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 that do not surrender sufficient allowances at the end of the compliance period will be subject to enforcement under the ‘Environment Act.’ |
Canada - Québec Cap-and-Trade System | |
REPORTING FREQUENCY: Annually. | A covered entity that fails to cover its 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 CNY 50,000 (USD 7,245.57). 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 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 emission or verification report on time, providing false information, or disturbing the verification process range from CNY 10,000 (USD 1,449) to CNY 30,000 (USD 4,347). 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 per allowance, with a maximum limit of CNY 30,000 (USD 4,347). Additionally, 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 1,449) to CNY 30,000 (USD 4,347). |
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 1,449) to CNY 50,000 (USD 7,246). 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 7,246). 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. | Hubei has introduced a capped mechanism for the compliance obligations. If the difference between the annual verified emissions and the allocated allowances of an entity exceeds either 20% of the allocation or 200,000 tonnes, the allowances will be added or deducted to cap the surplus or deficit within the 20%/200,000 tonnes limit. |
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 1,449) to CNY 50,000 (USD 7,245). |
China - Shenzhen pilot ETS | |
REPORTING FREQUENCY: Annual reporting of CO2 emissions to the ETS competent authority, using different tiers of emission factors depending on the size of the company. A quarterly emissions report is also submitted. In addition, covered industrial entities must annually submit a statistical indicator report covering their production data to the municipality’s statistics department. | Covered entities 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 14,491). Covered entities 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. | There are no financial penalties for noncompliance. 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. In addition, since mid-2020, companies and third-party verifiers face further penalties. Companies failing to surrender enough allowances to match their emissions will face deduction of double the amount of the gap in the next year’s allocation. Third-party verifiers found not to comply with regulations (e.g., in the case of false verification reports) will be banned from providing verification services for three years in Tianjin. |
China National ETS | |
REPORTING FREQUENCY: Under the national ETS, covered entities submit the previous year’s emission reports by the end of March each year. Entities in the power sector have had MRV obligations since 2013. | According to the current Allocation Plan, compliance obligations are limited. Gas-fired plants only need to surrender allowances up to their level of free allocation as per the benchmarks. The compliance obligation of other covered entities is limited to the level of free allocation as per benchmarks, plus 20% of their verified emissions. This means that no allowances must be surrendered for verified emissions above this threshold. These measures aim to promote gas-fired units and reduce the overall compliance burden. |
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 114.22/tCO2) for each tonne of CO2 emitted for which no allowance has been surrendered, in addition to buying and surrendering the equivalent amount of allowances. The name of the non-compliant operator is also made public. Member States may enforce different penalties for other forms of noncompliance. |
German National Emissions Trading System | |
REPORTING FREQUENCY: Annual self-reporting in the form of an emissions report based on electronic templates to be submitted by 31 July. | 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 penalty payments in the equivalent amount. Payment of the penalty doesn’t release the entity from the obligation to surrender allowances to cover the emissions: entities remain obliged to purchase and surrender the outstanding allowances. |
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. | If the reduction target is not achieved, the name of the company is made public and the insufficient reduction amount added to the reduction amount of the following compliance period. |
Japan - Tokyo Cap-and-Trade Program | |
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. Large tenants, i.e., those with a floor space above 5,000m2 or 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 14,585/tCO2 (USD 35.32) in 2021). 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 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 84.73)/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 an Annual Emissions Return (emissions report). | An entity that fails to surrender or repay emissions units when required must surrender the units and pay a cash penalty of three times the current market price for each unit that was not surrendered by the due date. Entities can be fined up to NZD 24,000 (USD 15,564) 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 32,424) on conviction for knowingly altering, falsifying, or providing incomplete or misleading information about any obligations under the scheme, including in the Annual Emissions Return report. 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 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 133.14/tCO2). In addition to the fine, entities must surrender the missing allowances in the following year. |
United Kingdom | |
The UK ETS has adopted the EU ETS approach to MRV, with some changes. | Regulated entities must pay an excess emissions penalty for each tonne of CO2 emitted without surrendering a permit. This penalty is equal to GBP 100/tCO2e (USD 128.21) initially, but is adjusted for inflation over time. The names of non-compliant operators are published. |
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 is automatically assessed as an untimely surrender obligation, requiring it to surrender each missing compliance instrument as well as 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: Quarterly | In case of excess emissions (i.e., if entities are found to not surrender all required allowances), allowances for three times the amount of excess emissions must be surrendered. Furthermore, covered entities may also be subject to specific penalties imposed by the RGGI state where the entity is located. |
Colombia | |
Indonesia | |
Montenegro | |
Russian Federation - Sakhalin | |
Ukraine | |
REPORTING FREQUENCY: Reporting is required annually for: fuel combustion in installations over 20 MW; oil refining; and the production of: coke, metal ores, pig iron, steel, ferrous alloys including ferroalloys (if the total nominal thermal capacity of combustion units exceeds 20 MW), cement clinker, lime or the calcination of dolomite or magnesite (with a production capacity exceeding 50 tonnes per day), nitric acid, and ammonia. Aside from CO2, reporting is also required for N2O emissions from nitric acid production. | No information available yet. |
USA - Pennsylvania | |
USA - Transportation and Climate Initiative Program (TCI-P) | |
Vietnam | |
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 25,000 tCO2 and/or 100 tonnes of particulate matter due to combustion processes per year from 2023 onwards. Current methodologies are expected to be updated in the future to incorporate all possible regulated fixed sources. | No information available yet. |
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 (power, steel, petrochemical, cement, and manufacturing of semiconductors and flat panel displays) with annual emissions greater than 25,000 tCO2e. Currently, 293 entities are under the mandatory reporting scheme. | No information available yet. |
Thailand | |
Turkey | |
The Turkish MRV legislation establishes an installation-level system for CO2 emissions for ~800 entities. Sector coverage includes the energy sector (total rated thermal input >20MW) and industry sectors (coke production, metals, cement, glass, ceramic products, insulation materials, pulp and paper, and chemicals over specified threshold sizes/production levels). | No information available yet. |
USA - New Mexico | |
USA - New York City | |
USA - North Carolina | |
USA - Oregon | |
USA - Washington |
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