MRV & Enforcement
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.
Monitoring, Reporting, Verification (MRV) | Enforcement |
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Canada - Nova Scotia | |
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In Nova Scotia, MRV is referred to as “Quantification, Reporting, and Verification.” | 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. |
Canada - Québec Cap-and-Trade System | |
REPORTING FREQUENCY: One year. Report to be submitted by 1 June of each year. | 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 of the Environment and the Fight Against Climate Change. |
China - Beijing pilot ETS | |
REPORTING FREQUENCY: Annual reporting of CO2 emissions. | Penalties for failing to submit emissions or verification reports on time can result in fines up to 50,000 CNY (USD 7,113). Furthermore, companies failing to surrender enough allowances to match their emissions are fined up to five times the average market price over the previous 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. | There are no financial penalties for noncompliance. Nonfinancial 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. | 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 a 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. | Penalties for failing to submit emissions or verification reports on time range from CNY 10,000 (USD 1,423) to CNY 50,000 (USD 7,113). 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 7,113). Other nonfinancial penalties include negative impacts on access to bank loans and subsidy programs. |
China - Hubei pilot ETS | |
REPORTING FREQUENCY: Annual reporting of CO2 emissions. | 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. | 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). |
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. | 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. | In case of noncompliance, companies are disqualified for three years for preferential financial support and other national supporting policies, e.g., on recycling economy, energy-saving measures, and emission reductions. There are no financial penalties for noncompliance. |
China National ETS | |
REPORTING FREQUENCY: Annual reporting of emissions to be submitted within a given timeline. | 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. |
EU Emissions Trading System (EU ETS) | |
REPORTING FREQUENCY: Annual self-reporting based on harmonized electronic templates prepared by the European Commission. | Regulated entities must pay an excess emissions penalty of EUR 100/tCO2 (USD 112/tCO2) for each tonne of CO2 emitted for which no allowance has been surrendered, next to buying and surrendering the equivalent amount of allowances. The name of the noncompliant operator is also made public. Member states may enforce different penalties 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. | 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 5,000m2or over six million kWh electricity use per year, are required to submit their own emissions reduction plans to the TMG in collaboration with building owners. | In the case of noncompliance, the following measures may be taken: |
Kazakhstan Emissions Trading Scheme | |
REPORTING FREQUENCY: Reporting is required annually for businesses or financial facilities above the 20,000 tCO2/year threshold. | The non-compliance penalty equals five monthly standard units for each tonne (approximately KZT 13,255/tCO2 [USD 35.2/tCO2] in 2020). In 2013 and in 2014, penalties for noncompliance 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). | The penalty shall not exceed three times the average market price of allowances of the given compliance year or KRW 100,000 (USD 85.8)/tonne. |
Mexico | |
REPORTING FREQUENCY: Annual self-reporting based on electronic templates prepared by SEMARNAT. | The system is designed to pose no economic impact on regulated entities; however, in case of noncompliance, entities lose the opportunity to bank unused allowances for the next compliance periods within the pilot. Moreover, noncompliant entities will receive fewer allowances during the operational period of the national ETS (two fewer allowances for each nondelivered allowance during the pilot). |
New Zealand Emissions Trading Scheme | |
REPORTING FREQUENCY: Most sectors are required to report annually; deadline of 31 March to submit emissions return. | Currently, an entity that fails to surrender emissions units when required to must surrender the units and pay a penalty of NZD 30 (USD 19.73) for each unit that was not surrendered by the due date. In certain circumstances the penalty may be reduced. As a part of the review and reform process, the government plans to introduce a new surrender penalty consisting of a cash penalty set at three times the allowance price. |
Swiss ETS | |
Monitoring plans are required for every installation and for every aircraft operator (approved by a competent authority) no later than three months after the registration deadline. | 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: Annually | A covered entity that fails to surrender sufficient compliance instruments to cover its verified GHG emissions on either an annual surrender deadline or at the end of a compliance period must surrender each missing compliance instrument and will have to surrender three additional compliance instruments for each compliance instrument it failed to surrender. |
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. | 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 must submit three allowances for each metric tonne of noncompliance. |
USA - Regional Greenhouse Gas Initiative (RGGI) | |
REPORTING FREQUENCY: Compliance is evaluated at the end of each three-year control period. From the third control period, covered entities have been required to hold allowances equal to 50% of their emissions during each interim control period (the first two calendar years of each control period). | In case of excess emissions, compliance allowances for three times the amount of excess emissions have to be surrendered in future periods. Furthermore, covered entities may also be subject to specific penalties imposed by the RGGI state where the entity is located. |
Colombia | |
German National Emissions Trading System | |
Details are under preparation in a separate regulation. | During the first phase, when allowances are allocated at a fixed price, entities must pay an excess emissions penalty for each tCO2 emitted for which no allowance has been surrendered, which is two times the fixed price. Mistakes in the emissions reports also lead to payments in the equivalent amount. Payment of the penalty doesn’t release from the obligation to surrender allowances to cover the emissions. Entities remain obliged to purchase and surrender the outstanding allowances. |
Montenegro | |
Ukraine | |
USA - Pennsylvania | |
USA - Transportation and Climate Initiative (TCI) | |
USA - Virginia | |
Brazil | |
Chile | |
The current GHG MRV system serves primarily the implementation of the carbon tax. Current regulations determine that operators of boilers and turbines of 50 MW or more of thermal capacity are required to monitor and report emissions through government-approved methodologies. Participation thresholds have been changed by the approved tax reform. With these changes, the carbon tax will apply to entities that emit more than with 25,000 tCO2 and/or 100 tonnes of particulate matter due to combustion processes per year. | No information available yet. |
Indonesia | |
Japan | |
Pakistan | |
Philippines | |
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. | No information available yet. |
Thailand | |
Turkey | |
The Turkish MRV legislation establishes an installation-level system for CO2 emissions for roughly 800 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, and chemicals over specified threshold sizes/production levels). | No information available yet. |
United Kingdom | |
USA - New Mexico | |
USA - New York City | |
USA - North Carolina | |
USA - Oregon | |
USA - Washington | |
Vietnam |
Studies
Fuessler, J., et al. (2012). Chile PMR Activity 1. MRV, Compliance and Registry. Infras, Deuman and Perspectives.Official Websites and Presentations
Australia
National Greenhouse and Energy Reporting
California
Air Resources Board webseite - Greenhouse Gas Emissions Inventory and Mandatory Reporting
EU ETS
European Commission website - Monitoring, reporting and verification of EU ETS emissions
New Zealand
Reporting Guidance for the Stationary Energy and Industrial Processes and Liquid Fossil Fuels sectors under the New Zealand Emissions Trading Scheme
RGGI
RGGI Webseite - Information on emissions data
Switzerland
Website of the Federal Office for the Environment - Information on monitoring emissions