Evaluation of EU ETS Monitoring, Reporting and Verification
Administration Costs
Final report
June 2016
Europe Direct is a service to help you find answers to your questions about the European Union.
Freephone number (*):
00 800 6 7 8 9 10 11
(*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you).
LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein.
More information on the European Union is available on the Internet (http://www.europa.eu).
Luxembourg: Publications Office of the European Union, 2016
ISBN 978-92-79-64425-2 doi:10.2834/640029
© European Union, 2016 Reproduction is authorised provided the source is acknowledged.
European Commission, DG CLIMA Evaluation of EU ETS Monitoring, Reporting and Verification Administration Costs
Final Report
June 2016
Amec Foster Wheeler Environment & Infrastructure UK Limited 2 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Report for Copyright and non-disclosure notice
Robert Gemmill The contents and layout of this report are subject to copyright João Serrano Gomes owned by Amec Foster Wheeler (© Amec Foster Wheeler European Commission DG CLIMA Environment & Infrastructure UK Limited 2016) save to the Avenue de Beaulieu 24 extent that copyright has been legally assigned by us to B-1160 Auderghem another party or is used by Amec Foster Wheeler under Brussels licence. To the extent that we own the copyright in this report, Belgium it may not be copied or used without our prior written agreement for any purpose other than the purpose indicated in this report. The methodology (if any) contained in this report is provided to you in confidence and must not be disclosed or Main contributors copied to third parties without the prior written agreement of Amec Foster Wheeler. Disclosure of that information may Chris Green (Amec Foster Wheeler) constitute an actionable breach of confidence or may Amelia Sharman (Amec Foster Wheeler) otherwise prejudice our commercial interests. Any third party Juan Calero (Amec Foster Wheeler) who obtains access to this report by any means will, in any Hetty Menadue (Amec Foster Wheeler) event, be subject to the Third Party Disclaimer set out below. Mary Ann Kong (BIO) Lidia Wisniewska (BIO) Sebastien Soleille (BIO) Third-party disclaimer Any disclosure of this report to a third party is subject to this Issued by disclaimer. The report was prepared by Amec Foster Wheeler at the instruction of, and for use by, our client named on the front of the report. It does not in any way constitute advice to any third party who is able to access it by any means. Amec Foster Wheeler excludes to the fullest extent lawfully permitted all liability whatsoever for any loss or damage howsoever arising from reliance on the contents of this report. We do not ...... however exclude our liability (if any) for personal injury or Amelia Sharman death resulting from our negligence, for fraud or any other matter in relation to which we cannot legally exclude liability.
Approved by Management systems This document has been produced by Amec Foster Wheeler Environment & Infrastructure UK Limited in full compliance with the management systems, which have been certified to ISO 9001, ISO 14001 and OHSAS 18001 by LRQA...... Chris Green
Document revisions
Amec Foster Wheeler No. Details Date Floor 4 1 Draft final report 24 May 2016 60 London Wall London EC2M 5TQ 2 Final report 30 June 2016 United Kingdom Tel +44 (0) 203 215 1610 3 Final report (Representative 05 July 2016 Doc Ref. 37474 data only) h:\projects\37474 ppcc evaluation of eu ets mrv compliance costs\c client\reports\5. final issued report\redacted version_representative data only\37474_final report_representative data only_05june2016.docx
July 2016 Doc Ref. 37474 3 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Executive summary
Subject This subject of this report is an evaluation of European Union Emissions Trading System (EU ETS) monitoring, reporting and verification (MRV) compliance costs. The study was completed for DG Climate Action at the European Commission (‘the Commission) by Amec Foster Wheeler, Environment and Infrastructure UK Limited (‘Amec Foster Wheeler’) in partnership with BIO by Deloitte (‘BIO’).
Background The EU ETS applies to approximately 11,500 installations across the 28 EU Member States and three European Economic Area (EEA)-European Free Trade Area (EFTA) states (Iceland, Liechtenstein and Norway). It covers sectors responsible for approximately 45% of total EU greenhouse gas (GHG) emissions, including major industrial emitters, the power sector and, from 2012, the aviation sector.1
The EU ETS started operating in 2005, with a pilot phase (Phase I) running from 2005 to 2007, followed by a second trading period (Phase II) between 2008 and 2012. These two phases were governed by Directive 2003/87/EC and Directive 2004/101/EC. The EU ETS is now in its third phase, running from 2013 to 2020 (Directive 2009/29/EC). The fourth phase will follow in 2021.
In the EU ETS, one allowance is equal to one tonne of carbon dioxide equivalent (CO2e) emission. Articles 14 and 15 of Directive 2003/87/EC provide the legal basis for the monitoring, reporting, verification and accreditation requirements. Additionally, Annex IV sets some basic principles for the monitoring and reporting of emissions in and Annex V outlines the verification criteria. Installations and aircraft operators are required to monitor their emissions falling under the scope of the EU ETS during each calendar year starting from 1 January through to 31 December. These data are then summarised in an annual emissions report, which is verified by an accredited third party verifier before submission to the Competent Authority (CA) by 31 March each year. Operators must annually surrender an equivalent number of allowances by 30 April to compensate for their emissions. Finally, should an improvement report be required, these must be submitted to the CA by 30 June.
The first Monitoring and Reporting Guidelines (MRG) were adopted by the Commission in 2004 (Decision 2004/156/EC) and applied for the first trading period (2005-2007). In 2007, the Commission adopted a revised version of the guidelines (MRG 2007) (Decision 2007/589/EC) to be applied for the 2008-2012 trading period. For the third trading period, the reviewed ETS Directive (2009/29/EC) provided for the adoption of two new Regulations which replaced Commission Decision 2007/589/EC: Commission Regulation (EC) No 601/2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC (MRR); and Commission Regulation (EC) No 600/2012 on the verification of greenhouse gas emissions reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC (AVR).
The MRR replaced the MRG 2007 with a particular emphasis on simplifying the monitoring process when possible and improving the overall cost-efficiency of the monitoring and reporting duties. The MRR takes into account best practices that were observed in different Member States. The success of the EU ETS resides on the full compliance by Member States. The MRV system enables a more transparent process for tracking implementation and for ensuring the enforcement of the operators’ obligation to surrender sufficient allowances.
Issue MRV is fundamental to any functioning emission trading scheme as it ensures the integrity of the system and underpins the value of allowances. The integrity, credibility and success of the EU ETS requires that one tonne of CO2e, measured, reported and verified in one country is equivalent to one tonne measured, reported and verified in another country. The EU ETS MRV compliance cycle involves different elements
1 Note that this evaluation does not include aviation operators.
July 2016 Doc Ref. 37474 4 © Amec Foster Wheeler Environment & Infrastructure UK Limited
(permit, plant, emission data, reporting etc.) and different actors (Member States’ CA, operators, verifiers and national accreditation bodies). For the EU ETS to not be compromised there needs to be a high level of compliance and high level of consistency in the approach taken by all actors.
While it is widely accepted that the EU ETS has enabled the reduction of GHG emissions at a relatively low cost, the issue of cost-efficiency is of primary importance. The introduction of the MRR and AVR) has provided some clear improvements from the MRG 2007 on proportional approaches in order to increase cost-efficiency such as provisions for simplified monitoring plans.
However, relatively little reliable information is available on the costs of compliance with the EU ETS MRV, particularly as regards costs relating to implementation of Phase III under the MRR/AVR. Multiple analyses are available on the best carbon pricing strategy, but those studies do not focus on administrative and compliance costs. Where data are available, figures are however somewhat uncertain and vary between installations. Moreover, they are based on industry surveys, which contain many uncertainties such as biased sample size (with an overrepresentation of larger companies), approximate answers due to the lack of internal MRV cost tracking, conversion error between time spent and monetary cost of labour. This study attempts to provide a statistically representative understanding of MRV compliance costs across Europe for both CA and operators participating in Phase III of the EU ETS.
Methodology The method for this study comprised three main elements: a literature review, a survey, and a follow-up consultation phase.
Literature review The literature review surveyed policy evaluation reports, scientific articles/books, grey literature2 and proceedings of conferences, symposia and meetings. Sources containing specific quantitative cost information on MRV, or a large volume of relevant qualitative information, or that provided timely data (i.e. the information provided remaining relevant to the current operation of the EU ETS) were prioritised for analysis.
Each source was categorised in terms of contextual information (geographic scope, industry/sector scope, scale, timeframe and stakeholder), type of qualitative data (e.g. description of compliance costs, whether they differed by sector or installation size), and type of quantitative data (including financial and time costs of MRV). All sources were also reviewed in terms of the relevance and quality of the data included (including how the data was gathered, the robustness of the assumptions and methodology contained therein, and the likely representativeness of the source i.e. to ensure data included is as impartial and objective as possible).
Surveys An initial screening process identified specific elements of the EU ETS MRV package to be assessed as part of this study. Each article of Directive 2003/87/EC, the MRR and the AVR was reviewed against screening criteria (estimated cost, complexity, or flexible application) in order to identify administrative requirements that result in MRV compliance costs. Those articles which were deemed to be highly costly, highly complex and which could be flexibly applied were prioritised for development of survey questions.
Two surveys were developed; one for CA and one for installation operators. The CA survey was sent to 107 CA across Europe and 31 survey results were received (29% response rate). Of these, 13 were identified from the higher GDP country grouping and 18 from the lower GDP country grouping (see below for an explanation of these categories).
The total population of operators used for this study was 11,383 individual installations, sourced from the European Union Transaction Log (EUTL) database. This population comprised the entire dataset of EU ETS installations excluding aircraft operators (activity type 10) and those installations with closed accounts.
2 Grey literature comprises research and other materials produced by organisations outside traditional academic or commercial publishing channels. This includes industry or government publications.
July 2016 Doc Ref. 37474 5 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Three main variables were considered to be likely to influence the level of compliance costs incurred by installations: scale of emissions, relative wealth, and activity type. Scale of emissions was considered to be important because economies of scale or scope may occur within certain installations leading to lower average compliance costs. This study used the categories of Category A, Category B and Category C installations, as well as noting where possible, differences for installations of low emissions.3 The relative wealth of countries was regarded as potentially important because factors such as capacity constraints to implement available technologies or best practices may influence relative levels of compliance costs faced by installations. Installations were grouped into two main categories (higher GDP = Group I and lower GDP = Group II) according to GDP per capita 2013 from Eurostat. These groupings were also used for the analysis of CA compliance costs. Finally, it was considered that different activity types may have different levels of compliance cost due to their relative level of complexity. Seven activity types were chosen as representing a variety of complexity in terms of activity and monitoring and reporting requirements: Combustion (activity 20); Refineries (activity 21); Primary aluminium (activity 26); Cement (activity 29); Ceramics (activity 32); Paper (activity 36); and Integrated iron and steel (no specific activity type).
