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. 

Back to Top
Monitoring, Reporting, Verification (MRV) Enforcement
Canada - Nova Scotia

In Nova Scotia, MRV is referred to as “Quantification, Reporting, and Verification.”

REPORTING FREQUENCY: Annually. Report for 2018 to be submitted by 1 June 2019; verification by 1 September 2019. Starting in 2020, report and verification must be submitted by 1 May of each year for the previous calendar year (1 May 2020 for 2019, 1 May 2021 for 2020, 1 May 2022 for 2021, 1 May 2023 for 2022).

VERIFICATION: Reports must be verified by an accredited third-party organization. Lists of eligible verification bodies are available at:
Standards Council of Canada and the American National Standards Institute.

FRAMEWORK: The rules for reporting GHG emissions are outlined in Nova Scotia’s ‘Quantification, Reporting, and Verification of Greenhouse Gas Emissions Regulations’ and ‘Standards for Quantification, Reporting, and Verification of Greenhouse Gas Emissions.’

Participants who do not surrender enough allowances at the end of the compliance period will pay three times the latest auction settlement price per allowance they are short.

Administrative penalties for violations of other cap-and-trade regulations will be determined in further regulations.

Canada - Québec Cap-and-Trade System

REPORTING FREQUENCY: One year. Report to be submitted by 1 June of each year.

VERIFICATION: Emitters (and voluntary 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.’

For noncompliance, entities can be fined CAD 3,000500,000 (USD 2,315-385,875) and spend up to 18 months in jail in the case of a natural person, and CAD 10,000-3,000,000 (USD 7,718-2,315,252) in the case of a legal person.

Fines are doubled in the case of a second offence. In addition, the Minister of the Environment and the Fight against Climate Change may suspend the allocation to any emitter in case of noncompliance.

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 person with legal responsibility 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 ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions.

VERIFICATION: Third-party verification is required. In addition, further validation is carried out by government-assigned experts and random checks are conducted by fourth-party verifiers. Also, special attention is given to those only with mandatory reporting obligation while its reported emissions are close to 5,000 tCO2.

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 tce 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 (USD 7,558). Furthermore, companies failing to surrender enough allowances to match their emissions are fined up to five times the average market price over the past six months for each missing allowance. Other nonfinancial penalties include negative impacts on access to bank loans and subsidy programs.

China - Chongqing pilot ETS

REPORTING FREQUENCY: Annual reporting of GHG emissions.

VERIFICATION: Third-party verification is required.

FRAMEWORK: The Chongqing DRC released a guiding document for monitoring and reporting that includes methods for different emissions sources, including: combustion, industrial processes, and electricity consumption.

There are no financial penalties for non-compliance. Non-financial penalties may include public reporting, disqualification from the energy saving and climate subsidies and associated awards for three years, and a record entered in the State Owned Enterprise performance assessment system.

China - Fujian pilot ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions.

VERIFICATION: Third-party verification is required. In addition, further validation is carried out by government-assigned experts and random checks are conducted by fourth-party verifiers. Special attention is also given to those only with mandatory reporting obligation while its reported emissions are close to 5,000 tCO2.

FRAMEWORK: The Fujian DRC and the 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 the 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 false information, or disturbing the verification process range from CNY 10,000 (USD 1,512) to CNY 30,000 (USD 4,535). Companies failing to surrender enough allowances to match their emissions are fined between one to three times the average market price of the past 12 months, with the maximum limit of CNY 30,000 (USD 4,535). 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 information or leaking commercial secrets, could range from CNY 10,000 (USD 1,512) to CNY 30,000 (USD 4,535).

China - Guangdong pilot ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions.

VERIFICATION: Third-party verification is required. In addition, further assessment of all validation reports was carried out by the government. On-site cross re-verifications were also conducted by third parties for all compliance entities with questionable verification reports as well for randomly selected entities. These have been shifted to fourth-party assessment and verification since the 2016 compliance period. 

FRAMEWORK: The Guangdong DRC has released guidelines for monitoring and reporting for the compliance and reporting sectors.

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

Penalties for failing to submit emissions or verification reports on time range from CNY 10,000 (USD 1,512) to CNY 50,000 (USD 7,558). Furthermore, companies failing to surrender enough allowances to match their emissions will be deducted twice the amount of allowances from the following year’s allocation and are fined CNY 50,000 (USD 7,558). Other non-financial penalties include negative impacts on access to bank loans and subsidy programs.

China - Hubei pilot ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions.

 

VERIFICATION: Third-party verification is required. In addition, further validation is carried by government-assigned experts and random checks are conducted by fourth-party verifiers. Special attention is also given to those only with mandatory reporting obligation while its reported emissions are close to 26,000 tCO2.

