Credible information on emissions is the fundamental underlying basis for an emissions trading scheme. It is therefore important that emissions are accurately and consistently monitored (M), reported to regulators (R), and verified (V). Establishing a legal MRV framework to track compliance guarantees that a “ton is always a ton.” This, together with enforcement provisions including sanctions for non-compliance, ensures that the system is trustworthy, justifies allowance prices and helps its environmental effectiveness.

Emissions can be measured by direct emissions monitoring, where real time emissions are measured by a device (such as a Continuous Emissions Monitor or CEM System). Alternatively, emissions levels can be calculated using emission factors of fuels or of chemical processes. In either case, emissions then need to be reported to the relevant authority on a regular basis. It is important to have a robust quality assurance and quality control system in place which conforms to established standards. The system can then be audited or verified either by government inspectors or third party experts to ensure a sound and effective trading scheme. In addition, some schemes appoint accreditation entities which certify a private organization´s competence in verifying compliance of covered emission sources.

By creating incentives for compliance, the design of an ETS can help minimize the need for penalties. Enforcement provisions that identify consequences for the event that entities are non-compliant can help the system function. These may include monetary sanctions, criminal penalties, or tightened emission caps for the following monitoring period. 

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Monitoring, Reporting, Verification (MRV) Enforcement
Canada - Ontario Cap-and-Trade Program

Reporting frequency: Annually

Facilities and natural gas distributors emitting more than 10,000t CO2e, fuel suppliers that sell more than 200L of fuel annually, and electricity importers must report their emissions.

Verification: Third party verification is required for capped emitters.

If an entity fails to surrender sufficient allowances to cover their emissions, they must surrender four times the number of missing allowances (three times the shortfall plus the original shortfall, i.e., four times the number of the shortfall).

Failure to surrender allowances also renders the entity liable to a minimum fine of CAD 25,000/day (EUR 16,971/day) until the remaining allowances are surrendered (with a maximum fine of CAD 6 million [EUR 4.07 million]). Subsequent offences attract higher fines.

Individuals (persons) are liable for at least CAD 5,000/day (EUR 3,394) with a maximum fine of CAD 4 million (EUR 2.72 million) and imprisonment for up to five years.  Subsequent offences attract higher fines.

Penalties apply for other violations.

Canada - Québec Cap-and-Trade System

Reporting frequency: Once a year. Report to be submitted by 1 June of each year.
 
Verification: Emitters participating in ETS (higher threshold than those with regulatory reporting requirement) must send a verification report carried out by an organization accredited to ISO 14065.

Framework: Regulation on the mandatory reporting of certain emissions of contaminants into the atmosphere is outlined in the Environment Quality Act.

More information:

For non-compliance, entities can be fined CAD 3,000-500,000 (EUR 2,145-357,564) and spend up to 18 months in jail in the case of a natural person, and CAD 10,000-3,000,000 (EUR 7,151-214,538) in the case of a legal person.

Fines are doubled in the case of a second offense. In addition, the Minister of Sustainable Development, the Environment and the Fight against Climate Change may suspend the allocation to any emitter in case of non-compliance.

A covered entity that fails to cover its real and verified GHG emissions with enough allowances on 1 November following the end of a compliance period, must remit each missing allowance and will have to remit three additional allowances for each allowance it failed to remit to the Minister.

The emitter responsible for that entity would also be committing an infraction, subject to financial penalties, for each compliance instrument not surrendered as part of the compliance obligation.

China - Beijing pilot system

Reporting Frequency: Annual reporting of CO2 emissions.

Verification: Third-party verification is required.

Framework: The Beijing DRC has released guidelines for monitoring and reporting for the following seven sectors: heat production and supply, thermal power generation, cement, petrochemicals, transport, other industrial enterprises, and the service sector.

Other: In addition to the ETS participants, all legal entities with energy consumption of more than 2,000 tons of standard coal equivalent have to report their emissions. Verification is not required.

Penalties for failing to submit emissions or verification reports on time can result in fines up to 50,000 CNY (EUR 7,34). Furthermore, companies failing to surrender enough allowances to match their emissions are fined three to five times the average market price over the past six months for each missing allowance.

China - Chongqing pilot system

Reporting Frequency: Annual reporting of GHG emissions.

Verification: Third-party verification is required.

Framework: The Chongqing Development and Reform Commission (DRC) released a guiding document for monitoring and reporting that includes methods for different emissions sources: combustion, industrial processes and electricity consumption.

According to the ‘Interim Administrative Measures for the Chongqing ETS’ published in May 2014, there are no financial penalties for non-compliance. The punishments may include media reporting and public exposure of the non-compliance; disqualification from the energy saving and climate subsidies and associated awards for three years; and a record entered on the State Owned Enterprise (SOE) performance assessment system.