A sample of 4,186 installations was identified assuming a 20% response rate, and aiming to achieve a 95% confidence interval with a 10% margin of error (35% of the total population). In total, 360 operators responded to the survey. Statistical representativeness at this level was achieved for the relative wealth variable, for Category A and B installations, and for combustion plants. A lower rate of statistical representativeness was also achieved for Category C and Low emissions installations, and refineries.
Survey questions for both the CA and operators’ survey focused on identifying operational and capital expenditure related to MRV compliance costs, as well as more open-ended questions providing respondents an opportunity to inform potential recommendations on cost reductions. Surveys were delivered via an internet-based survey platform and via Microsoft Excel (using emails). Surveys were sent, where possible, directly to operators; however where this was not possible (for example, where email addresses were not accurate in the EUTL database), assistance in distributing the surveys was provided by both CA and relevant trade associations such as EURELECTRIC, EUROFER, EURIMA and Fuels Europe.
Follow-up consultation In order to supplement the information gained during the survey, and to investigate the rationales behind the information obtained a period of follow-up engagement occurred by telephone or email using semi-structured interviews. This targeted certain CA whose participation was deemed particularly useful given the scale of EU ETS operations in their countries (e.g. France, Germany and Italy), as well as trade associations representing operators where statistical representativeness was unable to be achieved. Trade associations engaged with low emissions installations were also targeted.
Constraints and limitations The study faced numerous constraints, particularly in terms of obtaining a statistically representative sample. This included the timeframe during which the survey was distributed (with the project team receiving several replies indicating that it was “a very busy time of year for staff involved in EU ETS compliance activity … so time is limited”, which served as a rationale for many installations not to complete the survey), identifying correct contact details for numerous installations from the EUTL, and incorrect data entry resulting in anomalies within the data. Given the detailed information required to meet the study objectives, the survey also faced challenges in terms of its length and complexity and which necessarily influenced response rates and respondent accuracy.
In addition, some of the literature reviewed on the costs of implementing the EU ETS were published several years ago. Although information from these sources may be outdated, these insights were considered relevant to consider as they help to gain a wider perspective on the trends in costs of implementation over the years and through the different phases of the EU ETS. Nevertheless, it is important to note that the scope and context of the current phase of the EU ETS differs greatly from that of previous years.
3 Category A (average annual verified emissions of less than 50,000 tonnes of CO2e in the 2008-2012 trading period); Category B (average verified annual emissions between 50,001 to 500,000 tonnes of CO2e in the 2008-2012 trading period); Category C (average verified annual emissions of more than 500,001 tonnes of CO2e in the 2008-2012 trading period); and Low emissions installations (less than 25,000 tonnes CO2e in the 2008-2012 trading period).
July 2016 Doc Ref. 37474 6 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Summary of results
Competent authorities The average cost per Member State for the 2014 compliance cycle (as an indicative compliance cycle under phase III of the EU ETS) is €51,8004 and the average cost per Member State per installation is €2,250. This is lower than the costs anticipated by the European Commission’s impact assessment in 2008 for MRV costs under a previous phase of the EU ETS, which showed an average cost of €6,500. This may suggest a much higher degree of efficiency over time which may be a consequence of learning from previous phases of the EU ETS or revisions made to the MRV requirements, or a combination thereof. The table below shows the average cost per Member State for different types of MRV activities, as specified within the survey.
Table 0.1 Summary of CA costs (2014 compliance cycle)
MRV Q Cost description Average cost Average cost per MS per # per MS installation
M 9 Approving and issuing new monitoring plans for 2014 7,915 344
M 11 Assessing operators’ claims that applying a specific monitoring 1,144 50 methodology shall incur unreasonable costs
M 13 Receiving and reviewing operator improvement reports 7,492 326
R 12 Receiving and reviewing annual emissions reports 16,349 711
V 16 Carrying out site inspections 4,063 177
Other 23 Any other costs* 14,850 646
Total operational costs 51,8135 2,253
* Any other costs include costs such as training or translation of documentation.
The results indicate that for CA, monitoring and reporting represent relatively equal compliance costs. The average cost breakdown per MS is as follows:
Monitoring: 32% of MRV
Reporting: 31% of MRV Verification: 8% of MRV
Other: 29% of MRV
The average investment in capital equipment made per Member State was €63,4006.
4 Figures in this section have been rounded to the nearest hundred. Note that all figures in this report, unless otherwise specified, are in Euro (€). Also, unless otherwise specified, in the executive summary, costs refer to operational expenditure. Operational expenditure refers to the day-to-day costs of operations, such as production, general and administrative expenses. 5 Note that this figure excludes costs for approving significant modifications to the monitoring plan for 2014 as these were considered to be inflated compared to a ‘standard’ year as a higher number of significant modifications could still be expected as operators adjust to the change in regulatory regime in 2012. If these costs are included, the average cost per Member State is €89,821 and the average cost per Member State per installation is €3,905. 6 Capital equipment refers to equipment such as metering equipment for temperature or pressure measurement, online gas chromatographs, or other sampling or data processing equipment such as IT systems or software. Note this does not include equipment specifically for emissions abatement.
July 2016 Doc Ref. 37474 7 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Operators The average cost per installation for the 2014 compliance cycle is €59,200. This is higher than the reported average in the literature of €22,000 per annum, which suggests an average range of €15,000 to €32,000 (Jacquier and Bellassen in Bellassen and Stephan (eds), 2015).
The same source suggested an average annual cost per tonne of CO2e in the literature of €0.07. The data from this study shows an average cost per tonne of CO2e of €0.16 (over the 18 month compliance cycle). This figure is achieved by dividing the average total cost of €59,200 by average reported CO2e emissions per installation.
Table 0.2 Summary of operator costs (2014 compliance cycle)
MRV Q # Cost description Average cost per installation
M 16 Preparing significant modifications to your monitoring plan (Note: 2015 data only) 7,212
M 17 Monitoring in accordance with the approved monitoring plan 15,671
M 18 Quality assurance and quality control procedures 12,021
M 22 Preparing improvement reports* 4,109
R 19 Preparing an annual emissions report and submitting it to your competent authority 4,355
V 20 Verification 6,789
Other 32 Any other costs* 9,052
Total operational costs 59,207 * Note that these figures may represent an exaggeration of true costs as not all operators carried out this activity during the 2014 compliance cycle.
Average costs for each emissions category follow the expected trend related to economies of scale, whereby 7 the average cost per tonne of CO2e per installation is higher the smaller the installation :
Low emissions: €3.348
Category A (including low emissions installations): €0.56
Category B: €0.49 Category C: €0.07
Again, as with CA, for operators, monitoring is the most substantial element of MRV and which is higher than anticipated in the literature, where verification is anticipated to account for approximately 40% of MRV costs. The cost breakdown is as follows:
Monitoring: 61% of MRV
Reporting: 9% of MRV
Verification:13% of MRV
7 Note that these cost per tonne of CO2e per installation figures are calculated by averaging the cost across installations and then dividing by the emissions averaged across installations. As such, they are strongly influenced by high emitters, which account for the majority of emissions. If an alternative approach is taken whereby cost per tonne of CO2e is calculated per installation, then averaged across all installations, these figures are much higher. The former approach is more representative of the MRV costs per tonne of CO2e for the EU ETS as a whole. The latter approach is more representative of the cost per tonne of CO2e incurred by each installation. Further detail is provided in the main body of the report. 8 Note that data for low emissions installations has a lower confidence level (due to fewer responses to the survey) than other categories.
July 2016 Doc Ref. 37474 8 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Other: 17% of MRV
When monitoring costs are broken down into their component parts, actual monitoring in accordance with the monitoring plan is the most substantial element (40% of total monitoring costs) and quality assurance and quality control procedures are the second most costly element (31%). This may suggest that costs that may have previously been spent on verification in previous phases of the EU ETS are shifting earlier along the compliance cycle, and internally to operators’ QAQC.
In terms of capital expenditure, only 23% of installations indicated that they had been required to specifically purchase capital equipment in order to ensure compliance with MRV. The average value was €29,000 and the average annual operating costs of all equipment purchased was €1,600.
Conclusions Conclusions were developed in a sequential manner, drawing from the study results, the analysis of study data that brought together the different components of the study (i.e. comparing survey results against those found within the literature review), and the analysis against the key REFIT9 criteria of relevance for this study: efficiency, relevance and coherence.
The following are the key conclusions from this study for CA:
Average total costs of MRV per 18 month compliance cycle are approximately €52,000 per Member State
The average annual cost per Member State per installation per 18 month compliance cycle is €2,250
No clear trends existing regarding whether costs are higher or lower for CA in different Member States, although efficiency gains in certain Member States regarding the use of electronic reporting systems have been identified
Costs to approve monitoring plans decreased substantially between 2013 and 2014
Monitoring and reporting activities represent the highest operational costs for CA in 2014
The following are the key conclusions from this study for operators:
Average total costs of MRV per 18 month compliance cycle are approximately €59,200 per installation
The average annual cost per tonne of CO2e per 18 month compliance cycle is €0.16
Approximately two thirds of MRV costs are spent on monitoring
No clear trends exist regarding whether average costs are higher or lower for operators in different Member States, but costs per tonne of CO2e are consistently higher in those Member States with higher GDP per capita (Group I Member States)
Costs are, in general, proportionately higher the smaller the volume of emissions, as shown by the costs per tonne of CO2e by size category reported above. Average costs based on survey responses range between € 0.07/tonne CO2e (Category C) and € 3.34/tonne CO2e (Low emissions installations).
QAQC costs account for a high proportion of the costs of monitoring (of costs allocated to monitoring, QAQC accounts for 31%).
Operators largely appreciate that the need for robust MRV outweighs compliance costs
9 REFIT refers to the European Commission’s Regulatory Fitness and Performance programme.
July 2016 Doc Ref. 37474 9 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Recommendations As with the conclusions, recommendations were developed only where they could be explicitly drawn from the previous analysis, specifically the analysis against the key REFIT criteria of relevance for this study: efficiency, relevance and coherence.