 

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 (USD 1,512) to CNY 30,000 (USD 4,535). Trade participants that manipulate the market face up to CNY 150,000 (USD 22,673) 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 (USD 22,673).

China - Shanghai pilot ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions.

VERIFICATION: Third-party verification is required. Besides this, the government also conducts quality checks.

FRAMEWORK: The Shanghai DRC has released monitoring and reporting guidelines for the following 10 sectors: iron and steel, electricity and heat, chemicals, nonferrous metals, non-metallic mineral products, textiles and paper, aviation, shipping, large buildings (hotels, commercial, and financial), and transport stations.

Penalties for failing to submit an emissions report or verification report on time or providing fraudulent information range from CNY 10,000 (USD 1,512) to CNY 50,000 (USD 7,558).
Between CNY 50,000 (USD 7,558) and CNY 100,000 (USD 15,115) can be imposed for non-compliance, besides surrendering the adequate amount of allowances. Further sanctions may also be imposed, such as 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 ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions with a tiered approach taking into account the size of the company. A quarterly emissions report is also submitted. In addition, covered industrial entities must annually submit a statistical indicator data report.

VERIFICATION: Third-party verification of the emissions report is required. Covered entities cannot use the same verifiers for three consecutive years. For the statistical indicator data report, the municipal statistical department may entrust the statistical indicator data verification agency to verify. In addition, further random checks of emission reports and verification reports are conducted by the government. The proportion of these checks shall not be less than 10% of the total number of covered entities. The competent authority may assign this inspection work to a specialized agency.

FRAMEWORK: The Shenzhen DRC has released a guiding document on monitoring and reporting that includes sector-specific guidance for the covered sectors.

Institutes providing false information can be fined for the difference between reported and actual emissions at three times the average allowance price of the past six months. Penalties for disturbing the market order can cost up to CNY 100,000 (USD 15,115). 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. Other nonfinancial penalties include public reporting, reporting to relevant credit information of public banks, disqualification from financial subsidies (for five years), and a record entered in the State Owned Enterprise performance assessment system.

China - Tianjin pilot ETS

REPORTING FREQUENCY: Annual reporting of CO2 emissions.

VERIFICATION: Third-party verification is required. Covered entities cannot use the same verifiers for three consecutive years.

FRAMEWORK: The Tianjin DRC has released a guiding document on monitoring and reporting that includes sector-specific guidance for the covered sectors.

In case of noncompliance, companies are disqualified for three years for preferential financial support and other national supporting policies, i.e., on recycling economy, energy-saving measures, and emission reductions. 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.

MRV FRAMEWORK: Since phase 3, the MRV framework for the EU ETS has been further harmonized. European Commission regulations now apply for emissions monitoring and reporting, as well as 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 (USD 118/tCO2) for each tCO2 emitted for which no allowance has been surrendered. The name of the noncompliant operator is also published. Different penalties exist at the national level for other forms of noncompliance.

Japan - Saitama Target Setting Emissions Trading System

REPORTING FREQUENCY: Annual emissions reporting, including emission reduction plans. All seven GHGs must be monitored and reported: CO2, CH4, N2O, PFCs, HFCs, SF6, and NF3.

VERIFICATION: These reports require third-party verification by the end of adjustment period.

FRAMEWORK: These are based on ‘Saitama Monitoring/Reporting Guidelines’ and ‘Saitama Verification Guidelines.’

None

Japan - Tokyo Cap-and-Trade Program

REPORTING FREQUENCY: Annual emissions reporting, including emission reduction plans. All seven GHGs have to be monitored and reported: CO2, CH4, N2O, PFCs, HFCs, SF6, and NF3. Large tenants, i.e., those with a floor space above 5000m2 or over six million kWh electricity use per year, are required to submit their own emissions reduction plan to TMG in collaboration with building owners.

VERIFICATION: These annual reports require third-party verification.

FRAMEWORK: These are based on ‘TMG Monitoring/Reporting Guidelines’ and ‘TMG Verification Guidelines.’

In the case of noncompliance, the following measures may be taken:

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 [USD 4,528]) and surcharges (1.3 times the shortfall).

Kazakhstan Emissions Trading Scheme

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

Annual reporting is required for operators of installations with emissions between 10,000 tCO2/year and 20,000 tCO2/year (so-called “subjects to administration”), even though these operators are not required to participate in the ETS or to verify annual emission reports.

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

VERIFICATION: Emissions data reports and their underlying data require accredited third-party verification.

The non-compliance penalty equals five monthly standard units for each tonne (approximately KZT 10,605/tCO2 [USD 31/tCO2]). In 2013 and in 2014, penalties for non-compliance were waived.