China - Fujian pilot system

Reporting Frequency: Annual reporting of CO2 emissions before end of February and submission the verified report by end of April.

Verification: Third-party verification is required.

Framework: The Fujian DRC and Fujian Statistical Bureau have jointly released a guiding document on monitoring and reporting that includes a monitoring plan template, using national measuring and reporting guidelines. In addition, the Fujian DRC and Fujian Quality and Technical Supervision Bureau also jointly released a measure for the administration of third-party verifiers, which specifies criteria for the verifiers and their staff.

Penalties for failing to submit an emissions or verification report on time, providing fake information, or disturbing the verification process range from CNY 10,000 to CNY 30,000 (EUR 1,35 to EUR 4,04). Companies failing to surrender enough allowances to match their emissions are fined one to three times the average market price of the past 12 months, with the maximum limit of CNY 30,000. Twice the amount of the missing allowances can be withdrawn from the account of the company or deducted from next year's allocation. Penalties for the misconduct of trading entities and their staff, such as not publishing relevant trading info or leaking commercial secrets, could range from CNY 10,000 to CNY 30,000.

China - Guangdong pilot system

Reporting Frequency: Annual reporting of CO2 emissions.

Verification: Third-party verification is required.

Framework: The Guangdong Development and Reform Commission (DRC) has released guidelines for monitoring and reporting for the compliance and reporting sectors.

Penalties for failing to submit emissions or verification reports on time range from CNY 10,000 (EUR 1,309) to CNY 50,000 (EUR 6,544). Furthermore, companies failing to surrender enough allowances to match their emissions will have twice the amount of allowances deducted from their allocation for the following year and be fined CNY 50,000 (EUR 6,544).

China - Hubei pilot system

Reporting Frequency: Annual reporting of CO2 emissions.

Verification: Third-party verification is required.

Framework: The Hubei DRC has released a guiding document on monitoring and reporting that includes sector-specific guidance for the following sectors: power, glass, aluminum, calcium carbide, pulp and paper, automobile manufacturing, iron and steel, ferroalloys, ammonia, cement, and petroleum processing.

Penalties for failing to submit an emissions or verification report on time range from CNY 10,000 (EUR 1,354) to CNY 30,000 (EUR 4060). Trade participants that manipulate the market face up to CNY 150,000 (EUR 20,306) in fines. Furthermore, companies that fail to surrender enough allowances to match their emissions will be deducted twice the amount of allowances from next year's allocation and are fined one to three times the average market price for every allowance, with a maximum limit of CNY 150,000 (EUR 20,306).

China - Shanghai pilot system

Reporting Frequency: Annual reporting of CO2 emissions.

Verification: Third-party verification is required.

Framework: The Shanghai Development and Reform Commission (DRC) has released guidelines for monitoring and reporting for the following ten sectors: Iron and steel, electricity and heat, chemicals, non-ferrous metals, non-metallic mineral products, textiles and paper, aviation, shipping, large buildings (hotels, commercial and financial) and transport stations.

Penalties for failing to submit emission report or verification report on time or providing fraudulent information range from CNY 10,000 (EUR 1,309) to CNY 50,000 (EUR 6,544).

Between CNY 50,000 (EUR 6,544) – CNY 100,000 (EUR 13,088) can be imposed for non-compliance, besides surrendering the adequate amount of allowances. On top of the financial sanctions, further sanctions may be imposed, e.g., entry into the credit record of the company, publication on the internet, cancelation of ability to access special funds for energy conservation and emissions reduction measures.

China - Shenzhen pilot system

Reporting Frequency: Annual reporting of CO2 emissions with a tier approach taking into account the size of the company.

Verification: Third-party verification is required.

Institutes providing fake information can be fined for the difference between reported and actual emissions at the price three times of the average of the past six months. Penalties for disturbing the market order can cost up to CNY 100,000 (EUR 13,088). Companies failing to surrender enough allowances to match their emissions are fined three times the average market price of the past six months. The missing allowances can be withdrawn from the account of the company or deducted from next year's allocation.

China - Tianjin pilot system

Reporting Frequency: Annual reporting of CO2 emissions.

Verification: Third-party verification is required.

In case of non-compliance, companies are disqualified for preferential financial support and policies for three years. There are no financial penalties for non-compliance.

EU Emissions Trading System (EU ETS)

Reporting frequency: Annual self-reporting based on harmonized electronic templates prepared by the European Commission.

Verification: Verification by independent accredited verifiers is required before 31 March each year.

