   Analysis and examples
(i)         The number of small scale
emitters in the EU ETS is around 50% with respect to the 11,500 fixed
installations and 80% with respect to the 4,000 aircraft operators. 
(ii)        “Gold-plating” examples from
Member States' practices that may lead to excessive costs for operators.
 Example provided by Germany:   Review of Annual Emissions Reports. According to national legislation, the regional authorities have to check the verified reports for completeness and randomly for correctness of content. As random checks are not further defined, the share of reports which are checked and the specifics of checking depend on the individual federal state. As a result, enormous differences exist in the checking practise between the different states.   
(iii)       Respect to simplification
potential, in order to support cost-effectiveness with smaller emitters,
Section 16 of the MRG details a number of simplified requirements for
installations which emit less than 25kt of CO2 annually.
All Member States use the requirements of section 16 of the MRG except for the
provision allowing Member States to waive site visits (for more information see section 3.4.4). Four
Member States  provide simplified monitoring plan templates for small emitters or
simple installations (e.g. using only natural gas). Further potential for
reduction of efforts was found in the development of simplified monitoring
procedures and templates, not only for small emitters but also for
installations requiring only simple monitoring processes.
A best practice exists in Denmark where
installations of category A and B, using only standard fuels and having no
process emissions, can use simplified monitoring, reporting and verification
templates as well as simplified procedures. This does not only include standard
procedures for monitoring activity data - the installations usually monitor
their emissions at the main gate of the installation and get their activity
data from the gas supplier - but also the use of up-to-date and accurate
standard factors for the NCV and EF. Simplified verification approaches and
partially automatically generated emission reports are part of these
procedures. 
Approaches for simplified procedures can,
while not reducing the quality of compliance, considerably reduce costs both on
the side of the operator as well as on the side of the Competent Authority.
(iv)       The current legislation of  the
2007 Monitoring and Reporting Guidelines allows for a list of applications
(e.g. drinks production, grain disinfestations, underground storage of CO2)
to deduct from an installation's total CO2 emission the CO2
transferred out the installation as long as this is reflected in the national
inventory.
The requirement to mirror a transfer of CO2
in the report on the national inventory is generally difficult to implement, as
the IPCC 1996 GL and 2000 GPG do not list emission categories to report such a
transfer. The IPCC 2006 GL clearly state that captured CO2 used
downstream, should be accounted for at the originating process, unless the
inventory clearly foresees that these emissions should be accounted for
somewhere else (e.g. at product use[11]).
The current MRG approach can thus lead to a situation in which the transferred
emissions are neither accounted for under the EU ETS nor under the national
inventory.
Generally, those Member States that have
not been confronted with the transfer of CO2 and/or have not
prepared for this, do not have a specific position under which conditions they
would allow such transfers. Most Member States were aware that in the future,
installations for which a transfer might apply (e.g. ammonia production), will
be in the system from 2013 onwards and that developing a “transfer” strategy
was therefore required. These Member States stated that EU-guidance on this
issue would be highly appreciated. The current wording
of the MRG provisions can lead to CO2 leaving the EU ETS, which is
then unaccounted for. While at the moment, there is still some flexibility with
national inventories, a common approach will be necessary when the IPCC 2006 Guidelines
come into effect. This is generally scheduled for 2013 for the EU, although a
final decision has not yet been made.
With the following text specific examples
are given for each of the issues taken into account:

 Uncertainty assessment;
 Harmonised interpretation of unreasonable costs;
 Transfer of CO2
 Treatment of solid and liquid biomass, including sustainability
     criteria
 Sampling approach and frequency

6.      Production
related data
7.      Simplified
procedures and requirements

 Application of the improvement principle
 Information technology

3.3.2.   Uncertainty Assessments
Member States have
interpreted the requirements on uncertainty assessment in a different way. Fifteen
Member States require information on how the uncertainty thresholds will be met
and how the uncertainty is assessed. Member States have used very different
approaches in doing so. With regards to the uncertainty connected to quantity
measurements of the source stream, approaches include using calibration
certificates as proof, or requiring a full blown uncertainty assessment. Some Member
States use a combination of approaches. 
As the fallback
approach, usually a full blown uncertainty assessment is required. The quality
of the uncertainty assessments in the Monitoring Plan differs, making it
difficult for a verifier to check whether indeed the overall uncertainty is
being met. Most of the Member States using the fall back approach stated the
need for additional guidance on the uncertainty assessment.
There is no common
understanding of how to assess the uncertainty related to the measurement of
existing equipment or analyses. Sometimes uncertainty is unknown (e.g. where a
standard factor is applied). Sometimes no evidence can be obtained (e.g. where
supplier invoices are used). Sometimes uncertainty should not be expressed as
percentage (analysis standards, weighbridges). There is no common understanding
on what kind of proof on the uncertainty assessment should be submitted with
the Monitoring Plan and how it should be assessed.
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. In specific terms, provided that
measurement instruments are installed, maintained and calibrated appropriately
for their use specifications, the
maximum permissible errors (MPEs) specified for the measurement
instrument – or if lower, the uncertainty obtained by calibration – can be used
as uncertainty value relevant for activity data tiers.  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. 
With respect to Option 2 clear savings are
identified in the order of 70% for operators M&R and for facilitating
present very complex discussions with Competent Authority.  This particular
claim can be substantiated on the basis of the likely numbers of installations
that will be able to benefit from the more straightforward approaches to
demonstrating that they meet uncertainty requirements.  The intention will be
to alleviate the burden on all smaller emitting installations (Category As and
possibly some Category Bs and Cs as well).  Bearing in mind the approximate
breakdown of installations is Category A: ≤50,000 tCO2
emission per year (ca. 80% of installations); Category B: >50,000 tCO2
≤ 500,000 tCO2 emission per year (ca. 15% installations); and
Category C: ≥ 500,000 tCO2 emission per year (ca. 5%
installations), an estimated saving of 70% may be regarded as conservative and
therefore the option clearly attractive from a cost-perspective without small
if any risk to data quality.  Adoption of Option 2 will also bring savings in
the verification process in the order of 10 – 20 %. Overall the adoption of
Option 2 is perceived to be Category I.
 Option 1 is not a viable option, because it will perpetuate the current inconsistencies and associated inefficiencies, and reduce confidence in the comparability and adequacy of monitoring and reporting data. Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained. 
3.3.3.   Harmonised Interpretation of Unreasonable
Costs 
The definition of
unreasonable costs, which are laid down in section 2(4)(a) of the MRG, has been
interpreted and implemented differently between Member States. Some Member States[12]
use the IMPEL/ETSG guidance note on unreasonable costs, or have adapted this
approach. Other Member States are assessing unreasonable costs on a case-by-case
basis. In four Member States the highest tier approach is not applied to the
letter as they are of the opinion that the minimum tiers, in Table 1 of Annex I
of the MRG, are the required tiers. This is partly due to the fact that the
interrelation between section 5.2 of the MRG and Table 1 of the MRG is found to
be rather ambiguous and unclear. Several Member States stated that they had
real difficulty in convincing operators to apply the highest tier from the
beginning of the second trading period on.
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[13] 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"). This clarification shall make
it possible for the Operator to evaluate the costs of implementing measures.
This will improve metering, sampling and/or analytical accuracy in proportion
to the benefits obtained. 
With respect to Option 2 its adoption will
result in better predictability for the operator and longer term planning.
Savings will be in the order of Category II. This will be something in the
order of 20 – 30 % savings for operators.
 Option 1 will continue to favour different interpretations to the concept of unreasonable cost. Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained. 