The following are the key recommendations from this study:
Simplification and reporting Opportunities exist regarding further simplification of requirements, particularly as regards small emitters both for CA and for operators.
Simplify the process of determining de minimis source streams, particularly for small emitters.
Improve standard reporting forms.
Increase the support and guidance relating to electronic reporting systems, particularly in Group II countries.
Information exchange and education Further promote participation in information exchange practices10.
Better education regarding the required scope of QAQC costs to operators.
Further promote and explain the methodology relating to calculating unreasonable costs.
10 Note that this includes informal information exchange between CA, as well as participation in more structured and formal practices.
July 2016 Doc Ref. 37474 10 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Contents
Executive summary 3 Subject 3 Background 3 Issue 3 Methodology 4 Summary of results 6 Conclusions 8 Recommendations 9
1. Introduction 14 1.1 This report 14
2. Policy context 15 2.1 EU ETS 15 Revision of the EU ETS 15 2.2 Monitoring, reporting and verification 16 Evolution of the monitoring and reporting requirements and guidelines 16 Previous studies on EU ETS MRV and lessons learnt 21 EU ETS MRV in the context of the REFIT programme 23
3. Objectives and scope of the study 24 3.1 Objectives 24 3.2 Study scope 25
4. Methodology 26 4.1 Identification of EU ETS MRV to be assessed 26 4.2 Stakeholder consultation: Survey 26 Competent authorities 26 Operators 27 Survey questions 32 Survey distribution 33 4.3 Stakeholder consultation: Follow-up engagement 33 Competent authorities 33 Operators 34 Verification bodies 35 4.4 Literature review 36 4.5 Data analysis 37 Competent authorities 37 Data from operators 38 4.6 Evaluation against the REFIT criteria 39 Evaluation questions 39 4.7 Constraints and data limitations 40
5. Results: Identifying and quantifying compliance costs 42 5.1 Stakeholder consultation: Competent authorities 42 Q1: Country of CA 42 Q2: Currency 43
July 2016 Doc Ref. 37474 11 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Q3: Number of installations that the CA works with 43 Q4: Staff involved 44 Q5: Additional staff required in times of peak workload 44 Q6: Salary 44 Q7: Cost of new monitoring plans (2013) 45 Q8: Cost of approving significant modifications (2013) 46 Q9: Cost of approving and issuing new monitoring plans (2014) 47 Q10: Cost of approving significant modifications (2014) 49 Q11: Cost of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs, including carrying out CBA and estimating uncertainty thresholds (2014) 49 Q12: Cost of receiving and reviewing annual emissions reports (2014) 50 Q13: Cost of receiving and reviewing operators' improvement reports (2014) 51 Q14: Cost of site inspections (2014) 52 Q18: Savings related to information exchange practices (2014) 53 Q19 and 20: Cost of equipment (investment) 54 Q21: Cost of equipment (Annual operating costs) 54 Q23: Additional important costs 55 Q24: Confidence 56 Q25: Least beneficial aspect of MRV 56 Q26: Other overlapping legislation 57 Q27: Differences in costs between trading periods 57 Q28: Suggestions for simplifications 58 Horizontal overview: Competent authorities 59 5.2 Stakeholder consultation: Operators 60 Q1: Country of installation 61 Q2: Currency 62 Q3: Category of installation 62 Q4: Emissions 62 Q5: Full-time equivalent (FTE) staff 63 Q6: Activity type 63 Q7: Salary 64 Q8: Year of monitoring plan approval 65 Q9: Monitoring plan preparation and approval 65 Q10: Determining the classification of source streams 66 Q11: Risk assessment 68 Q12: Evidence for each source stream 69 Q13: Calculating whether specific monitoring methodologies may incur unreasonable costs 70 Q14 and Q15: Significant modifications to the monitoring plan 71 Q16: Cost of making significant modifications to the monitoring plan 72 Q17: Cost of monitoring activities (monitoring according to the approved monitoring plan) 73 Q18: Quality assurance and quality control 74 Q19: Annual emissions report 76 Q20: Verification 77 Q21 and 22: Improvement report 78 Q23-25: Low emissions installations 79 Q26-27: Electronic reporting tools 80 Q28-30: Capital equipment 80 Q31-32: Additional important costs 81 Q33: Confidence 82 Q34: Least beneficial aspect of MRV 83 Q35: Overlap 84 Q36: Detail in MRR on calculating unreasonable costs 85 Q37: Other suggestions and final comments 85 Horizontal overview: Operators 86 5.3 Literature review 90 Costs to operators 90 Costs to verifiers 92 Costs to competent authorities 93 Preliminary recommendations arising from the literature 93
6. Analysis: Evaluation of compliance costs 95 6.1 Overview of EU ETS MRV costs affecting competent authorities and operators 95 Overview of average CA costs 96 Overview of average operator costs 98 6.2 EU ETS MRV costs: Competent authorities 100 Main costs 100 Differences according to GDP per capita grouping 100 Economies of scale and scope 101 Cost savings 101 Evaluation analysis 102
July 2016 Doc Ref. 37474 12 © Amec Foster Wheeler Environment & Infrastructure UK Limited
6.3 EU ETS MRV costs: Operators 103 Main costs 104 Differences according to GDP per capita grouping 104 Differences according to scale of EU ETS operation 106 Differences according to activity type 107 Evaluation analysis 109
7. Conclusions and recommendations 111 7.1 Conclusions 111 Competent Authorities 111 Operators 111 7.2 Limitations and recommendations for further work 112 7.3 Recommendations 113 Simplification and reporting 113 Information exchange and education 114
Table 0.1 Summary of CA costs (2014 compliance cycle) 6 Table 0.2 Summary of operator costs (2014 compliance cycle) 7 Table 2.1 Requirements of the EU ETS MRV placed on the relevant EU ETS actors: MRR 18 Table 2.2 Requirements of the EU ETS MRV placed on the relevant EU ETS actors: AVR 19 Table 4.1 EU ETS activity type codes included in this study 27 Table 4.2 Country groupings 29 Table 4.3 Activity types included for representativeness in this study 30 Table 4.4 Data selection 31 Table 4.5 Follow-up engagement: CA 34 Table 4.6 Follow-up engagement: Operators 35 Table 4.7 Follow-up engagement: Verification bodies 36 Table 4.8 Evaluation questions against the REFIT criteria 40 Table 5.1 Competent authorities that responded to the survey 43 Table 5.2 Number of EU ETS installations that CA works with 44 Table 5.3 Number of staff involved in the implementation of the EU ETS MRV, by GDP grouping 44 Table 5.4 Number of additional staff required in times of peak workload by GDP grouping 44 Table 5.5 Cost of approving and issuing new monitoring plans (2013) (€) 45 Table 5.6 Cost of approving significant modifications to monitoring plans (2013) (€) 47 Table 5.7 Cost of approving and issuing new monitoring plans (2014) (€) 48 Table 5.8 Cost of approving significant modifications to monitoring plans (2014) (€) 49 Table 5.9 Cost of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs (2014) (€) 50 Table 5.10 Cost of receiving and reviewing annual emissions reports (2014) (€) 51 Table 5.11 Cost of receiving and reviewing operators’ improvement reports (2014) (€) 52 Table 5.12 Cost of site inspections (2014) (€) 53 Table 5.13 Cost of equipment (investment) (€) 54 Table 5.14 Cost of equipment (annual operating costs) (€) 55 Table 5.15 Additional important costs (€) 56 Table 5.16 Average verified emissions by GDP, category size and activity type 60 Table 5.17 Emissions per installation per installation category (tonnes of CO2e) 63 Table 5.18 Average FTE per installation 63 Table 5.19 Activity types 63 Table 5.20 Monitoring plan approval costs by GDP grouping (€ and €/tonne of CO2e) 66 Table 5.21 Monitoring plan approval costs by emissions category (€ and €/tonne of CO2e) 66 Table 5.22 Monitoring plan approval costs by activity type (€ and €/tonne of CO2e) 66 Table 5.23 Costs of determining the classification of source streams by GDP grouping (€ and €/tonne of CO2e) 67 Table 5.24 Costs of determining the classification of source streams by emissions category (€ and €/tonne of CO2e) 67 Table 5.25 Costs of determining the classification of source streams by activity type (€ and €/tonne of CO2e) 68 Table 5.26 Costs of performing risk assessment by GDP grouping (€ and €/tonne of CO2e) 68 Table 5.27 Costs of performing risk assessment by emissions category (€ and €/tonne of CO2e) 68 Table 5.28 Costs of performing risk assessment by activity type (€ and €/tonne of CO2e) 69 Table 5.29 Costs of providing evidence for source stream by GDP grouping (€ and €/tonne of CO2e) 69 Table 5.30 Costs of providing evidence for source stream by emissions category (€ and €/tonne of CO2e) 70 Table 5.31 Costs of providing evidence for source stream by activity type (€ and €/tonne of CO2e) 70 Table 5.32 Costs of calculating specific monitoring methodologies by GDP grouping (€ and €/tonne of CO2e) 70 Table 5.33 Costs of calculating specific monitoring methodologies by emissions category (€ and €/tonne of CO2e) 71 Table 5.34 Costs of calculating specific monitoring methodologies by activity type (€ and €/tonne of CO2e) 71 Table 5.35 Costs of making specific modifications to the monitoring plan by GDP grouping (€ and €/tonne of CO2e) 72 Table 5.36 Costs of making specific modifications to the monitoring plan by emissions category (€ and €/tonne of CO2e) 73 Table 5.37 Costs of making specific modifications to the monitoring plan by activity type (€ and €/tonne of CO2e) 73 Table 5.38 Cost of monitoring activities by GDP grouping (€ and €/tonne of CO2e) 74 Table 5.39 Cost of monitoring activities by emissions category (€ and €/tonne of CO2e) 74
July 2016 Doc Ref. 37474 13 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.40 Cost of monitoring activities by activity type (€ and €/tonne of CO2e) 74 Table 5.41 Quality assurance and quality control costs by GDP grouping (€ and €/tonne of CO2e) 75 Table 5.42 Quality assurance and quality control costs by GDP grouping (€ and €/tonne of CO2e) 75 Table 5.43 Quality assurance and quality control costs by activity type (€ and €/tonne of CO2e) 76 Table 5.44 Annual emissions report costs by GDP grouping (€ and €/tonne of CO2e) 76 Table 5.45 Annual emissions report costs by emissions category (€ and €/tonne of CO2e) 76 Table 5.46 Annual emissions report costs by activity type (€ and €/tonne of CO2e) 77 Table 5.47 Verification costs by GDP grouping (€ and €/tonne of CO2e) 77 Table 5.48 Verification costs by emissions category (€ and €/tonne of CO2e) 77 Table 5.49 Verification costs by activity type (€ and €/tonne of CO2e) 78 Table 5.50 Improvement report costs by GDP grouping (€ and €/tonne of CO2e) 78 Table 5.51 Improvement report costs by emissions category (€ and €/tonne of CO2e) 79 Table 5.52 Improvement report costs by activity type (€ and €/tonne of CO2e) 79 Table 5.53 Capital equipment average costs and standard deviation (€ and €/tonne of CO2e) 81 Table 5.54 Additional important costs by GDP grouping (€ and €/tonne of CO2e) 81 Table 5.55 Additional important costs by emissions category (€ and €/tonne of CO2e) 82 Table 5.56 Additional important costs by activity type (€ and €/tonne of CO2e) 82 Table 6.1 Categories of total operational costs for CA in the 2014 compliance cycle 96 Table 6.2 Categories of total operational costs for operators in the 2014 compliance cycle 96 Table 6.3 Reported average operational costs for CA in the 2014 compliance cycle (€) 97 Table 6.4 Reported average operational costs for operators in the 2014 compliance cycle 99 Table 6.5 Breakdown of monitoring costs for operators in the 2014 compliance cycle 104 Table 6.6 Average costs per tonne of CO2e per installation category (“top down” method) 106 Table 6.7 Average costs per tonne of CO2e per installation category (“bottom up” method) 106