Framework: For Phase three onwards, European Commission Regulations have been published for monitoring and reporting, and for verification and accreditation of verifiers. A monitoring plan is required for every installation and aircraft operator (approved by competent authority).

Entities must pay an 'excess emissions penalty' of EUR 100/tCO2 emitted for which no allowance has been surrendered in due time. The name of the non-compliant operator is also published. Different penalties exist at the national level for other forms of non-compliances.

Japan - Saitama Target Setting Emissions Trading System

Reporting Frequency: Annual reporting. All seven GHGs have to be monitored and reported: CO2 (non-energy related), CH4, N2O, PFCs, HFCs, SF6 and NF3.

Verification: Verification is required only when it is used for compliance.

Framework: Participants are required to report their verified emissions based on the Saitama Prefectural Government Monitoring/Reporting Guidelines and the Saitama Prefectural Government Verification Guidelines.

Other: Verified reduction amounts can be used for compliance, but cannot be traded with other facilities except for energy-related CO2.

None

Japan - Tokyo Cap-and-Trade Program

Reporting Frequency: Participants are required to annually submit (fiscal year) their emission reduction plans and emissions reports. Seven GHG gases have to be monitored and reported: CO2 (non-energy related), CH4, N2O, PFCs, HFCs, SF6 and NF3.

Verification: These reports also require third-party verification.

Framework: These are based on "TMG Monitoring/Reporting Guidelines" and "TMG Verification Guidelines".

Other: CO2 emission factors are fixed during the five year compliance period.

Verified reduction amounts can be used for compliance, but cannot be traded with other facilities except energy-related CO2. Verification is required only when it is used for compliance.

In case of non-compliance, the following measures may be taken in two stages:

First stage: The Governor orders the facility to reduce emissions by the amount of the reduction shortfall multiplied by 1.3.

Second stage: Any facility that fails to carry out the order will be publicly named and subject to penalties (up to JPY 500,000 [EUR 4, 113]) and surcharges (1.3 times the shortfall).

Korea Emissions Trading Scheme

Reporting Frequency: Annual reporting of emissions must be submitted within three months from the end of a given compliance year (by the end of March).

Verification: Emissions must be verified by a third-party verifier.

Other: Emissions reports are reviewed and certified by the Certification Committee of the Ministry of Environment within five months from the end of a given compliance year (by the end of May).

If the liable entity fails to report emissions correctly, the report will be disqualified.

The penalty shall not exceed three times the average market price of allowances of the given compliance year or KRW 100,000/ton (EUR 70).

New Zealand Emissions Trading Scheme (NZ ETS)

Reporting frequency: Most sectors are required to report annually.

Verification: Self-reporting supplemented by audits (methodology is consistent with NZ income tax auditing procedures). Third party verification is only required when participants apply for the use of a unique emissions factor.

Other: Post-1989 forestry participants are required to report emissions at the end of each five year ‘mandatory emissions reporting period’, with the option to report annually as well.

An entity that fails to surrender emission units when required to, will have to surrender units and pay a penalty of NZD 30 (EUR 19.58) for each unit.

Entities can be fined up to NZD 24,000 (EUR 15,67) for failure to collect emissions data or other required information, calculate emissions and/or removals, keep records, register as a participant, submit an emissions return when required, or notify the administering agency or provide information when required to do so.

Entities can also be fined up to NZD 50,000 (EUR 32,64) for knowingly altering, falsifying or providing incomplete or misleading information about any obligations under the scheme, including emissions return. This penalty and/or imprisonment of up to five years also apply to entities that deliberately lie about obligations under the NZ ETS to gain financial benefit or avoid financial loss.

Swiss ETS

Monitoring plans are required for every installation (approved by a competent authority) no later than three months after the registration deadline.

Reporting Frequency: Annual monitoring report, based on self-reported information (by 31 March). 

Verification: The Federal Office for the Environment may order third party verification of the monitoring reports.

The penalty for failing to surrender sufficient allowances is set 125 CHF/tCO2 (103.89 EUR/tCO2). In addition to the fine, entities must surrender the missing allowances and/or international credits in the following year.

USA - California Cap-and-Trade Program

Reporting frequency: Once a year

Verification: Emission data reports and their underlying data require independent third-party verification annually for all entities covered by the program (generally defined as entities with emissions that equal or exceed 25,000 tCO2e (metric) per year).

Other: Reporting is required for most operators at or above 10,000 tCO2e (metric) per year. Operators must implement internal audits, quality assurance and control systems for the reporting program and the data reported.

More information:
Mandatory Greenhouse Gas Reporting Regulation - Overview

Penalties may be assessed pursuant to Health and Safety Code section 38580 (misdemeanor, fines, and possibly imprisonment).