3.3.4.   Transfer of CO2
A common understanding of the
implementation of the provisions on transferred CO2 does not exist. The
current wording of the MRG provisions can lead to CO2 leaving the EU
ETS, which is then unaccounted for. While at the moment, there is still some
flexibility with national inventories, a common approach will be necessary when
the IPCC 2006 Guidelines come into effect. This is generally scheduled for 2013
for the EU, although a final decision has not yet been made.
In 2008, only fifteen Member States reported,
in the Article 21 report, such a transfer of CO2. With regards to
this transfer of CO2, Member States generally follow section 5.7 of
the MRG. Only a few Member States have introduced additional requirements to
avoid loopholes in the transfer of CO2. Those Member States treat
the list of examples in section 5.7 of the MRG as exhaustive, i.e. they do not
allow the transfer for other uses or only in case the CO2 is
transferred to another EU ETS installation. Two Member States do not allow any
transfer of CO2. One Member State would prefer not to allow a
transfer of CO2 at all but feels that section 5.7 of the MRG did not
provide the legal basis to do so. In one Member State the transfer is not
represented in the national inventory under the UNFCCC. 
The requirement to mirror a transfer of CO2
in the report on the national inventory is generally difficult to implement, as
the IPCC 1996 Guidelines and 2000 GPG do not list emission categories to report
such a transfer. The IPCC 2006 Guidelines clearly state that captured CO2
used downstream, should be accounted for at the originating process, unless the
inventory clearly foresees that these emissions should be accounted for somewhere
else (e.g. at product use). The current MRG approach can thus lead to a
situation that the transferred emissions are neither accounted for under the EU
ETS nor under the national inventory.
The current provisions in the MRG result in
some of the greatest differences in decisions seen between Member States,
inconsistencies with national greenhouse gas inventory reporting and concerns
about an unlevel playing field. 
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).  
No other options were under discussion due
to the very clear-cut situation.
Option 2 is a highly supported amendment
that will eliminate currently suggested transfers to uses such as in dry ice,
carbonated drinks, and grains disinfestations that only result in temporary
retention of the CO2 and difficulties concerning proper accounting
in national greenhouse gas inventories.  Future transfers will only be allowed
to CCS activities where permanent avoidance of emission can be reasonably expected.
The adoption of Option 2 is perceived to be quite cost neutral, therefore
falling within Category III. On the contrary continuing with the status quo
(Option 1) will result in higher costs due to increasing discussions and
difficult relations between Competent Authorities and operators. Therefore this
will be resulting in Category V: 50% increase in M&R expenses.
 Option 1 will continue to jeopardise the environmental integrity of the system. Option 2 is fully in line with the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained. 
3.3.5.   Treatment of solid and liquid
biomass, including sustainability criteria
“Biomass” means biomass,
bioliquids and biofuels within the meaning of Directive 2009/28/EC including
sustainability criteria for biofuels and bioliquids. Important to note that the
first reference to “biomass” constitutes “EU ETS biomass”, the second reference
refers to the “Renewable Energy” Directive 2009/28/EC (RED) definition of
biomass, while the reference to sustainability criteria is only intended in
connection with biofuels  and bioliquids deemed sustainable in accordance with
Directive 2009/28/EC; NOT other forms of (solid or gaseous) biomass.
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 that is now considered unsustainable. The introduction
of biomass sustainability criteria is not supported by a number of Member
States – but the main concern is solid biomass. It has to be clarified that an
emission factor of zero for biomass is retained – as already established by the
EU ETS Directive – and that emission savings factors from the RED are not
required as emission factor under the EU-ETS.
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. The disadvantages
of retaining this option will include incompatibility with the RED definition
and objectives. Moreover there will be a missed opportunity to integrate
sustainability criteria into the EU ETS and, therefore, to support wider
climate change interests. The maintaining of the status quo will allow
sustainable and non-sustainable biomass to continue enjoying the same
advantages regarding zero-rating (exemption from surrender of emission
allowances). Finally, under this option, the EU ETS will be attracting
increased quantities of non-sustainable biomass by virtue of being seen as an
incentivised outlet.
Option 2:   Change to a RED compatible definition
but without application of sustainability criteria. This approach will retain
the zero rating for biomass but it will not open up to the sustainability
criteria. ("RED definition only") This option will address only
partially the consistency issue with the RED and continue to jeopardise the
integrity of EU ETS. In fact, most of the disadvantages listed for Option 1
will remain.
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").
Although there are consequences for EU ETS
operators in that non-sustainable biofuels and bioliquids would be no longer
eligible for EU ETS zero-rating (emissions would have to be reported and a
corresponding number of emission allowances surrendered), the operator remains
at liberty to switch to using sustainable alternatives (the intention) or
biomass other than biofuels and bioliquids in order to retain eligibility for
zero-rated emissions.  This position should result in negligible additional
cost burden regarding EU ETS implementation.  
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. DG CLIMA is currently working on a proposal to develop and put in place
a comprehensive LULUCF accounting system. Whilst the "zero-rating"
will remain at installation level in the EU ETS, the existence of a
LULUCF accounting system would ensure that all human-induced emissions (and
removals) of CO2 associated with different uses of biomass (energy
production and other, e.g. timber for construction and in situ use such
as conservation or enhancement of carbon stocks) are captured / visible in Member
States emission inventories.
The adoption of Option 3 will result in
limited additional costs for operators at the beginning, also due to the still
overall uncertainty of the system implementation. However the overall impact,
especially on fixed installations, will be limited due to the limited use of
biofuels and bioliquids. Therefore Option 3 is seen to be falling within
Category IV.
 Option 1: 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: This option will answer only partially the consistency issue with the RED and continue to jeopardise the integrity of EU ETS. Option 3: This option will satisfy the RED and address sustainability criteria for biofuels and bioliquids, for which EU criteria have been developed.   Option 3 is  retained as the basis to organise Monitoring and Reporting 
3.3.6.   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. 
In particular, Sixteen
Member States (covering 64% of the Union-wide emissions) applied Table 5 and
section 13.6 of the MRG as it is. For the most part they focus on Table 5 as
the uncertainty requirement in 13.6 is found to be difficult to apply and also
because the requirement is generally not (fully) understood (see also section
3.2.1 on uncertainty assessments). Member States therefore tend to use Table 5
to determine the sampling and analysis frequency. This is the case in at least
four Member States, even without the Member States requiring the operator to
justify the need for this approach. There was however a common understanding
that the frequencies in Table 5 are too onerous in some cases and too lenient
in others, and that the table clearly needs a full review and update. In
general, Member States asked for a more detailed and practical approach on the
requirements for the sampling frequency and procedures.
Option 1:   Confirm the pragmatic
approach of the MRG. ("No policy change").
Option 2:   Better define 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. The operator shall agree the sampling plan with the
laboratory carrying out the analysis. The relevant analyses, sampling,
calibrations and validations shall be carried out by applying methods based on
CEN standards. If CEN standards are not available, suitable ISO standards or
national standards shall apply. 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.
The adoption of Option 2 will result in
some operators doing more than they are already doing right now. The increase
will have to be positioned between Category III (cost-neutral) and Category IV
(limited increase). Continuation of the present pragmatic approach (Option 1)
indicated by the MRG will result in costs related to Category III
(cost-neutral). 
 Option 1 will continue to favour the present pragmatic interpretation with respect to sampling requirements. Option 2 will be more preferable in the medium-long term but present lack of knowledge and time-constraints do not make it possible. Option 1 is retained. 