Figure 2.1 The EU ETS compliance cycle (for emissions in year N) 16 Figure 2.2 Estimated costs of MRV under the EU ETS 23 Figure 4.1 Number of CA per country to which initial survey request was sent 27 Figure 5.1 Average cost to CA of approving and issuing new monitoring plans (2013) – Cost per Member State 45 Figure 5.2 Average cost to CA of approving significant modifications to monitoring plans (2013) – Cost per Member State 46 Figure 5.3 Average cost to CA of approving and issuing new monitoring plans (2014) – Cost per Member State (€) 48 Figure 5.4 Average cost to CA of approving significant modifications to monitoring plans (2014) – Cost per Member State 49 Figure 5.5 Average cost to competent authorities of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs (2014) – Cost per Member State 50 Figure 5.6 Total cost to competent authorities of receiving and reviewing annual emissions reports (2014) 51 Figure 5.7 Average cost to CA of receiving and reviewing operators’ improvement reports (2014) 52 Figure 5.8 Average cost to CA of undertaking site inspections (2014) 53 Figure 5.9 Cost of equipment to CA (investment) 54 Figure 5.10 Annual operating cost of equipment - CA 55 Figure 5.11 Confidence estimation (competent authorities) 56 Figure 5.12 CA reporting differences in costs between reporting phases 58 Figure 5.13 Average costs for all standard cost model questions, by GDP grouping 59 Figure 5.14 Operator survey responses per country 62 Figure 5.15 Year of new monitoring plan approval 65 Figure 5.16 Year in which significant modifications to the monitoring plan were submitted to the competent authority for approval 72 Figure 5.17 Helpfulness of detail in MRR and AVR for installations of low emissions 80 Figure 5.18 Costs saved or spent using electronic reporting tools 80 Figure 5.19 Confidence estimation (operators) 83 Figure 5.20 Overlap between EU ETS MRV and other reporting requirements 85 Figure 5.21 Helpfulness of detail in MRR in calculating unreasonable costs 85 Figure 5.22 Average costs for all standard cost model questions, by GDP grouping 87 Figure 5.23 Average costs for all standard cost model questions, by emissions category 87 Figure 5.24 Average total costs for all standard cost model questions, by activity type 88 Figure 5.25 Costs per standard cost model question, per tonne of CO2e, by GDP 88 Figure 5.26 Costs per standard cost model question, per tonne of CO2e, by size category 89 Figure 5.27 Costs per standard cost model question, per tonne of CO2e, by activity type 89 Figure 6.1 Q9: Average costs of preparing and approving a monitoring plan, by year of approval 105
Appendix A References Appendix B Stakeholder consultation: Surveys Appendix C Trade associations contacted for Phase 1 consultation Appendix D Stakeholder consultation: Follow-up interviews Appendix E Literature review sources
July 2016 Doc Ref. 37474 14 © Amec Foster Wheeler Environment & Infrastructure UK Limited
1. Introduction
1.1 This report
This report concerns a contract (No. 340201/2015/714697/SER/CLIMA.A.3 between the European Commission (‘the Commission’) and Amec Foster Wheeler Environment and Infrastructure UK Limited (‘Amec Foster Wheeler’) related to the evaluation of European Union Emissions Trading System (EU ETS) Monitoring, Reporting and Verification (MRV) compliance costs. This work is delivered in partnership with BIO by Deloitte (‘BIO’).
The purpose of the study is to provide an overview of the EU ETS MRV costs affecting the operators and competent authorities (CA) operating in the EU-28 Member States and Iceland, Lichtenstein, and Norway. In addition, the report includes an evaluation of compliance costs to inform recommendations on possible cost reduction measures. The evaluation aspects of this report are, wherever relevant, consistent with the requirements for the Commission’s Regulatory Fitness and Performance Programme (REFIT) and the EC Impact Assessment Guidelines.
This is the draft final report for this study and is structured as follows:
Section 2 provides a brief policy context for this study.
Section 3 describes the objectives for this study.
Section 4 sets out the methodology used in the study.
Section 5 provides the results of this study, focusing on the identified EU ETS MRV compliance costs as identified through the literature review and stakeholder consultation processes.
Section 6 analyses the cost data obtained from the literature review and stakeholder consultation process against the specific study objectives.
Section 7 contains the conclusions and recommendations of the study, including identification of opportunities for cost savings and common implementation problems as well as areas for further investigation.
Appendix A consists of the references used to support this study.
Appendix B consists of the questionnaires that were developed for stakeholders.
Appendix C details the trade associations contacted for Phase 1 of the stakeholder consultation.
Appendix D consists of the interview protocols used during the follow-up phase of stakeholder consultation.
Appendix E consists of the literature review sources.
July 2016 Doc Ref. 37474 15 © Amec Foster Wheeler Environment & Infrastructure UK Limited
2. Policy context
2.1 EU ETS
The European Union (EU) Emissions Trading System (hereafter ‘EU ETS’), set up by Directive 2003/87/EC is the largest example of an emissions trading system anywhere in the world. It applies to approximately 11,500 installations across the 28 EU Member States and three European Economic Area (EEA)-European Free Trade Area (EFTA) states (Iceland, Liechtenstein and Norway) and covers sectors responsible for approximately 45% of total EU greenhouse gas (GHG) emissions, including major industrial emitters, the power sector and, as from 2012 the aviation sector. Operators of installations and aircraft operators included under the scope of the Directive are required to hold approved monitoring plans (GHG emission permits in the case of installation operators) and to surrender allowances (obtained through purchase in auction, traded in the market and/or received as an allocation of free allowances) equivalent to the amount of emissions of these gases annually. By establishing a market in CO2, the system creates incentives for action to abate emissions in an efficient manner.
The EU ETS started operating in 2005, with a pilot phase (Phase I) running from 2005 to 2007, followed by a second trading period (Phase II) between 2008 and 2012. These two phases were governed by Directive 2003/87/EC and Directive 2004/101/EC. The first two phases of the EU ETS led to the identification of several anomalies, including differences in monitoring and reporting requirements as well as verification requirements leading to different interpretations and procedures throughout the European Union (PricewaterhouseCoopers, n/d11).
The Directive was modified and consolidated in 2009 (Directive 2009/29/EC) to contribute to the objectives of the EU Climate and Energy Package (for the 2030 version of this package see DG CLIMA, 2015a) and in order to correct the issues encountered in Phases I and II. Special emphasis was put on further harmonising the system. The scope was also expanded to include new sectors and pollutants as well as different auctioning requirements for the different sectors. The EU ETS is now in its third phase, running from 2013 to 2020. The fourth phase will follow in 2021.
Revision of the EU ETS The European Council has agreed on the 2030 framework for climate and energy, including a binding domestic target for reducing GHG emissions of at least 40% in 2030 as compared to 1990 (European Council, 2014). To meet this target, the European Council agreed that the emissions in the EU ETS should be reduced, compared to 2005, by 43%. The EU ETS remains the main instrument to achieve the emission reduction target.
As a surplus of emission allowances has built up in the EU ETS since 2009, the Commission has enacted several measures to ensure the system continues to be able to meet the more demanding emission reduction targets in a cost-effective manner. These measures include the postponement of auctions for 900 million allowances until 2019-2020 in order to rebalance supply and demand (Commission Regulation (EU) No 1210/2011), and the proposed establishment of a market stability reserve in 2018 which will be operational in 2019 (DG CLIMA, 2015b). A stakeholder consultation on the revision of the EU ETS Directive was held by the Commission between 19 December 2014 and 16 March 2015 (DG CLIMA, 2015c). The results of this consultation fed into the Commission’s legislative proposal to increase the rate at which the overall number of allowances is reduced within the EU ETS to 2.2% annually, as compared to the current rate of 1.74% (DG CLIMA, 2015d). This proposal was subject to an impact assessment (European Commission, 2015a), and the proposal has been submitted to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions for further consideration.
11 This report covered MRV and compliance enforcement in 27 Member States during the period 2007-2008.
July 2016 Doc Ref. 37474 16 © Amec Foster Wheeler Environment & Infrastructure UK Limited
2.2 Monitoring, reporting and verification
Evolution of the monitoring and reporting requirements and guidelines Monitoring, reporting, verification and accreditation (MRVA) are fundamental to any functioning emission trading system as it ensures the integrity of the system and underpins the value of allowances. The integrity, credibility and success of the EU ETS requires that one tonne of carbon dioxide equivalent emission (CO2e), measured, reported and verified in one country is equivalent to one tonne measured, reported and verified in another country.
Installations and aircraft operators are required to monitor their emissions falling under the scope of the EU ETS during each calendar year starting from 1 January through to 31 December. These data are then summarised in an annual emissions report, which is verified by an accredited third party verifier before submission to the Competent Authority (CA) by 31 March each year. Operators must annually surrender an equivalent number of allowances by 30 April to compensate for their emissions. Finally, should an improvement report be required, these must be submitted to the CA by 30 June. Figure 2.1 shows the entire 18 month compliance cycle.
