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The importance of MRV [Measuring Reporting Verification] in climate change.

Under the UNFCCC and Kyoto Protocol, monitoring reporting and review is fairly well developed for Annex 1 countries who have an obligation to report annually on inventories of GHG emissions. In contrast, non Annex 1 Countries report on a more irregular basis, thus the international community has currently has no official ‘snapshot’ of either global GHG emissions, or of actions being undertaken to mitigate climate change.

The Bali Action Plan refers to ‘measurable reportable and verifiable [MRV] as an important part of the international process intended to deliver concrete national actions to address climate change. MRV is required both on a macro level for GHG inventories and a micro level for programmes and projects within trading schemes.

Both the ETS [ Emissions Trading Scheme] and the CDM [Clean Development Mechanism] have faced abuse that requires the creation of robust MRV mechanisms to improve Carbon governance.

The ETS

The flagship of the EU’s 2008 climate and energy package is the ETS, a multi sector and multi country cap and trade scheme, that has been the EU’s primary instrument for regulating carbon emissions from large and industrial installations since 2005.

The Commission allowed a decentralised scheme that allowed member states to develop national allocation plans [NAPS] thereby giving latitude in how Kyoto emissions targets were distributed causing a collapse in allowance prices. Other concessions to certain sectors were abused, so the scheme was reviewed during Phase II (2008-2012). 164 sectors have now been earmarked for free allowances in Phase III (2013-2020).

It is now recognised that monitoring and control of the market itself is now required due to various types of abuse including;

  • Carousel Fraud [VAT missing trader]
  • Phishing Fraud [Identity Theft]
  • Gaming Practices [Strip and Swap and Fuel Switching]

The CDM

The CDM is one of the flexibility mechanisms defined in the Kyoto Protocol that provides for emissions reduction projects that generate Certified Emissions Reduction [CER] units that may be traded in emissions trading schemes.

The CDM is defined in Article 12 of the Protocol, and is intended to meet two objectives: (1) to assist parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC), which is to prevent dangerous climate change; and (2) to assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments (greenhouse gas (GHG) emission caps). “Annex I” parties are those countries that are listed in Annex I of the treaty, and are the industrialized countries. Non-Annex I parties are developing countries.

The CDM is managed by the executive that reports to the Conference and Meetings of the Parties, approves methodologies and accredits Designated Operational Entities (DoEs) who are conferred the authority to assess whether projects have delivered the claimed emissions reductions and should therefore be issued with[CERs].

Difficulties have arisen; a number of DoE’s have had their accreditation suspended for continually proposing projects that do not fulfil the minimum approval criteria. Climate fraud has been detected where the same CDM project is sold to multiple buyers or complete failure to achieve the claimed savings of emissions have not occurred.

BAU Baseline

It is clear that closer scrutiny of behaviour within carbon markets is needed to deter market abuse. Professor Andrew Gouldson explains that it is necessary to have a robust business as usual [BAU] baseline, that shows what would have happened without the project/programme. Developing a robust reliable and transparent methodology is the necessary next step to build trust in the carbon markets [See for example Ecological Modernisation and the Governance of Carbon: A Critical Analysis , Bailey, Gouldson and Newell 2011].

Increasing the availability of comparable information on GHG emissions/or mitigation actions across countries could also help the international community with a better picture of what current actions are taking place and help build trust between developing countries where reporting is sparse and developed countries who can report on planned actions and support that has been offered.

Recent calls for enhanced MRV systems however recognise that new institutional structures, guidance and processes are likely to be needed at international and domestic levels, to ensure that information is held and disseminated in a common form [See the OECD analysis for COP 15 ‘Measurable, Reportable and Verifiable Mitigation Actions and Support].


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