3.3.7.   Reporting of Production Deleted
Data
Combination of the Common
Implementing Measures (CIMS) related to benchmarking and annual emissions and
tonne-kilometre reporting are likely to be overly complicated and add costs.
Reporting of allocation-related data presents different technical challenges; although
the legal basis has already been provided (within the CIMS). The burden is on
the operator to report changes to different timescales compared to annual
emissions or tonne-kilometre reporting. This is only required in the event of
changes. 
Combined reporting is
not in the interests of cost-effectiveness and efficiency. The consequence will
be to have two reporting templates with an additional verification burden
(added competency regarding allocation rules required in all cases).
Combination could reduce transparency and efficiency, not improve it. Verifier quality
assessment checks can still be carried out (A&V Regulation, guidance).
According to
Article 14(2) of the revised ETS Directive: “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
production related reporting requirements in the M&R Regulation.  ("No
policy change"). Option 1 will maintain the focus of the regulation on installation-based
GHG emissions reporting. 
Option 2:   Add production related data
collection and reporting 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. Introducing a parallel monitoring and
reporting on production data will be confusing and add disproportionate costs
for data that at best will be of partial use. The onus will
be on the operator to report changes to different timescales compared to annual
emissions/tonne-kilometers reporting. This is only required in the event of
changes, for example when an operator decreases the capacity of a
'sub-installation' by more than 30%. Furthermore what could be confusing
between the monitoring under this regulation and the possible monitoring under
the ETS benchmarking is that the reference unit for the latter is the
"sub-installation" whereas in the M&R it is still the traditional
"industrial installation". As more reporting
templates might have to be developed, verification costs would be higher. There
could be further concern related to the added commercial secrecy that is
typically associated with production-related data.
With respect to Option 1 continuing with
the present system will be cost neutral (Category III). Adopting Option 2 may
result in increases in the order of 5 – 10% for reporting and in significant
increases for verification, in the order of 50% (Category V). The range of
savings is not unrealistic and again likely to be a comfortably conservative
estimate.  Definition of a very small installation could be suggested to be in
the order of installations emitting less than 10,000 tCO2 per year.
 Option 1 maintains the focus of the regulation on installation-based GHG emissions reporting. Option 2 would generate double track, risk of confusion and substantially higher cost for companies. Option 1 is retained 
3.3.8.   Simplified Procedures and
Requirements
In order to support cost-effectiveness with
smaller emitters, the MRG details a number of reduced requirements for installations
which emit less than 25kt of CO2 annually.
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. He may determine the amount of fuel
or material by using purchasing record and estimated stock changes. He is also
exempt from the requirement to provide an uncertainty assessment. He may apply
as a minimum tier 1 for the purposes of determining activity data and
calculation factors for all source streams and mass streams. He may use any
laboratory that is technically competent. 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,
for example, using fuels like natural gas and where no process emissions occur
(standard factors for Net Calorific Values and Emission Factors). 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. 
The adoption of Option 2 will result in
savings for small installations for the monitoring and reporting in the order
of 5 -10 %, Category II, going also up to 50 % for some individual very small
installations. In terms of verifications savings will be in the order of
category I (significant reduction) with cost savings between € 1000 and € 2000.
Section 2.2 of the IA already sets the
scene for special considerations for small emitters.  Inclusion of an
operational objective concerning simplified procedures and requirements for M&R
confirms the priority attached to reducing unnecessary burdens and costs on
small emitters. The cost of implementing EU ETS requirements overall are known
to be disproportionately greater for small emitters and so every effort is
being made to reduce the impact of the M&R Regulation to the extent allowed
under Articles 14 of Directive 2003/87/EC.  This will be further developed in the
form of guidance and through the production of special templates and exemplars
designed for 'off the shelf' use. These will additionally encourage a more
consistent approach across different Member States and reduced the technical
resource and cost burden on small emitters, as well as confidence in a more
level playing field.
 Option 1: it is not sufficient to ensure cost-effectiveness 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 
3.3.9.   Application of the Improvement Principle
The MRG contain provisions aimed at
ensuring improvement of an installation’s monitoring over time. There are two
implementation approaches that support this in particular. The first is
achieving improvement by moving towards higher quality stages in monitoring over
time (until reaching the so called highest tier position). The second area of
improvement concerns acting on recommendations supplied by the verifier to the
operator in the verification report.
A common understanding is still missing
among the Member States on how to treat the "improvement principle".
This should address how the principle of monitoring methodology, in general,
should be implemented and how recommendations of verifiers should be required
and followed up. This is also closely related to the issue of how non-material
misstatements and non-conformities should be addressed by the operator. 
A common understanding on how to interpret
unreasonable costs and technical infeasibility is developed. It should be
assessed whether this needs to be updated. Best practice on the definition of
technical infeasibility could come from the Belgium Flemish region.
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 required in order to ensure
compliance with current expectations under the MRG and the proposed M&R
Regulation and to ensure fairness and a level playing field for all operators. 
It is reasonable for both the MRG and the proposed M&R Regulation to state
default positions regarding minimum expectations for monitoring methodology (in
order to ensure data of sufficient minimum quality to maintain confidence in
the EU ETS and that a tonne reported is a tonne emitted).  It is also
reasonable that this is accompanied by contingencies for temporary derogation
based on technical feasibility and not resulting in unreasonable costs.
However, it is unreasonable to allow such derogation ad infinitum or for
verifier recommendations for improvements to go ignored. Option 2 will protect
from this happening and the resentment that goes with it.
Adoption of Option 2 will result in initial
cost increases for both operators and verifiers. With respect to operators the
initial costs will be in the order of Category IV (limited increase) but then
they will be balanced by a more general confidence in the system even at
international level resulting in Category II savings. With respect to verifiers
they are expected to increase their workload by an average of 10 % at the
beginning. This is a hypothetical and semi-quantitative
estimate.  It is also likely that the given estimate is a highly conservative
one with actual average increases being less than 10% in reality. Observations
on possible improvements that an operator could make are supposed to be
something that a verifier makes during the course of their main verification in
any case (so actual increase in costs could be argued to be even more minimal).
The 10% estimate is purely to recognise that there may be a small impact on
verifier time requirement as they become use to the confirmed additional
requirement.  It should be noted, however, that this is to become familiar with
something that verifiers should have been doing all along under the MRG but
which they often ignored.  The overall benefit of adopting this option in terms
of consistent approach and credibility of EU ETS will quickly outweigh any
initial increases in costs.
 Option 1: the maintenance of current situation would lead eventually to undermine the quality of the EU ETS M&R process Option 2: Enhance the application of the improvement principle within the original requirements set-up by the IA of Directive 2009/29. Option 2 is retained 
3.3.10. Information Technology
There are also a number
of barriers causing some Member States not to implement such IT
functionalities. These barriers will need to be remedied in order to more
closely harmonise ETS MRV across the Union. This could come in the form of
either sharing of existing systems or through joint development of new IT
functionalities by a number of Member States (with or without Commission
involvement). There
are also Member States participating in the current project with less or no IT
functionalities available in systems for MRV support. As barriers to define,
buy, implement or develop such a system the following reasons were mentioned: lack
of funding; shortage of staff; shortage of IT expertise and no long-term
planning capability.
Significant staff
savings and improved customer service are expected from moving to an IT system.
There
is a multitude of process, information and strategic advantages (both financial
and non-financial) to the use of IT systems to support the MRV processes in the
Member States.