Start of compliance cycle N (01 January)
Where necessary, submit improvement Allocation of allowances report to Competent N (28 February) Authority N+1 (30 June)
Surrender allowances End of monitoring N+1 (30 April) period N (31 December)
Submit verified emissions report to Competent Authority N+1 (31 March)
Figure 2.1 The EU ETS compliance cycle (for emissions in year N)
In the EU ETS, one allowance is equal to one tonne of CO2e emission. Articles 14 and 15 of Directive 2003/87/EC provide the legal basis for the monitoring, reporting, verification and accreditation requirements. Additionally, Annex IV sets some basic principles for the monitoring and reporting of emissions in Annex IV and Annex V outlines the criteria for verification.
The first Monitoring and Reporting Guidelines (MRG) were adopted by the Commission in 2004 (Decision 2004/156/EC) and applied for the first trading period (2005-2007). These guidelines called for the monitoring and reporting to be based on completeness, consistency, transparency, accuracy, and cost-effectiveness, and aimed to target the overall improvement of performance in monitoring and reporting emissions.
In 2007, the Commission adopted a revised version of the guidelines (MRG 2007) (Decision 2007/589/EC) to be applied for the 2008-2012 trading period. The revision took into account experiences from the first trading period and looked at improving the overall clarity and cost-effectiveness of compliance with the EU ETS. In
July 2016 Doc Ref. 37474 17 © Amec Foster Wheeler Environment & Infrastructure UK Limited
this Decision, the Commission also highlighted the need to better address the needs of low emitting installations. For the third trading period, revisions of the ETS Directive (published as Directive 2009/29/EC) provided for the adoption of two new Regulations to replace Commission Decision 2007/589/EC:
Commission Regulation (EC) No 601/2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC (hereafter MRR); and
Commission Regulation (EC) No 600/2012 on the verification of greenhouse gas emissions reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC (hereafter AVR).
The MRR replaced the MRG 2007 with a particular emphasis on simplifying the monitoring process when possible and improving the overall cost-efficiency of the monitoring and reporting duties. The MRR takes into account best practices that were observed in different Member States and made several changes, including, but not limited to:
Further emphasising the importance of the monitoring plan as the main instrument for the monitoring and reporting system (note that the AVR also establishes the monitoring plan as the starting point for verification);
Clarifications relating to the role of written procedures which supplement the monitoring plan with practical details, but are kept separate for ease of update;
Reinforcing the principle of continuous improvement of the monitoring plan by including a requirement for the operator to react to the recommendations made by the verifier;
Introducing more flexibility in the combination of the possible monitoring methods (e.g. measurement-based approaches are on equal footing with calculation-based approaches);
Providing clarification related to the understanding of ‘unreasonable costs’ as a way to justify derogation from a specific tier and the possible improvement of a monitoring approach.
The AVR also presents a number of innovative requirements as it is the first time that an instrument is devoted exclusively to issues related to verification and accreditation. The key priority of the AVR is that verification and accreditation are now carried out in accordance with harmonised international standards with commensurate benefits concerning confidence in the quality of verification and therefore the accuracy of data reported in operator’s annual report. Verification also comprises an assessment carried out by independent verifiers that the monitoring plan developed by the operator (and approved by the CA) has been implemented properly. Once verified, a verification report must be sent by the verifiers to the operators who must pass it on to the CA. The AVR requires the CA to take action if the verification opinion is deemed to be non-satisfactory. A verified emission report will be considered by the CA as a faithful, true and fair account of the emissions data.
Verifiers must either be accredited or certified. Legal entities (verification bodies or legal individual bodies) must be accredited by a national accreditation body (NAB). Natural persons may be certified by a national certification authority where this is permitted by the Member State in question. It is noted that certification is extremely rare with only one verifier in one Member State currently certified for EU ETS. The AVR describes both the process (accreditation and certification) and their requirements.
Table 2.1 and Table 2.2 show the main MRV requirements arising from, respectively, the MRR and AVR.
July 2016 Doc Ref. 37474 18 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 2.1 Requirements of the EU ETS MRV placed on the relevant EU ETS actors: MRR
Requirement Operators Competent Authority (CA)
Monitoring plan Preparation of the monitoring plan and submission to Competent Authority (CA). Review and approval of the monitoring plan Each operator shall determine the category of its installation, classify the source streams, describe the methodology used, etc.
Monitoring plan modification Preparation and notification to CA, including justification of the changes Review and approval of the modifications (if they are ‘significant’12) (if applicable)
Risk assessment Preparation and submission to CA (along with the monitoring plan) Review of the risk assessment (NB the risk assessment is not part of the monitoring plan, but it is taken into account by CA when approving the monitoring plan)
Uncertainty assessments Preparation and submission to CA (along with the monitoring plan) Review of the uncertainty assessments (as part of the monitoring plan approval)
Simplified monitoring plan Preparation of the simplified monitoring plan and submission to CA Review of the operator’s justification. Checks on exceedances of installations that are defined as low emissions installations. MS/CA allowance to use a simplified or standardised monitoring plan.
Annual emissions report Preparation of the annual emissions report as per MRR Article 67 and Annex X, Review of the reports. In cases where operators have not submitted it, the and submission to CA CA has to calculate the emissions of those particular installations
Requirements related to data Creation and maintenance of written procedure. IT system and IT security measures management and record Creation and maintenance of a control system for emissions data. keeping QA procedures for the testing, calibration and checking of measurement equipment. Maintenance of IT equipment Recording of data and control activities
IT requirements Operators may be required to submit files electronically Provision of templates or alternative electronic formats
Technical feasibility and Preparation and submission of the claim (if applicable) Assessment of the claim and decision unreasonable costs claims
12 Any significant modifications to a monitoring plan (as defined by Article 14(3) of the MRR) require CA approval.
July 2016 Doc Ref. 37474 19 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 2.2 Requirements of the EU ETS MRV placed on the relevant EU ETS actors: AVR
Requirement Operators Competent Verifier National Accreditation Body (NAB) Authority (CA)
Pre-contract stage – Operators to submit information to verifiers Before accepting verification engagement, verifier (submission and review so that it can plan and carry out the to assess whether it can undertake the verification of relevant verification: for the specific operator: documentation) - All versions of the monitoring plan, - Evaluate risks involved in verification activity improvement report, internal and external - Review information provided by the operator e.g. data sources such as fuel invoices, the last operator report, monitoring plan and laboratory reports, etc. permit
Strategic analysis Strategic analysis to understand the operator’s business and set the stage for the risk analysis
Risk analysis Assess the risks of misstatements and non- conformities and their material effect on the reported data. This determines how and to what extent the verification activities should be designed, planned and implemented
Verification plan Establish the verification plan to include a verification programme, a test plan setting out the scope and methods of testing and a data sampling plan setting out the scope and methods of data sampling
Verification activities Implementation of the verification plan and collection and documentation of evidence for the verification opinion: - Verification that monitoring is in line with the MRR, and has been implemented - Data testing: data collected are free from material misstatement
Site visit Submission to CA regarding waive of site Site visits can be During the verification process (described above), visit (depending on the verifier's risk waived in exceptional verifier to carry out site visit(s) to assess adequacy analysis and determination of what is situations by the CA13 of data collected necessary to reach a verification opinion with reasonable assurance)
Internal verification Internal record (technical trail) of all the verifier’s documentation considerations and decisions
13 Note that installations of low emission do not need to seek CA approval for waive of site visit (based on the verifier's recommendation). Approval is only required for larger emitters.
July 2016 Doc Ref. 37474 20 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Requirement Operators Competent Verifier National Accreditation Body (NAB) Authority (CA)
Verification report Submission of verification report to CA Review of verification Fulfil content requirement including report to determine recommendation of improvement. Ensure the whether report is report goes through an independent review. satisfactory
Accreditation Must meet all accreditation requirements Independent assessment by the NAB on whether the verifier has the competence, impartiality and independence to carry out the verification, in line with the AVR
July 2016 Doc Ref. 37474 21 © Amec Foster Wheeler Environment & Infrastructure UK Limited
The success of the EU ETS resides on the full compliance by Member States. The MRV system enables a more transparent process for tracking implementation and for ensuring the enforcement of the operators’ obligation to surrender sufficient allowances. As stated above, the integrity, credibility and success of the system requires that one tonne of CO2e, measured, reported and verified in one country is equivalent to one tonne measured, reported and verified in another country.
The compliance cycle (as shown in Figure 2.1) involves different elements (permit, plant, emission data, reporting etc.) and different actors (Member States’ CA, operators, verifiers and NAB). For the EU ETS to not be compromised there need to be a high level of compliance and high level of consistency in the approach taken by all actors.
By the second trading period, Member States were beginning to realise the advantage of exchanging more information with each other and working more closely together towards a common approach and to harmonise Member States’ practices. One development put forward to address this issue was the creation of the Compliance Forum (DG CLIMA, n/d). The Compliance Forum supports Member States’ implementation and harmonisation of EU ETS through information exchange. It is composed by representatives of the MS EU ETS competent authorities that participate on a voluntary basis. This institution consists of:
The Compliance Forum Steering committee (executive body); The Compliance Forum Secretariat (provides administrative support);
Specific task forces (monitoring and reporting, aviation issues, e-reporting, carbon capture and storage, verification and accreditation);
Targeted events (e.g. the Compliance Conference, aimed at sharing best practice and facilitating dialogue); and
SharePoint (shared communications platform).
With the new MRV rules, the focus of attention turned to requirements for the provision of associated guidance and the development of tools to facilitate correct interpretation and uniform implementation. User manuals, general and specific guidance, templates, examples and sets of frequently asked questions (FAQs) have been developed by the Commission, in coordination with Member States’ CAs and other relevant stakeholders to help ensure that the rules governing MRV are implemented in a suitably harmonised way across the EU (DG CLIMA, 2015e).
The Commission published its Fourth ETS MRV Compliance Review at the beginning of 2015 (Larkin et al., 2015). The review stated that there have been tangible improvements in the new MRR and AVR compared to the MRG 2007 (in place from 2008 to 2012). However, these improvements were uneven across Member States, depending on the previous progress in implementation.