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 (MOE) 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 (USD 90.85)/tonne.

New Zealand Emissions Trading Scheme

REPORTING FREQUENCY: Most sectors are required to report annually.

VERIFICATION: Self-reporting supplemented by a program of second- and third-party audits run by the regulator. Participants must seek third party verification if they apply for the use of a unique emissions factor.

An entity that fails to surrender emissions units when required to must surrender the units and pay a penalty of NZD 30 for each unit (USD 20.76) that was not surrendered by the due date. In certain circumstances the penalty may be reduced.

Entities can be fined up to NZD 24,000 (USD 16,607) on conviction 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 (USD 34,598) on conviction 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.

A new “infringement offence regime” is expected to be established from 2020 for minor offences. Infringement offences will result in financial penalties for offenders but not convictions.

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 at CHF 125/tCO2 (USD 127.82/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: One 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 to or exceed 25,000 tCO2e per year).

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

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 Greenhouse Gas Reporting Regulation.’

USA - Massachusetts Limits on Emissions from Electricity Generators

REPORTING FREQUENCY: Regulated entities are required to submit emission reports (by 1 February) and compliance certification reports (by 1 March) indicating emissions and the holding of sufficient allowances, respectively.

VERIFICATION: Emissions must match reports to RGGI and US EPA. Documents (i.e., emissions reports and compliance certification reports) must be certified by a designated representative identified by the facility, and MassDEP may choose to conduct audits.

If the MassDEP establishes that an entity is in violation of compliance, this will be presumed to constitute “a significant impact to public health, welfare, safety or the environment.” In addition to penalties, the regulated entity has to submit three allowances for each tonne of noncompliance.

USA - Regional Greenhouse Gas Initiative (RGGI)

REPORTING FREQUENCY: Compliance is evaluated at the end of each three-year control period. The RGGI program is currently in its fourth three-year control period (2018-2020).

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.

China National ETS

REPORTING FREQUENCY: Annual reporting of emissions to be submitted within a given timeline.

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

FRAMEWORK: MRV guidelines, supplementary data sheets, verification guidelines, and other guidance are available for the eight sectors expected to be covered by the ETS.

From 2013 to 2015, the NDRC released a series of MRV guidelines covering a total of 24 sectors. Supplementary MRV data sheets for the eight sectors expected to be covered under the national ETS, 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,’ were all released in 2016. In 2017, new requirements on data collection, categorization, and verification were added.

OTHER: The MEE is taking efforts to develop the management measure for corporate emissions reports as well as improve the existing guidelines and technical specifications for the national ETS.

Noncompliance would result in punishment, which may include recording the noncompliance information in the national credibility information sharing platform*, although details are yet to be developed.

*The national credibility information sharing platform, developed in 2015, integrates credibility information provided by various departments and regions across the country. As of 2018, it has achieved interconnection with 44 ministries, 31 provinces and autonomous regions, and 65 market institutions.

Colombia
Mexico
Ukraine
USA - New Jersey
USA - Virginia
Brazil
Chile

The current MRV system serves primarily the implementation of the carbon tax. Operators of boilers and turbines of 50 MW or more of thermal capacity are required to monitor and report emissions through government-approved methodologies.

VERIFICATION: Verification procedures are administered by the Superintendence of the Environment under the Ministry of Environment (no third-party verification is currently used).

In the context of the Paris Agreement, the Ministry of Energy is working on the design and implementation of an MRV platform of mitigation actions in the energy sector, as a starting point to build a robust accounting framework under the agreement. This activity is being supported by the PMR, and it is in line with the national MRV platform that is being carried out by the Ministry of Environment.

No information available yet.

Indonesia
Japan
Russia
Taiwan, China

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

VERIFICATION: Third-party verification is required.

FRAMEWORK: Back in 2004, a voluntary GHG reporting under the Air Pollution Control Act, which became mandatory in 2013. Since 2016, GHG reporting and inventory program is mandatory under the GHG Accounting and Registration Regulations, which are authorized by 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 900 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).

MONITORING AND REPORTING: Entities had until October 2014 to submit their first monitoring plans.

VERIFICATION: Entities subsequently submitted verified emissions reports for 2015, 2016, and 2017 to the Ministry of Environment and Urbanization Verifiers were accredited by the Turkish Accreditation Organization in 2018. During 2016–2018, the Ministry of Environment and Urbanization provided training, examination, and licensing services.

OTHER: Entities that fail to comply with the Turkish MRV regulation are subject to sanctions under the Turkish Environmental Law No. 2872.

No information available yet.

USA - New Mexico
USA - Oregon
USA - Washington
Vietnam

Studies

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