Higher efficiency in the
execution of compliance tasks and the streamlining of operations associated
with existing regulation of stationary installations participating in EU
Emissions Trading are to be achieved. Current methods are working at maximum
capacity, incapable of further expansions to meet forthcoming EU ETS expansion
needs (such as Aviation at the moment and perhaps Shipping in the future) and
require considerable operator and CA staff effort to operate. 
Reducing the reliance on
external consultants to manage the regulatory workload for operators of
stationary installations and for aircraft operators is another potential benefit.
Data handling as well as
data quality generated by the software solution is delivered at a level of
reliance that is most probably impossible to generate manually. The workload of
the Competent Authority will be greatly reduced by the use of a well-designed
IT system and the administrative burdens for the Operators and for the CAs will
be reduced substantially.
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 reports, and for further types of
communication between competent authority, operator, aircraft operator,
verifier and accreditation body, as appropriate. 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. The
development of the EU ETS reporting language (XETL) and the next steps towards
the development of common IT tools with built-in (automated) controls will be
most helpful for those MS that intend to set up IT systems for their own
compliance processes.
Examples of claimed efficiency
gains are: up to 8 man hours per installation per year for Competent Authorities
and verifier combined; savings, depending on the installation size, in the
region of €1.500 - €4.000 per year per operator.[14]
The
workload of the Competent Authority will be greatly reduced by the use of a
well-designed IT system and the administrative burdens for the Operators and
for the Competent Authorities will be reduced substantially.
At the level of the
Commission some dedicated resources will be necessary but in a limited way (1/2
man/day over 3 months/year) to ensure the continuity and quality/safety of the
IT system. The cost of the system itself is not relevant.
The adoption of Option 2
will result in a strong increase in quality of enforcement but there will be
some initial increase in cost. In particular if the IT development will be
limited mainly to standardized Excel templates in order to facilitate
electronic reporting, costs will be in Category II: 10 – 20%. If IT changes
will be more in the direction of developing XML dedicated reporting costs at
the beginning will be in the order of Categories IV and V but then later on
relevant savings  in the order of Categories II and I will counter-balance
initial expenses.
Option 2 is fully in line with the original
requirements set-up by the IA of Directive 2009/29. 
   Option 1: it does not offer a correct support to the harmonisation of the EU ETS M&R Option 2: it allows clear  efficiency gains and involves limited costs at EU level   Option 2 is retained 
3.4.      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. Improving the consistency of
required monitoring and reporting across similar sized and types of
installation are very important to ensure fairness and equity of treatment. 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. Continuing
with different  reporting requirements means that some operators put more
effort into reporting than others, potentially leading to concerns over
‘fairness’ with the current system. Some Competent Authorities reporting
systems are more efficient than others e.g. paper based through to online
reporting. This situation would remain with the status quo option. 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
Table 4 - Overview summary
 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 
 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
4.         Accreditation
and Verification Regulation
4.1.      General policy objectives
The specific objectives for accreditation
and verification 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 accreditation and
verification;
–      Harmonising internal market for accreditation and verification
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
accreditation and verification in most MS.  
The basic verification steps required under
Annex V of the EU ETS Directive, the MRG and EA-6/03 are followed in all MS.
However, differences arise in the specific implementation of certain
accreditation and verification activities. The Accreditation and Verification
Regulation provides an opportunity to promote a more common understanding of
requirements and to remove scope for unnecessary differences in approach. 
4.2.      Specific
and operational objectives
Establish
the accreditation requirements
Operational objectives:
§        
Accreditation of verifiers;
§        
Mutual
recognition of verifiers;
§        
Peer evaluation of Accreditation Bodies;
§        
On-going supervision of verifiers and corrective
measure.
Establish
the verification requirements
Operational objectives
§        
Risk analysis;
§        
Simplified procedures and requirements;
§        
Single verifier issue and independent technical
review;
§        
Content of the Verification Report.
All of the
operational objectives covered seek to address the issues discussed in section
2.1 (problem definition) of the IA, such
as:

 a reduction of variation between
     Member States policies on accreditation and verification; 
 building up an even more level
     playing field;
 reaching improved environmental
     integrity.

(i)         All
of the proposed options can be considered to address these issues as well as
all of the general policy objectives set for A&V in section 4.1, namely, establishing
a consistent and comparable level of accreditation and verification;
harmonising internal market for accreditation and verification services and
improving cost effectiveness.
This will result in greater harmonisation and commonality
of systems to reduce costs and achieve transparency in relation to quality and
consistency of data to provide even more trust in EU ETS. 
Table 5 –
Links between problems and operational objectives and options
   || OPERATIONAL OBJECTIVES 
 Accreditation requirements || Verifications requirements 
 GENERAL POLICY PROBLEMS || Reducing variation reduction between MSs policies || The issue of accreditation of verifiers this will provide clear requirements for the accreditation of legal persons and certification of verifiers as natural persons. || The objective of simplified procedures and requirements is linked to this problem (but also to the building-up of an even more level playing field) facilitating a more coherent implementation to this aspect of verification practices. 
 Improving level playing field || Regarding the objective of mutual recognition of verifiers, this measure will be key in ensuring the opening-up of the EU market for verification of annual GHG emissions reports. || The link with the content of the verification report is very much related to this problem, where verifiers in different MSs (and operators) will have to comply with the same requirements and proposed measures resulting in a more efficient and transparent exercise. 
 Improving environmental integrity || The objective related to peer-evaluation of accreditation bodies will have an impact on the quality of operations of accreditation bodies, therefore improving also the quality of verification activities and, doing so, the environmental integrity. There is a link also with the objective of having on-going supervision of verifiers and corrective measure. An effective system for exchange of views between the Accreditation Bodies and the Competent Authorities will be established contributing to the overall improvement of the quality of the system. || The objective on risk analysis is linked in particular because it will facilitate the setting up of clarified requirements for both the verifier's strategic analysis and risk analysis. In addition, it is important to consider the very positive impact on the quality of verification provided by the objective of the single verifier issue and the independent technical review. 
The operational objectives covered
represent the known relevant issues, based on stakeholder feedback, and were established
following the on-line consultation.  Omissions would beg the question as to why
an issue deemed relevant in these related circumstances is then ignored in the
IA.  The number of options concerning each operational objective has usually
been restricted to the minimum of two; the nearest thing to a status quo
baseline position and then next most applicable or optimal alternative. Section
2.1 of the IA points out the relevance of considering the status quo position. 
The regular references to particular options (the selected ones) being
"fully in line with the original requirements set-up by the IA of
Directive 2009/29/EU" should be read as fully compliant with the general
policy objectives specified for the A&V Regulation.  
(ii)        The options for operational
objectives considered of most significant likely impact are already preceded by
more lengthy introductory text to establish the particular concern. 
(iii)       The options discussed all
propose to meet the stated requirements of Article 15 of Directive 2003/87/EC
(and its corresponding Annex V).   
4.3.      Policy options
Policy options are presented for the
operational objectives outlined in section 4.2. The range of presented policy
options is proportionate to an already well understood position based on:

 The requirements for monitoring and reporting (MR), and for accreditation
     and verification (AV), set out in Articles 14 and 15 respectively of
     Directive 2003/87/EC;
 Six years of operational stakeholder experience with the EU
     ETS, including in relation to the requirements of Commission Decision
     2007/589/EC (the EU ETS M&R Guidelines) and its predecessor;
 Information reported in conclusion to Commission reviews
     concerning implementation of EU ETS MRVA and compliance cycle requirements
     (most pertinently last year's Support to the Commission for the Review of
     Permits, Monitoring Plans and Verification Reports in the EU ETS at the
     level of Member States for the 2008-2009 Compliance Cycle), ref: section
     1.2 of the IA;
 Technical Working Group stakeholder (including other relevant
     Commission DG) consultation during the drafting of the two Regulations,
     and feedback from the wider technical consultations held in conjunction
     with the Stakeholder Workshops  (M&R Regulation on 3 May, A&V
     Regulation 4 May), ref: section 1.3 of the IA;
 Response to the on-line consultation, ref: section 1.4 of the
     IA.