Previous studies on EU ETS MRV and lessons learnt It is widely accepted that the EU ETS has enabled the reduction of GHG emissions at a relatively low cost. According to the Environmental Defense Fund, “no negative effects on the overall economy are evident, and even the effects on energy-intensive sectors such as power, steel, and pulp-and-paper have been minimal” (Merrill Brown et al., 2012, p. vi). A 2011 study that reviewed published literature on the costs and competitiveness effects of the EU ETS summed up the consensus that “being subject to the EU ETS did not significantly affect profits, employment or added value during the first phase and the beginning of the second phase” (Abrell et al., 2011, p. 15). The same study confirmed those results in a comprehensive analysis of the performance of more than 2,000 European firms covered by the EU ETS.
Operators in the electricity sector agree that the EU ETS is a cost effective tool. The response of Eurelectric to the consultation on revision of the EU ETS (Eurelectric, 2015, p. 3) states that: “Eurelectric has consistently advocated for a thorough reform of the EU ETS, which should remain the key instrument to reduce carbon emissions and to promote investments in low carbon technologies. The ETS is cost-effective, technology-neutral and fully compatible with the internal energy market. Alternative non-market (emissions performance standards) or national (carbon tax) carbon policies do not fulfil these criteria and risk to affect the functioning of the ETS and the internal energy market. The
July 2016 Doc Ref. 37474 22 © Amec Foster Wheeler Environment & Infrastructure UK Limited
EU ETS is also more suitable for possible globalisation of climate change policies (e.g. through linking).”
Eurelectic (2015, p. 3) also argued that “the ETS as it stands today cannot incentivise the low-carbon investments required to meet the EU’s ambitious goals up to 2030 and beyond. It must be urgently strengthened by swiftly adopting the Market Stability Reserve and ensuring its entry into force by 2017”.
The issue of cost-efficiency of the EU ETS is of primary importance. It is one of the criteria used by the Commission to design and set up the European carbon market, and to improve it for the third phase. The introduction of the MRR and AVR) has provided some clear improvements from the MRG on proportional approaches in order to increase cost-efficiency: special derogations for installations of low emissions and small emitters in aviation, reduced requirements for minor and de-minimis source streams, consideration of technical feasibility and unreasonable costs and provisions for simplified monitoring plans. An impact assessment which accompanied the development of the two regulations (European Commission, 2012) states that:
“In both regulations, special attention is given to clarifying existing grey areas with respect to EU ETS MRV that at the moment are resulting in inefficient and time-consuming discussions between operators and Competent Authorities. With respect to verification, the clear procedures that are resulting from the draft A&V Regulation will bring much more control to the costs that verifiers are imposing to operators.”
However, little information is available on the costs of compliance with the EU ETS MRV. Multiple analyses are available on the best carbon pricing strategy, but those studies do not focus on administrative and compliance costs.
The key studies that do exist include one published by the Centre for European Economic Research (Heindl, 2012) which compiles several scientific articles on the transaction costs14 of various MRV systems including the EU ETS, and a report for the United Kingdom government which assesses the cost to UK operators of compliance with the EU ETS (King et al., 2010). More recently, Bellassen and Stehan (2015) have compiled an overview of MRV requirements at regional and national levels in numerous emission trading systems, including the EU ETS.
The main conclusion from those studies are:
Complying with the MRV regulation constitute the bulk of transaction costs of participating in the EU ETS – between 65 to 95% depending on studies;
Large economies of scale exist for MRV. The cost of monitoring, reporting, accreditation and verification per emitted tonne of CO2 for operators decreases exponentially with the amount of verified emissions;
For smaller emitters, verification constitutes the bulk of MRV costs. The AVR allows for a proportionate approach to collecting and verifying emissions costs and provides some additional dispensations aimed at reducing costs for smaller emitters;
MRV, and in particular monitoring, is much more costly in some specific sectors such as refining and cement production, due to the complexity of the processes involved and fuels used15; and
On average, MRV costs are almost evenly distributed between monitoring, reporting and verification, although verification is a little more expensive than the first two (i.e. accreditation and verification corresponds to 40% of the total MRV costs while monitoring and reporting each corresponds to the 30% of the total costs). Installation size strongly influences this distribution (as described above, the share of the verification cost increases while the size of the emitter decreases), Verification can represent as much as two thirds of MRV costs for installations below 25,000 tonnes of CO2 per year.
14 The term transaction cost designates the cost for each actor to participate in the EU ETS. It includes the time spent and the investments cost to fulfil the requirements of the MRV as well as administrative costs, access to information and trading costs. 15 These sectors burn non-commercial fuels (e.g. refineries burn self-produced liquid and gaseous fuels), the quality of which is highly variable. Consequently, it is not possible to base emission calculation on standard and stable fuel-related emission factors.
July 2016 Doc Ref. 37474 23 © Amec Foster Wheeler Environment & Infrastructure UK Limited
On average, MRV costs per installation are €15,000 to 32,000 per year, and are in the order of €0.04 to 0.08/tonne of CO2e/year (Bellassen and Stephan (eds), 2015). These figures are however somewhat uncertain and vary between installations. Moreover, they are based on surveys commissioned by industry, which contain many uncertainties such as biased sample size (with an overrepresentation of larger companies), approximate answers due to the lack of internal MRV cost tracking, and conversion error between time spent and monetary cost of labour. While similar uncertainties may be present in the current study, substantial effort has been made to ensure a representative sample that excludes bias as far as possible (see Section 4).
Figure 2.2 Estimated costs of MRV under the EU ETS
Source: Jacquier, 2014.
EU ETS MRV in the context of the REFIT programme Finally, analysis of EU ETS MRV is also able to be considered in relation to the wider evaluation policy of the European Commission, specifically the Commission’s strategy on Better Regulation (European Commission, 2015b). This strategy aims to improve the policy cycle (from design to revision of legislation) in order to ensure that European policies and regulations are easy to implement, provide certainty and predictability and avoid any unnecessary burden, so that they achieve their objectives in the most effective and efficient way.
As part of its Better Regulation Agenda, the Commission has also strengthened the role of its Regulatory Fitness and Performance Programme (REFIT) (European Commission, 2015c) which was set up at the end of 2012 to ensure that the body of EU legislation remains effective and efficient without compromising policy objectives. This is a rolling action programme to make EU law simpler and reduce regulatory burden that includes simplification proposals for the benefit of business as well as mandates for evaluations and fitness- checks of existing policies. The REFIT State of Play and Outlook published in May 2015 (European Commission, 2015d) highlights how the MRR and AVR regulations have contributed to the REFIT objectives of simplification and reduced regulatory burden by allowing small emitters and small aircraft operators to produce simplified monitoring plans and to have a larger margin of error in emission reports, thereby reducing their audit costs.
To improve the evidence base which underpins legislation, the Commission has reinforced its approach to impact assessment and evaluations and has published Better Regulation guidelines (European Commission, 2015e ). These guidelines aim to provide a common framework for conducting retrospective evaluations and state that all evaluations have to assess the evaluation criteria of: effectiveness, efficiency, coherence, relevance and EU added value of the intervention. Of these criteria, the evaluation of the EU ETS MRV compliance cost feeds into the efficiency analysis which aims to provide evidence on the actual costs and benefits, making it clear to what extent and how these can be linked to the EU intervention.
July 2016 Doc Ref. 37474 24 © Amec Foster Wheeler Environment & Infrastructure UK Limited
3. Objectives and scope of the study
3.1 Objectives
In light of the above, the main objective of this project was to provide the Commission with authoritative and up to date information on the costs associated with the main elements of EU ETS MRV in order to better advise future policy and possible improvements to the MRR and AVR.
The aim was to achieve this through providing:
An overview of EU ETS MRV costs affecting EU ETS operators and CA;
Breakdown of the main costs associated with activities by CA in the countries participating in the EU ETS (in addition to EU-28, the following EEA countries will be covered: Iceland, Lichtenstein, Norway), including approval and issue of permits and monitoring plans, maintenance of permits and monitoring plans, receipt and review of verified annual emission reports, receipt and approval of operator improvement reports, site inspections, exchange of information with verifiers and NAB, and enforcement action;
Breakdown of the main costs affecting operator implementation of EU ETS, including submission of permits and monitoring plans for CA approval, monitoring according to the approved monitoring plan, maintenance of appropriate QA/QC procedures, annual emissions reporting, verification fees, submission of necessary improvement reports and CA fees, costs associated with the main requirements of the MRR and AVR;
Identification of differences/ ranges in costs as a result of economies of scale affecting CA implementation and enforcement, including in terms of:
Member States (MS) with the largest and the lowest numbers of EU ETS operators within their jurisdiction:
The number of CA personnel required to implement and enforce EU ETS MRV on a permanent basis as well as in times of peak workload (including necessary outsourced support).
Any additional cost associated with there being more than one (multiple) EU ETS CA within certain Member States and advantages of greater coordination;
Any additional cost associated with geographical centralisation or dispersal of CA EU ETS MRV resources; and
The costs and cost savings due to available guidance, templates, helpdesks and automated IT systems concerning data management and reporting.
Identification of differences/ranges in costs typically associated with different scales of EU ETS operation, including in terms of Category C, B and A installations and installations of low emissions (as defined by MRR Articles 19 and 47) and, separately the different complexities of a representative selection of individual EU ETS activities (for example, simple combustion, oil refining, integrated iron and steel, primary aluminium, other non-ferrous and ferrous metals production/processing, cement, lime, glass and ceramics). The effects on both operators and competent authorities should be considered.
A secondary objective was, where possible, to provide recommendations on possible cost reduction measures, including:
Identification of cost savings as the result of centrally provided guidance, templates, exemplars, tools and FAQ published by the Commission as well as by the activities of the EU ETS Compliance Forum; and
July 2016 Doc Ref. 37474 25 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Identification of the scope for possible further reduction of EU ETS MRV costs in particular concerning installations of low emissions, but bearing in mind the completeness, consistency and integrity principles and responsibilities stated for MRV in the MRR and AVR. Therefore, acknowledging the need to present such possibilities in terms of the quantity/proportion of emissions likely to be affected and the cost-benefit considering inter alia the effect on data quality.
The evaluation of the compliance costs and provision of recommendations on possible cost reductions is consistent, where relevant, with the requirements for the Commission’s Regulatory Fitness and Performance Programme (REFIT) and the Commission’s Impact Assessment Guidelines (European Commission, 2015e). A full evaluation of the MRR and AVR is however beyond the scope of this study.
3.2 Study scope
This study focuses on identifying the compliance costs facing stationary installations and CA participating in the EU ETS. The scope is intended to provide a representative sample of all stationary installations and CA participating in the EU ETS (see the following section).