There are separate and substantial penalties for mis- or non-reporting under the Mandatory GHG Reporting Regulation.

Under the Cap-and-Trade Regulation, if an entity fails to surrender a sufficient number of compliance instruments to meet its compliance obligation, there is a separate violation of this article for each required compliance instrument that has not been surrendered, or otherwise obtained by the Executive Officer.

A separate violation accrues every 45 days after the end of the Untimely Surrender Period for each required compliance instrument that has not been surrendered.

Adjustment to Compliance Obligation: Outside of enforcement, there is also an automatic adjustment to the compliance obligation due equal to the number of allowances short for that compliance surrender deadline multiplied by four. A quarter of that amount is retired and the remaining amount is auctioned by the state.

USA - Regional Greenhouse Gas Initiative (RGGI)

Framework: Emissions data for emitters are recorded in the United States Environmental Protection Agency's (US EPA) Clean Air Markets Division database in accordance with state CO2 Budget Trading Program regulations and US EPA regulations. Provisions are based on the US EPA monitoring provisions.

Data are then automatically transferred to the electronic platform of the RGGI CO2 Allowance Tracking System, which is publicly available.

Penalties for non-compliance are set by each state; in case of excess emissions, compliance allowances for three times the amount of excess emissions have to be surrendered in future periods.

Canada - Nova Scotia
China

Reporting Frequency: Annual

Verification: The NDRC is currently drafting regulation for third-party verification for the national ETS. Before this is finalized, local DRCs are asked to select suitable institutions and personnel to carry out the verification tasks according to suggested requirements by the NDRC.

Framework: From 2013-2015, the NDRC has released a series of MRV guidelines covering a total of 24 sectors. In 2015, the NDRC further provided supplementary data sheets on GHG MR for the 8 ETS covered sectors as well as ‘Reference Guidance on Third-party Verification of China ETS’ and ‘Reference Qualification on Third-party Verification Body and Verifiers of China ETS’.

To support the NDRC drafting of the national allocation plan in 2016, local DRCs collected emissions reports from entities in their regions for 2013-2015 in accordance with the MRV sector guidelines. Companies were also required to report production and other industry-specific data that may be used for benchmark allocation. The reports had to be verified by third-party verifiers. Both the emissions and verification reports had to be checked by local DRCs and were sent to the NDRC before the end of June 2016.

No information available yet.

Kazakhstan Emissions Trading Scheme (KAZ ETS)

Reporting is required for businesses or financial facilities above the 20,000 tCO2/year threshold.

Aside from CO2, reporting is also required for CH4, N2O and PFCs emissions.

Reporting Frequency: Annually, with reporting due on 1 April.

Verification: Emission data reports and their underlying data require accredited third-party verification.

Other: Installations below the compliance threshold must submit non-verified inventory reports.

In 2013, penalties for non-compliance were waived. The current non-compliance penalty is approximately EUR 30/tCO2.

Ukraine
Brazil
Chile

Design and implement of an MRV framework and Registry that allows the recording and tracking of emissions and emission permit transactions is part of the Chilean Market Readiness Proposal (MRP).

No information available yet.

Japan
Mexico
Russia
Taiwan

Reporting Frequency: Annual reporting of GHGs (CO2, CH4, N2O, SF6, NF3, PFCs and HFCs) for entities from certain sectors with annual emissions greater than 25,000 tCO2e.

Verification: Third-party verification is required.

Framework: As of 2004, Taiwan introduced voluntary GHG reporting under the Air Pollution Control Act. This became mandatory in 2013 and is continued under the Greenhouse Gas Reduction and Management Act.

No information available yet.

Thailand
Turkey

The Turkish MRV legislation establishes an installation-level system for CO2 emissions for roughly 1,000 entities. Sector coverage includes the energy sector (combustion fuels >20MW) and industry sectors (coke production, metals, cement, glass, ceramic products, insulation materials, paper and pulp, chemicals over specified threshold sizes/production levels).

Entities had until October 2014 to submit their first monitoring plans and will submit verified emissions reports for 2015 and 2016 to the Ministry of Environment and Urbanization by 30 April 2017. Verifiers will be accredited by the Turkish Accreditation Organization by 2019. During 2016-2018, the Ministry of Environment and Urbanization will provide training, examination and licensing services.

Entities that fail to comply with the Turkish MRV regulation are subject to the generic data reporting requirements and related sanctions under the Turkish Environmental Law No. 2872.

USA - Oregon
USA - Washington
Vietnam

Studies

Fuessler, J., et al. (2012). Chile PMR Activity 1. MRV, Compliance and Registry. Infras, Deuman and Perspectives.