Section 3.3 of the IA explains that only
two options are generally presented for each of the identified operational
objectives. Absence of an equivalent to
Commission Decision 2007/598/EC for A&V makes selection of a baseline
position less clear-cut, but it has nevertheless been possible to present one
option to reflect the majority position and at least one other to represent the
next most applicable or optimal alternative.  Again, this provides a logical
approach to the starting point and alternatives. Options are entirely based on
items (1) to (5) above.
No options favoured by the majority of
stakeholders are discarded, as this would tend to exacerbate potential problems
regarding achievement of greater consistency, harmonisation and
cost-effectiveness. 
4.3.1.   Analysis and examples
(i)         The number of small scale
emitters in the EU ETS is around 50% with respect to the 11,500 fixed
installations and 80% with respect to the 4,000 aircraft operators. 
(ii)        “Gold-plating” examples from
Member States' practices that may lead to excessive costs for operators.
 Example provided by Germany:   Accreditation of Verifiers. In Germany there is no specific accreditation body nominated for the EU ETS; instead, several accreditation routes have been established with already existing institutions. In principle there are three routes for the accreditation of verifiers: EMAS-verifiers or EMAS verification bodies, who have been accredited by the German Accreditation Body of Environmental Verifiers (DAU), can act as EU ETS verifiers as well as officially appointed and sworn experts (“öffentlich bestellt und vereidigte Sachverständige”) for verification under the EU ETS which have been approved by their local chamber of commerce (IHK). Coordinated control activities of accreditation bodies do not exist. IHKs control themselves to a certain extent, due to the engagement of honorary active members. Official control of legality is carried out by the appropriate Federal Ministry of Commerce. IHKs are corporations under public law and have to follow the German ETS legislation. DAU Accreditation body is legitimated by the Federal Environment Ministry.   Example provided by Portugal   Reporting and Verification. The number of man days a verifier has to spend on the verification of a specific installation, has to be determined using a table which considers factors like sector, annual emissions, number of sources among others. This concept has been introduced in the first trading period, in order to avoid low-price verifications, which, due to their short duration cannot provide the necessary quality. This measure had quite an impact on prices and costs of verification for operators.   
(iii)       With
respect to verification costs, original 2006 estimates[15]
that reached an average cost in the order of € 800 and € 1000 per fixed
installation and per year are still justified. Equally the average
verification time for the more than 11,500 installations is confirmed as a 3-4
days process.
Some NGOs have been challenging from time
to time the issue of independence of verifiers accusing them of broader
business relations and "proximity" with the industrial or aviation
operators. No clear evidence is available with respect to this issue at the
level of the Member States. However, the proposed accreditation framework
developed by the A&V Regulation is supposed to respond to this problem
ensuring that the competence and independence of verifiers is confirmed.
With the following text specific examples
are given for each of the issues taken into account:

 Accreditation of verifiers;
 Mutual recognition of verifiers;
 Peer-evaluation of Accreditation Bodies;
 On-going supervision of verifiers and corrective measures;
 Risk-analysis;
 Simplified procedures and requirements;
 Single verifier issue and independent technical review;
 Content of the verification report.

4.3.2.   Accreditation of Verifiers
On the 1st of January 2010,
Accreditation Regulation (EC) No 765/2008 went into effect. This framework
accreditation Regulation contains general requirements on the accreditation of
certification bodies. This framework Regulation is also highly relevant for the
accreditation under EU ETS. It requires that all Member States have one
national Accreditation Body with public authority and furthermore that this
body is a member of the EA. Unlike the initial 2003 ETS Directive, the revised
EU ETS Directive provides a legal basis for setting up an EU ETS accreditation
scheme by empowering the Commission to draft an accreditation and verification
regulation. This EU ETS specific accreditation scheme should be in place by
2013, when the A&V Regulation for EU ETS also comes into effect.
The CCEV 2010 report
showed that in nineteen Member States (84% of emissions) verifiers are formally
accredited, whereby in sixteen (57% of emissions) of these Member States the EA
approach for accrediting EU ETS verifiers is used. Of the three Member States
which use accreditation but are no EA members for the EU ETS, one has
implemented approaches very similar to EA accreditation requirements and two Member
States have implemented strongly differing approaches. Eight Member States (14%
of emission) use authorization. Out of these eight Member States, three smaller
Member States do not have an own Accreditation Body for the EU ETS, and they
authorize therefore only foreign verifiers to carry out verification activities.
In two further Member States verification is carried out by the Competent Authority,
and therefore no accreditation or authorization structures exist.
According to the MRG, a verifier is defined
as “a competent, independent, accredited verification body or person with
responsibility for performing and reporting on the verification process”.
No further requirements are mentioned in the MRG on accreditation, mainly because
the 2003 EU ETS Directive itself did not provide a clear legal basis. As a
consequence, Member States have used different approaches to accredit
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 will restrict
the scope of this policy only to legal persons, therefore excluding from the
system verifiers as natural persons 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 licensing bodies to accommodate the historic
arrangements affecting a small number of Member States. This option  comply
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. 
The adoption of Option 1, the switching to
Accreditation only may incur additional costs in some cases, but licensing
(Option 2) could be expensive too due to inconsistency costs, therefore we can
envisage a Category IV for both options. Cost of accreditation of verification
bodies is in the order of € 10000 per year. Furthermore Option 2 in some
specific Member States could reduce competition and at the end result in
increasing verification costs.
 Option 1: is the option explicitly mentioned in Article 15 of Directive 2009/29/EC but with a limited scope   Option 2: This option is foreseen by Article 15 of Directive 2009/29/EC and by Article 5.2 of Regulation 765/2008/EC.   Option 2 is retained 
4.3.3.   Mutual Recognition of Verifiers
A legal basis for mutual Member States
acceptance of verifiers under the ETS Directive is developed by Article 15 of
Directive 2009/29/EC. This would include the (local) surveillance of foreign
verifiers and the exchange of information between the Accreditation Bodies and
the Competent Authorities of respective Member States where the verifier is
active. Local surveillance of foreign verifiers refers to the checks that may
also be required on a verifier accredited by an Accreditation Body in one
Member State when the verifier is working in another Member State.
Three Member States require foreign
verifiers to take the national accreditation route, which is not in line with
Accreditation Regulation (EC) No 765/2008, which requires each Member State to
accept the accreditation certificate in case this Accreditation Body
successfully underwent an EA peer review. Rejecting verifiers or subjecting
them to additional requirements, that exclude those foreign verifiers without
due cause, would also be difficult to justify given the requirements free
movement of services and service providers pursuant to the Services Directive. While
neither the MRG nor the EA 6/03 contain requirements on mutual acceptance of
verifiers some Member State impose additional conditions to be fulfilled by
foreign verifiers, mostly language-related while sometimes evidence of the
accreditation and additional information are also required.
Six Member States survey the foreign
verifiers. Others would only do so if asked by the AB which accredited the
foreign verifiers. At least eight Member States have a policy, that in case
non-conformities would occur with a foreign verifier, the Accreditation Body
which accredited the verifier would be informed. With regards to foreign verifiers,
thirteen Member States (48% of emissions) accept verifiers that have been
accredited by other EA members against a standard with EA6/03 in scope, while two
Member States accept foreign verifiers with any kind of
accreditation/authorization.