July 2016 Doc Ref. 37474 26 © Amec Foster Wheeler Environment & Infrastructure UK Limited
4. Methodology
4.1 Identification of EU ETS MRV to be assessed
In order to identify specific elements of the ETS MRV to be assessed as part of this study, as well as a continued focus on the study terms of reference16, each article of the Directive 2003/87/EC (which incorporates the amendments published in Directive 2009/29/EC), the MRR and AVR was individually reviewed in order to identify relevant areas where administrative requirements are stipulated resulting in costs. This analysis identified, article by article, those elements of the MRR and AVR against the following screening criteria:
Estimated cost (high, medium or low);
Estimated complexity of task required (high, medium or low); and
Whether the requirement could be flexibly applied, i.e. applied by some installations and not others (yes, no).
Those articles which were deemed to be highly costly, highly complex and which could be flexibly applied were prioritised for question development. Focusing on costly and complex requirements was deemed important as they could potentially offer the highest cost savings as part of future revision to the MRV regime. Identifying requirements that may be flexibly applied and thus result in divergent levels of compliance costs was also important. Where variations in costs were uncovered as a result of the survey, these were analysed in conjunction with the main study variables (outlined in Section 4.2 below) in order to identify underlying drivers for these differences.
4.2 Stakeholder consultation: Survey
Competent authorities Competent authorities (CA) involved in EU ETS monitoring, reporting and verification were identified predominantly from the “Article 21 reports” that CA are required to submit to the European Commission (as per Article 21 of the EU ETS Directive).17 This list was supplemented by internet searches and data provided by the Commission (the European Environment Agency’s summary of Member State CAs).
In total, 107 CA were identified. Figure 4.1 shows the number of CA per country that were subject to initial contact. CA were encouraged to forward the survey to other CA within their country that may not have been identified by the project team. Of these CA identified at the outset of the project, 42% were in the higher GDP country grouping (Group I), and 58% were in the lower GDP country grouping (Group II) (see the section below for discussion of these groupings). Where multiple CA per country were identified, these generally represented the presence of regional CA in that Member State.
16 Throughout the study, and as arising from the discussions held between the project desk officer at DG CLIMA and the study team, certain requirements identified in the study terms of reference were prioritised and de-prioritised for inclusion and analysis in consideration of achieving a greater overall response rate to the survey. For example, questions that attempted to allocate a proportion of equipment costs to particular tasks were removed from the surveys as they were deemed overly complicated and likely to reduce the number of responses received. 17 These reports are available at: http://cdr.eionet.europa.eu/.
July 2016 Doc Ref. 37474 27 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Competent Authorities 12
10
8
6
4
2
0
Italy
Spain
Malta
Latvia
France
Cyprus
Poland
Ireland
Austria
Greece
Croatia
Iceland
Finland
Estonia
Norway
Sweden
Belgium
Bulgaria
Slovakia
Slovenia
Hungary
Portugal
Romania
Denmark
Germany
Lithuania
Netherlands
Luxembourg
Liechtenstein Czech Republic Czech UnitedKingdom
Figure 4.1 Number of CA per country to which initial survey request was sent
In total, 31 surveys were received from CA. This represents a 29% response rate. Of these, 13 were from the Group I and 18 from Group II. Certain CA that had been identified as particularly relevant to this study, given the large number of installations in those countries, did not complete surveys (i.e. Germany, France and Italy). During the follow up consultations, described in Section 4.3 below, a response was provided by UBA in Germany for the main aspects of the questionnaire.
Operators The total population used for this study was 11,383 individual installations, sourced from the European Union Transaction Log (EUTL) database (DG CLIMA, 2015f). This population comprised the entire dataset of EU ETS installations excluding aircraft operators (activity type 10) and those installations with closed accounts. Table 4.1 shows the full list of EU ETS activity type codes included in this study.18
Table 4.1 EU ETS activity type codes included in this study
Activity type code
20 All combustion of fuels (20.0 + 20.1) - 20.0 New activity code 20. Combustion of fuels - 20.1 Old activity code 1. Combustion installations
21 All refining of mineral oil (21.0 + 21.2) - 21.0 New activity code 21. Refining of mineral oil - 21.2 Old activity code 2. Mineral oil refineries
22 All production of coke (22.0 + 22.3) - 22.0 New activity code 22. Production of coke - 22.3 Old activity code 3. Coke ovens
23 All metal ore roasting or sintering (23.0 + 23.4) - 23.0 New activity code 23. Metal ore roasting or sintering
18 Note that activity type codes 45, 46 and 47 referring to the capture, transport and storage of greenhouses gases under Directive 2009/31/EC respectively have been excluded from this study as no installations are currently operating under these activity types within the EU ETS.
July 2016 Doc Ref. 37474 28 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Activity type code
- 23.4 Old activity code 4. Metal ore roasting or sintering
24 All production of pig iron or steel (24.0 + 24.5) - 24.0 New activity code 24. Production of pig iron or steel - 24.5 Old activity code 5. Pig iron or steel
25 Production or processing of ferrous metals
26 Production of primary aluminium
27 Production of secondary aluminium
28 Production or processing of non-ferrous metals
29 All production of cement clinker (29.0 + 29.6) - 29.0 New activity code 29. Production of cement clinker - 29.6 Old activity code 6. Cement clinker or lime
30 Production of lime, or calcination of dolomite/magnesite
31 All manufacture of glass (31.0 + 31.7) - 31.0 New activity code 31. Manufacture of glass - 31.7 Old activity code 7. Glass including glass fibre
32 All manufacture of ceramics (32.0 + 32.8) - 32.0 New activity code 32. Manufacture of ceramics - 32.8 Old activity code 8. Ceramic products by firing
33 Manufacture of mineral wool
34 Production or processing of gypsum or plasterboard
35 Production of pulp
36 All production of paper or cardboard (36.0 + 36.9) - 36.0 New activity code 36. Production of paper or cardboard - 36.9 Old activity code 9. Pulp, paper and board
37 Production of carbon black
38 Production of nitric acid
39 Production of adipic acid
40 Production of glyoxal and glyoxylic acid
41 Production of ammonia
42 Production of bulk chemicals
43 Production of hydrogen and synthesis gas
44 Production of soda ash and sodium bicarbonate
99 Old activity code 99. Other activity opted-in under Art.24
Variables Three main variables were considered to be likely to influence the level of compliance costs incurred by installations: scale of emissions, relative wealth and activity type.
Scale of emissions was considered to be important because economies of scale or scope may occur within certain installations leading to lower average compliance costs. This was a key finding of the literature review
July 2016 Doc Ref. 37474 29 © Amec Foster Wheeler Environment & Infrastructure UK Limited
(the results of which are provided in Section 5.3). Alternatively, installations with lower verified emissions may spend less on compliance costs as their installations are smaller and easier to monitor. As per Article 19 of the MRR, verified emissions for the previous phase of the EU ETS (2008-2012) were used to group the installations into three main categories:
Category A (average annual verified emissions of equal to or less than 50,000 tonnes of CO2e in the 2008-2012 trading period);
Category B (average verified annual emissions between 50,001 to 500,000 tonnes of CO2e in the 2008-2012 trading period); and
Category C (average verified annual emissions of more than 500,000 tonnes of CO2e in the 2008-2012 trading period).
Note that in the MRR, Category A encompasses all installations with verified annual emissions of equal to or less than 50,000 tonnes CO2e in the 2008-2012 trading period. This includes costs incurred by installations of low emissions (less than 25,000 tonnes CO2e in the 2008-2012 trading period). In the survey, operators were asked to identify their category based on average annual verified emissions and were able to identify themselves both as a Category A installation and, if applicable, as an installation of low emissions. Where data for these sub-groups are substantially different or it is considered that it may be a particularly important explanatory factor, it has been investigated further (i.e. in Section 5.2, results relating to costs have been presented in two parts: for low emissions installations, and Category A excluding low emissions installations).
The relative wealth of countries was regarded as potentially important because factors such as capacity constraints to implement available technologies or best practices may influence relative levels of compliance costs faced by installations. Table 4.2 shows how installations were grouped into two main categories19 according to GDP per capita 2013 from Eurostat (the most recent year comprehensive data is available) (Eurostat, 2015).20
Table 4.2 Country groupings
Country grouping Country GDP per capita 2013 Country grouping Country GDP per capita 2013
Group I Luxembourg 257 Group II Spain 94
Norway 186 Cyprus 89
Netherlands 131 Malta 86
Ireland 130 Czech Republic 82
Austria 128 Slovenia 82
Sweden 127 Portugal 79
Denmark 124 Slovakia 75
Germany 122 Greece 73
Belgium 119 Lithuania 73
Iceland 119 Estonia 73
Finland 113 Poland 67
United Kingdom 109 Hungary 66
France 107 Latvia 64
19 The study initially divided the relative wealth of countries into three groups (high, medium and low). However, due to the low survey response rate this was revised to two categories (Group I and Group II). 20 Liechtenstein was assumed to be part of Group I although no data was available in Eurostat.
July 2016 Doc Ref. 37474 30 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Country grouping Country GDP per capita 2013 Country grouping Country GDP per capita 2013
Italy 99 Croatia 61
Liechtenstein - Romania 55
Bulgaria 45
Additionally, it was considered that different activity types may have different levels of compliance cost due to their relative level of complexity. For example, combustion is a relatively simple activity compared to refineries which have a mixture of fuel types and processes.
There is a significant disparity in terms of types of activities within the population, with combustion (activity type 20) the most common (7,305 installations) and production of glyoxal and glyoxylic acid (activity type 40) the least common (one installation). Therefore, the following seven activity types (Table 4.3) were chosen as representing a variety of complexity in terms of activity and monitoring and reporting requirements. While it was considered that statistical representativeness was unlikely to be achieved for all activity types listed in the below table, it was considered important to increase the sample sizes for these activity types in order to encourage a higher response rate across different levels of installation complexity.
Table 4.3 Activity types included for representativeness in this study
Activity type Code Level of Rationale for selection complexity
Combustion 20 Low Vast majority of installations Many cases should be simple with a single fuel (natural gas) combustion emissions
Refineries 21 High Complex installations with multiple processes and emission sources, and use of waste gases as fuels
Primary aluminium 26 Medium New sector in Phase III Includes non-CO2 emissions
Cement 29 High Complex fuel mix (including waste and biomass) along with process emissions
Ceramics 32 Medium Relatively small emitter but includes both combustion and process emissions (with two reporting method options)
Paper 36 Medium Relatively small emitters that may have high biomass fuel consumption
Integrated iron & N/A* High Complex installations with multiple processes and emission sources, and steel use of waste gases as fuels. Mass balance approach is more widely applied than in other sectors.