Option 1:   Mutual recognition of
verifiers 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 if they are accredited by Accreditation Bodies 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 considered the baseline
position regarding mutual acceptance of verifiers as this represents the most
sensible accommodation of the stated requirement under Article 15 of Directive
2003/87/EC, and also taking into account related requirements in accordance
with Regulation (EC) No 2008/765 and the Services Directive 2006/123/EC.
Adoption of Option 2 will fully satisfy Internal Market and competition issues.
Cost savings will be in the order of Category II. Option 2 is fully in line
with the original requirements set-up by the IA of Directive 2009/29. 
 Option 1: This option does not match the requirements foreseen by Article 15 of Directive 2009/29/EC.   Option 2: It will promote overall harmonisation with respect to the quality of verifiers and the verifications carried out in line the requirements foreseen by Article 15 of Directive 2009/29/EC. Option 2 is retained. 
4.3.4.   Peer Evaluation of
Accreditation Bodies
Peer reviews and exchange programs for CA
and AB staff can be very effective in providing support for a better
understanding of approaches applied in other Member States. However, it
requires the financial and human resources that allow providing that support in
capacity building and training. Exchange programs would be useful for CAs on
how to organize and structure the review process and details of the MPs and the
AER/ VR review activities as well as set up inspection activities. 
The 2008
Council Accreditation Regulation (EC) No 2008/765 requires all national
accreditation bodies to subject themselves to a peer evaluation as organised by
the body recognized under Article 14 of the Accreditation regulation. For the
first period this will be EA.[16] [17] 
According to
Article 10(2) and (3) of Regulation (EC) No 765/2008, Member States shall
ensure that their national accreditation bodies regularly undergo peer
evaluation which shall be operated on the basis of sound and transparent
evaluation criteria and procedures, especially concerning, structural, human
resource and process requirements, confidentiality and complaints. Appropriate
appeals procedures against decisions taken as a result of the evaluation shall
be provided for.
Article 10 of Regulation (EU) No 765/2008
implies that changes should be made in the peer evaluation system now currently
applied by the EA. These changes should be welcomed since it strengthens the
peer evaluation process and makes the process more rigorous and transparent.
According to article 13(2) of regulation (EC) No 765/2008, the Commission may
request the EA to lay down evaluation criteria for peer evaluation and to
develop accreditation schemes. 
The EA
Multilateral Agreement on evaluation and re-evaluation of EA members is not EU
ETS specific. If evaluation criteria for peer evaluation are to be developed
more guidance is needed to make the peer evaluation more rigorous and more EU
ETS specific (i.e. competences of peer evaluators, who to report to in EU ETS during
and after the peer evaluation, what to assess during an EU ETS peer evaluation
etc.). EU ETS specific criteria for peer evaluation are needed since a
successful peer evaluation will mean under the new accreditation regulation
that the verifiers accredited by those accreditation bodies have free access to
the market and cannot be refused.
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. These will include: EU ETS competence requirements
for peer evaluators and the team; assessment of the competence and performance
of accreditation bodies against the EU ETS Accreditation and Verification Regulation,
with due and reasoned reference to ISO 17011 and other documents relevant to EU
ETS.  The overall impact will be to enhance consistency
in the accreditation of EU ETS verifiers and to improve effectiveness. Detailed
specific requirements will be developed by the Commission and the EA through
guidance. Moreover this exercise will be part of the broader regular peer-review
exercise run by the EA in the framework of the implementation of Council
Regulation 2008/765 dealing with accreditation in general. Option 2 is fully in
line with the original requirements set-up by the IA of Directive 2009/29. 
The adoption of
Option 2 is very necessary for an efficient functioning of the system. Costs
will be negligible and could fall in the cost neutral section (Category III).
This is due to the fact that already Accreditation Bodies are undergoing Peer
Evaluation.
 Option 1: This option will limit the effectiveness of the system.   Option 2: This option will allow the EA to implement more appropriate peer evaluation criteria in accordance with EU ETS requirements   Option 2 is retained. 
4.3.5.   On-going Supervision of Verifiers
and Corrective Measures
The CAs, which have established
ETS-specific in-depth knowledge and bear the overall responsibility for the
functioning of the system, get information on the performance of verifiers and
the quality of the audits by assessing the operator’s annual emissions reports
together with the verification reports. Therefore CAs should be entitled to
undertake further investigations to evaluate the quality of the audits to
contribute to the maintenance and improvement of the verifications/audits. Such
evaluation is in line with the current Monitoring & Reporting Guidelines:“The
internal verification report should as well facilitate a potential evaluation
of the audit by the competent authority and accreditation body.” (Annex I,
section 10.4.2 lit. (d))
In the sixteen Member States that are
members of the EA, each verification body is surveyed between 6-12 months
(specific time period varies among Member States) after the initial
accreditation and then regularly every 12-18 months until the re-accreditation
is due. In eleven Member States surveillance consists of both an office audit
and a witness, while in five cases it consists only of an office audit. It
seems that some Member States rather place the focus on an office audit whereby
one Member State  even stated that the
office audit provided more insight than the witness, while others feel that a
witness is indispensable.
Examples of information
exchange from the Accreditation Body to the Competent Authority could be
accreditation details, outcome of peer evaluation, serious incidents during
accreditation and reassessment and a management report. Examples of information
exchange between the Competent authority and the Accreditation Body could be
findings from inspection and enforcement that are relevant to know to an Accreditation
Body, complaints of an operator about a verifier, outcome review of emissions
report and verification report as well as recommendations.
Regarding the outcome of
the evaluation of the verifier/audit by the CAs, or just in cases of doubts
concerning the audit quality, it is necessary to establish an explicit right of
complaints for CAs submitted to the ABs. Furthermore the ABs should be required
to give qualified responds to complaints within a certain timeframe. Qualified
response means, that the AB has to substantiate which further surveillance
actions have been taken (e.g. reassessment, suspension, withdrawal) or why the
AB decided not to take further action. 
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. 
There is no
real baseline option concerning on-going supervision of verifiers and
corrective measures (section 4.3.4). Current practice varies greatly from
Member State to Member State, but Option 3 is sensible in terms of offering the
greatest cost effectiveness, the least duplication between competent
authorities and accreditation bodies, and the 'middle way' ". It is not
clear how the clarity of this section can be helpfully enhanced.  On-going
supervision of verifiers, once they are accredited, is another requirement
under Article 15 of Directive 2003/87/EC (to check they continue to abide by
their accredited procedures and specific requirements for impartiality and
independence and competencies among others.  This operational objective is
really exploring the optimal level of competent authority to accreditation body
inter-relation to best achieve this responsibility (and whose ultimate
responsibility the requirement really is).
The adoption of Option 1 (supervision of verifiers
by Competent Authorities) could result in ½ man/day average increase per
installation resulting in Categories IV to V costs,  Option 3 is definitely
more efficient than the others resulting in “everybody doing his own job” and
in savings between Categories II and I. 
 Option 1: This option will affect the overall efficiency of the system.   Option 2: This option could result in insufficient quality of verification   Option 3: It will improve in a cost efficient manner communication on transparency and status of accreditation of verifiers, setting clear requirements for all Member States   Option 3 is retained. 
4.3.6.   Risk Analysis
Both sections 5.3.2 of EA 6-03 as well as
Annex I, section 10.4.2 (b) of the MRG contain general requirements on the
verifier's risk analysis. The verifier has to assess the likely level of risks
of material misstatements in the emission reports and material non
conformities. In fact the verifier identifies and assesses the inherent risks[18],
control risks[19] and detection risk[20]
which all need to be taken into account to determine the verification risk[21].
Based on the risk analysis the verifier
drafts the verification plan and determines his verification activities (e.g.
sampling, nature, timing, extent of testing of the operator’s control
activities, site visits). The verifier’s risk analysis is an iterative process.
As a result of findings during the verification it should be amended if
necessary.
According to Annex V of the EU ETS
Directive and the MRG, the verifier is required to perform a risk analysis,
which means analysing the risk of data reported by an EU ETS operator being
misstated or not collected in conformance with the approved monitoring
methodology. The risk analysis establishes the verification programme and data
sampling a verifier will need to carry out to reach a satisfactory verification
opinion. However, the MRG does not provide detailed provisions on how the
verifier should perform the 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). It links more clearly to the risk assessment made by
Operators.  It is a more comprehensive basis for assessing risk, helping
verifiers to concentrate their efforts where data might have been misstated or
erroneously collected. This will result in greater effectiveness and efficiency
of verification. 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. 
Adoption of Option 2 will result in better
focusing on objectives that really matter. With respect to verification it
should further decrease costs: in the order of ½ man day per year. It could be
placed in the order of Category I.
 Option 1: This option will limit the effectiveness of the system.   Option 2: This option will set clarified requirements for both the verifier's Strategic Analysis and Risk Analysis in line with EA 6/03   Option 2 is retained. 
4.3.7.   Simplified Procedures and Requirements
The CCEV suggested that Member States exchange their approaches and
views on when to waive site visits and how they see this as a balance between
cost-effectiveness and quality. A waiver of site visits should be up to the
verifier, who should provide a proper justification to the CA based his risk
assessment. The CCEV found that the majority of Member States requires a site visit for all installations. In one Member State the waiving of the visit can apparently
be applied under clear conditions, but the central CA will not necessarily be
informed if this happens.
In nineteen Member States, a site visit is legally required and practiced for all
installations. Among the 10 MS allowing to waive site visits the strictness of
approaches vary and include the requirement of the explicit approval of the CA
to waive the site visit based on very to moderately strict conditions as well
as the option to waive the site visit without the approval of the CA, but based
on clear conditions.
The MRG states that the verifier shall
conduct a site visit, when appropriate, to inspect the operation of the
monitoring systems. For small emitters, the MRG allows Member States to decide
whether waiving a site visit can be granted. However, this approach has not
resulted in a common agreed practice, making it again difficult to achieve a
common-level playing field.
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.
The adoption of Option 1
could be in the order of activating savings between Categories II and I. With
respect to selected small emitters, this could result even in the saving of 1
man/day for verification.
Section 2.2 of the IA
already sets the scene for special considerations for small emitters. 
Inclusion of an operational objective concerning simplified procedures and
requirements for A&V confirms the priority attached to reducing unnecessary
burdens and costs on small emitters. The cost of implementing EU ETS
requirements overall are known to be disproportionately greater for small
emitters and so every effort is being made to reduce the impact of the A&V
Regulation to the extent allowed under Article 15 of Directive 2003/87/EC. 
This will be further developed in the form of guidance and through the
production of special templates and exemplars designed for 'off the shelf' use.
These will additionally encourage a more consistent approach across different
Member States and reduced the technical resource and cost burden on small
emitters, as well as confidence in a more level playing field.
 Option 1: It allows verifiers to use simplified verification plans and procedures if certain conditions to be confirmed (by the Commission) are met.   Option 2: This option will limit the efficiency of the system.   Option 1 is retained 
4.3.8.   Single Verifier Issue and Independent
Technical Review
According to the MRG a verifier means a
competent, independent, accredited verification body or person with
responsibility for performing and reporting on the verification process, in
accordance with the detailed requirements established by the Member State
pursuant to Annex V of the Directive 2003/87/EC. Given this definition a
verifier could also be a single person (hereafter: "single verifier")
provided that he has all the competencies required and he meets the process criteria.
A single verifier should also be a legal entity. 
In Germany[22], there are two procedures for the accreditation of verifiers:
EMAS-verifiers, who have been accredited by the German Accreditation Body of
Environmental Verifiers (DAU) can act as EU-ETS verifiers, and so can experts
(“Sachverständige”) for verification under the EU-ETS which have been approved
(“bestellt”) by their local Chamber of Commerce. The routes both cover issues
like the EU-ETS Directive, the MRG as well as a large number of relevant technical
standards (e.g. ISO)[23]. The first route is
under the German Environmental Auditing Law, the second under the Trade,
Commerce and Industry Regulation Act. In both cases only an application with
the DEHSt for a listing as an EU-ETS verifier is necessary to be allowed to perform
verifications under the EU-ETS. The DEHSt will not require further exams or
checks. The listing serves as formal acceptance and allows verification
activities only for the scope, which was covered under the exams taken under
the two routes (e.g. specific NACE-codes). The accreditation is not limited
time-wise and there are no reviews of a verifier’s performance after he has
been listed. Currently around 140 verifiers are listed with the DEHSt. Besides
verification of emission reports, verifiers can also be accredited for the
verification of allocation applications, which also has to be verified in
Germany. In most cases, verifiers are listed for both activities.
In the period between 2010 and 2013 the Accreditation
Regulation will not apply immediately to current non-EA members that have
single verifiers. This will be the case as from 2013 when the Accreditation and
Verification Regulation to be prepared under the revised EU ETS Directive will
refer to the Accreditation Regulation and require verifiers in all Member
States to be accredited. From 2013 onwards the EU ETS accreditation scheme for
EU ETS under the Accreditation Regulation (EC) No 765/2008 will apply. When
setting up an accreditation scheme for EU ETS attention should be paid to the
position of single verifiers.
According to section 5.5 of EA 6/03 the
draft verification report shall be subjected to an independent review prior to
a decision being made to issue the verification report, unless regulated
differently in national legislation. The process of an independent review
serves a proof reading function. It is perceived to be a crucial concept for
all verifications in all sectors and for all levels of complexity (hence
assessment of risk cannot lead to fully deleting the step in the verification
process). 
Another option would be to waive the
technical review in certain cases, such as when a verifier verifies for example
simple and small installations emitting less than 25,000 tonnes of CO2 per
year.
An independent review should not be waived
for single verifiers. Especially for complex installations and large
installations, independent review is an important quality assurance instrument
that is needed to provide a final check and correct mistakes. Single verifiers
are more prone to pressure by market players. Independent review would
therefore also be an important quality assurance instrument for single
verifiers.
Accreditation Regulation (EC) No 765/2008
sees to the accreditation of conformity assessment bodies. Conformity
assessment body means a body that performs conformity assessment activities
including calibration, testing, certification and inspection.[24] 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 could be a person. 
The competence process
should also be applicable to single verifiers so that the single verifier sees
to it that he remains competent to perform the verification activities and documents
how he meets the competence requirements and what he is doing to keep himself
up to date. However, some parts of the competence process such as continuously
monitoring competence of single verifiers by performing internal audits and
observations could be hard to meet for single verifiers.
Austria and Germany were of the opinion
that independent review for single verifiers does not have added value and
would lead to extra costs since single verifiers have to hire somebody to do
the independent review in that case.
Option 1:   Single verifiers) 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. According to the EA 6/03 the draft
verification report shall be subjected to an independent review prior to a
decision being made to issue the verification report, unless regulated
differently in national legislation. The process of an independent review
serves a proof reading function. It is perceived to be a crucial concept for
all verifications in all sectors and for all levels of complexity (hence
assessment of risk cannot lead to fully deleting the step in the verification
process). 
Option 2:   Single verifiers 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.[25]
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. Moreover a single verifier can be certified as a natural person
even in this case independent technical review, as any other equivalent
requirement to accreditation, will have to be put in place. 
An independent review should not be waived
for single verifiers. Especially for complex installations and large
installations independent review is an important quality assurance instrument
that is needed to provide a final check and correct mistakes. Single verifiers
are more prone to pressure of the market. Independent review would therefore
also be an important quality assurance instrument for single verifiers. Option
2 is fully in line with the original requirements set-up by the IA of Directive
2009/29
The adoption of Option 2 will result in
Categories II  to I savings and increased confidence in the system. The cost of
not having Independent Technical Review (Option 1) could result in more
mistakes and litigation from the verification side, therefore falling into
Category V.
 Option 1: This option will limit the effectiveness of the system.   Option 2: Single verifiers (as legal person only) are allowed to perform verification and an Independent Technical Review is required to guarantee Quality assurance   Option 2 is retained 
4.3.9.   Content of the verification report
Section 10.4.2 (e) of the MRG states basic
requirements regarding the content of the verification report, including the
verification methodology, the findings and the verification opinion. However,
the MRG does not include detailed provisions on what information or level of
detail needs to be provided. The result is that there is no common approach regarding
the contents and level of detail of a verification report, again making it
difficult to achieve confidence that there is a common-level playing field.
Nineteen Member States  provide
a template for the verification report, covering most of the MRG requirements.
Several Member States used the
template developed by the UK, although different optimisations were made. The
remainder of Member States
provides lists with minimum requirements which also
generally comply with the MRG. These minimum requirements were found to be
rather focused on the verification opinion and did not require detailed
information concerning the verification methodology.
A set of common requirements is developed in
the A&V Regulation. Such requirements should be based on the current
verification report requirements in the EA 6/03 and include information
allowing to understand the approaches used by the verifier and findings on at
least a medium level of detail. 
An exemplary template and guidance with a
number of sectoral examples could greatly support implementation of the more
precise requirements on how to include recommendations, reporting on open
non-material misstatements and non-conformities in the verification report and
how CAs should address these.
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. Such requirements
should be based on the current verification report requirements in the EA 6/03
and based on existing best practices. They include sufficient information to allow
understanding of the approaches used by the verifier and of the findings and
decisions, to at least a medium level of detail. 
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. In particular the report should consist of the following:
confirmation of the objectives of the verification;   the scope of the
verification; criteria which were used to verify the
operator’s or aircraft operator’s report, including the permit, where
applicable, and versions of the monitoring plan approved by the Competent
Authority as well as the period of validity for each monitoring plan; aggregated emissions; the verification opinion statement with 
reasonable level of assurance; a description of any identified misstatements
and non-conformities that were not corrected before the issuance of the
verification report; the dates on which site visits
were carried out; information on whether any site visits were waived as well as the reasons for
waiving these site visits.
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.
Having a more uniform and standardised
approach towards the finalisation of the verification report could result in
situation where prices and verification costs will be more equitable and
comparable. Therefore the final result will be positive in terms of
facilitating transparency of the process and would guarantee a real added value
in terms of monitoring and reporting;
The adoption of Option 2 will result in
additional costs for verification (possible ½ day increase) but these costs
will be directly proportional to savings for Competent Authorities that will
have to spend a considerable lower amount of time checking the verification reports.
Therefore Option 2 will be in the order of Categories III (cost neutral) to
Category II (limited savings). Option 2 is fully in line with the original
requirements set-up by the IA of Directive 2009/29. 
 Option 1: This option will maintain the generic requirements stated in the MRG Section 10.4.2 (e) but thus will limit the effectiveness of the system.   Option 2: Develop a more detailed list of requirements likely to result in a slight increase in verification costs but these will be balanced by greater transparency of the verification exercise Option 2 is retained 
4.4.      Assessment of cumulative
impacts of preferred options
Consistent and comparable level of accreditation
and verification: 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 accreditation
and verification 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. Consistent requirements applied in this way will improve the
quality of verifications and ability to determine and correct misstatements
(errors, omissions and misrepresentations), thus ensuring better data quality.
Data integrity will therefore be improved and maintained in the longer term. As
stated by Directive 2009/29, promulgating regulations on verification only once
at EU level, that apply directly within Member States is arguably the most
efficient way to achieve a harmonised approach to verification since once
passed they apply directly to individuals and there is no need to turn the
requirements into national legislation and no delays in their application.
Provisions foreseen in the two regulations under examination do answer this
requirement.
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). This also relies on greater harmonisation
of verification requirements across Member States, greater communication
between Member States and assurance that poor performing verifiers will be
dealt with by Member States accreditation agencies.
Improving cost-effectiveness: The development of one set of EU wide rules on accreditation and
verification will have significant cost savings for Member States after an
initial period of adjustment. For example, many Member States are now looking
to update their guidance and therefore a consistent set of requirements set at
a European level will avoid each Member States going through the process again.
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.
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 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.
Table 8 - Overview summary
 Policy options || Option 1 || Option 2 || Costs/savings 
 Accreditation 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
5.         Conclusion 

 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.
 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.
 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.
 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] The most recent one of a series of reports is: Support to the
Commission for the Review of Permits, Monitoring Plans and Verification Reports
in the EU ETS at the level of the Member States for the 2008-2009 Compliance
Cycle 
[2] http://ec.europa.eu/clima/consultations/0010/index_en.htm
[3] 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.
[4] COM/2008/16 of 23.01.2008 , p. 71
[5] SEC(2007) 174
[6] PwC, 2006 ETS Compliance Review Report
[7] DE, DK, FI, UK, HU, IT, NO, PL, PT, SE, SI
[8]  COM/2008/16 of 23.01.2008 , p. 67
[9] COM/2008/16 of 23.01.2008, p. 75
[10] COM/2008/16 of 23.01.2008, p. 67
[11] The IPCC 2006 GL specifically name urea and methanol production as
such cases. Where CO2 is transferred for such production purposes,
double counting of emissions can occur if emissions are accounted for both
under the EU ETS and under the national inventory.
[13] 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.
[14] Business Case ETERP, A common IT an answer to the
case for change towards a fully electronic ‘Emissions Trading Report Process,
PwC, draft 07, 29 April 2011, p.12
[15] PwC, 2006 ETS Compliance Review Report
[16] Article 10 (1) Proposed accreditation regulation.
[17] Article 10 (1) Proposed accreditation regulation.
[18] Inherent risk means the susceptibility of a
parameter in the annual emission report to material misstatements assuming that
there were no related control activities (section 2 (5) (c) MRG).
[19] Control risks means the susceptibility of a
parameter in the Emission report to material misstatements that will not be
prevented or detected and corrected on a timely basis by the control system
(section 2 (5)a) MRG).
[20] Detection risk means the risk that the verifier will
not detect a material misstatement or a material non-conformity (section 2 (5)
(b) MRG). 
[21] Verification risk means the risk that the
verifier expresses an inappropriate verification opinion. Verification risk is
a function of inherent risks, control risks, and the detection risk (section 2
(5) (d) MRG).
[22] Source: Evaluation Project of the Second Verification Cycle (by
PwC, Member State fiche drafted by Ecofys, 2008)
[23] These do not cover EA 6/03 and ISO 45011.
[24] Article 2 (16) AR
[25] Article 2 (16) AR