* Integrated iron and steel installations fall under several activity type codes (e.g. 20, 22, 23 and 24) and were identified manually within the total population of installations.
Data selection Given these variables, Table 4.4 shows the necessary sample sizes within the population of each category that were required to achieve a 95% confidence level with a 10% margin of error.21 It also shows the sample sizes that were achieved during the survey. Five complete operator responses were excluded from the dataset (and thus the sample achieved below). Four of these were considered outliers and they were excessively biasing the results. The remaining one did not provide any information on currency used, so no cost data could be calculated with confidence.
21 The margin of error defines how closely the answers provided by the sample match the “true value” of the population. The confidence level provides a measure of how certain it is that the sample accurately reflects the population, within its margin of error. Also note that the sample size calculator chosen for this study used a normal distribution (50%) to calculate optimum sample size.
July 2016 Doc Ref. 37474 31 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 4.4 Data selection
Total Sample Survey Sample Level of representativeness Key variable population required* population achieved§ achieved required†
GDP per capita country grouping
8218 95 475 231 95% confidence interval with a Group I 10% margin of error
3620 94 470 129 95% confidence interval with a Group II 10% margin of error
Emissions category
A (including low 9144 96 480 197 95% confidence interval with a emissions) 10% margin of error
A (excluding low 1299 90 450 123 95% confidence interval with a emissions) 10% margin of error
Low emissions 7915 95 475 74 80% confidence interval with a installations 11% margin of error
1955 92 460 94 95% confidence interval with a B 10% margin of error
739 86 430 69 80% confidence interval with a C 11% margin of error
Activity type (main, other)
7305 95 475 206 (180 main, 95% confidence interval with a Combustion (20) 26 other) 10% margin of error
140 58 140 20 (16 main, 4 80% confidence interval with a Refineries (21) other) 15% margin of error
Primary aluminium 28 22 28 7 (5 main, 2 No (26) other)
324 75 324 25 (23 main, 2 No Cement (29) other)
1183 89 445 41 (39 main, 2 No Ceramics (32) other)
659 84 420 31 (28 main, 3 No Paper (36) other)
Integrated iron and 39 28 39 2 No steel (N/A)‡ * Sample required to achieve 95% confidence interval with a 10% margin of error. “No” means that representativeness was not achieved. † Assuming a 20% response rate. Where the required survey population was estimated to be greater than the total population, the total population was used. ‡ Integrated iron and steel installations fall under several activity type codes (e.g. 20, 22, 23 and 24) and were identified manually within the total population of installations. § Total number of installations by activity is reported both according to “main activity” and “other activities” based on what installations indicated. Note that sample tracking reported in this table excludes five respondents that have been excluded from the main analysis due to incomplete responses or excessively distorting cost data.
July 2016 Doc Ref. 37474 32 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Representativeness was not achieved for primary aluminium (activity 26), cement (activity 29), ceramics (activity 32), paper (activity 26) and integrated iron and steel. Therefore this study does not attempt to draw conclusions based on data achieved for these sectors.
The survey population was chosen by randomly selecting permit IDs from within the total population spreadsheet (e.g. by selecting every nth row) to achieve the total survey population needed for each category. Then, the activity types within the survey population at that point were checked against the required survey population per activity type, and, where required, further installations were added to achieve the total survey population needed.
The total final survey population required (in order to achieve a 95% confidence interval with a 10% margin of error and assuming a 20% response rate) was 4,186 installations (35% of the total population).
Survey questions Two surveys were created for this study; one for CA and one for operators (the latter also including a subset of the questions only relevant for low emissions installations).
The survey questions were based on three main considerations. First, the specified data required as per the study objectives. This also included questions required to identify installations against key variables such as country, annual emissions (in CO2e), activity type, and number of employees (the latter is used to understand the scale of operations of the company operating the installation in question).
Second, questions were based on the analysis of Directive 2003/87/EC, the MRR and the AVR as explained above. The majority of these questions were based on identifying compliance cost information using the framework of the Standard Cost Model (European Commission, 2014). While not all aspects could be specified per task (for example, training costs and capital expenditure were unable to be broken down by task as that would have made the survey overly complicated), this included the following elements:
Operational expenditure: the day-to-day costs of operations, such as production, general and administrative expenses:
Time spent on specific MRV elements by each actor and associated person time costs;
Costs of registration to a system if applicable e.g. fees to a CA;
Training costs associated with providing staff the necessary knowledge to carry out MRV activities; and
Cost of external services – e.g. consulting services, costs for verification services.
Capital expenditure: money invested by a company to acquire or upgrade fixed, physical, non-consumable assets, such as equipment or a new business, including for instance:
Equipment purchased in order to ensure MRV compliance (including investments in IT equipment to monitor and record emissions in order to ensure compliance with MRV requirements).
The third priority was given to identifying open-ended questions that gave the respondent a chance to provide written comments, including to inform potential recommendations on how costs could be reduced. These include identifying overlaps with other reporting requirements for other legislation, elements of MRV that were of least benefit compared to their cost, and the helpfulness of guidance on particularly aspects of MRV e.g. the guidance on unreasonable costs in the MRR.
The final versions of the survey are included in Appendix B. The main version of the survey was delivered via an internet-based survey platform. The use of an internet-based survey was chosen in order to extend the reach of the survey, as the survey link22 may be shared easily. The survey was also made available in
22 The survey link was not personalised for individual respondents. This was to encourage ease of access to the surveys (i.e. they may be forwarded from the initial contact to other organisations) and this method of distribution was actively encouraged in the contact emails.
July 2016 Doc Ref. 37474 33 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Microsoft Excel, both in order to help respondents prepare their responses, or as an alternative completion mechanism. Approximately half of both the operator and CA surveys were received via each medium.
Survey distribution The email addresses for CA were identified from sources including Article 21 reports, online searches and data provided by the Commission. As detailed above, the survey was initially sent to 107 separate CA.
Email addresses for operators were obtained from EUTL data made available by the Commission for the purposes of this study. Of the 4,244 operators identified, 944 email addresses were not part of the EUTL data. These gaps were cross-checked against information held by Amec Foster Wheeler which identified approximately 75% of these email addresses. Approaches were made to CA in each country and European- level trade associations to request missing email addresses, or for the CA/trade association to forward the survey to the relevant members if email addresses were unable to be provided (see Appendix C for a list of trade associations).
A number of these approaches to CA or trade associations resulted in either the provision of missing email addresses or the forwarding of the survey to installations. Trade associations that assisted in survey distribution include EIGA (European Industrial Gases Association), EURELECTRIC, EUROFER (The European Steel Association), EURIMA (European Insulation Manufacturers Association), Fertilizers Europe, Fuels Europe and ASPAPEL (Spanish Association of Pulp and Paper Manufacturers). The Croatian Ministry of Environmental and Nature Protection and the Swedish Environmental Protection Agency were also particularly proactive in forwarding survey replies to the project team. While this involvement may have biased the sample received towards certain activity types or countries, it was considered a necessary compromise in order to increase the response rate as a whole.
The CA survey was launched on 29 January 2016 with an initial response period of four weeks. Due to a low response rate, the response period was extended by one week to 06 March 2016 to encourage further replies. Three reminder emails were sent to encourage responses during this period. In addition, individual reminder emails were sent to CA of particular importance (e.g. to Germany, the Member State covering approximately 25% of emissions in the EU ETS).
The operator survey was launched on 01 February 2016 with a response period of five weeks. Again, due to a low response rate, the response period was extended by one week to 13 March 2016 to encourage further replies. Three reminder emails were sent directly to operators to encourage responses during this period, in addition to a request sent to trade associations and CAs asking them to also encourage operators to respond to the survey.
For both surveys, and in light of the low overall response rate, responses received up to and including the end of April 2016 were included in the final analysis.
Finally, it is important to acknowledge that some operators provided separate commentary regarding their costs (as opposed to completing the survey). These inputs were acknowledged by the study team and where relevant (for example, in terms of providing a rationale as to why costs for certain activity types may be higher than for others), were incorporated into the analysis. However, such commentaries were included with caution as they only represent the views of a small number of operators.
4.3 Stakeholder consultation: Follow-up engagement
Subsequent to the survey, follow-up engagement targeted towards the main information gaps occurred as part of the second phase of consultation for this study. For all follow-up engagement, semi-structured telephone or email interviews were used. Completed interview question sets are included as Appendix D.
Competent authorities Three MS CA were identified as particularly relevant to engage during the follow-up phase of this study due to the scale of EU ETS operations in their respective MS: France, Germany and Italy. Table 4.5 shows the results of this engagement.
July 2016 Doc Ref. 37474 34 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 4.5 Follow-up engagement: CA
Organisation contacted Date contacted Response
Ministry of Environment, Energy and the Sea 12 April 2016 Unable to respond due to resource constraints (France)
Environment Agency (Germany) 12 April 2016 Replied to questions in writing on 10 May 2016
Ministry of Environment (Italy) 13 April 2016 Acknowledged request but no information provided
Operators Table 4.3 above shows that a statistically representative response rate was achieved for the key variables of relative wealth of country (both Group I and II); for the different emissions categories (at different representativeness levels); and for combustion installations (activity 20) and refineries (activity 21) (at different representativeness levels). Follow-up engagement therefore aimed to fill data gaps for large emitters (Category C) engaged in the activity types that did not achieve statistical representativeness (as these were the least represented in the survey data). Contact was made with the following six European- level industry associations related to each of the chosen activity types:
Refineries (Activity 21): FuelsEurope
Primary aluminium (Activity 26): AluEurope
Cement (Activity 29): CEMBUREAU Ceramics (Activity 32): Ceram-Unie
Paper (Activity 36): CEPI
Integrated iron & steel: EUROFER
This strategy was chosen because larger emitters are generally well represented by industry associations and, as such, these associations were expected to be able to provide informed views on behalf of their members.
In addition, while statistical representativeness was not initially sought for low emissions installations (a sub- category of Category A), certain questions in the operator survey did specifically address issues related to low emission installations (Q23, 24 and 25). Moreover, greater understanding of the reasons why such installations may face higher costs (as identified in the literature review) was deemed valuable. The following trade associations were identified as possibly being able to provide further explanation as to the costs facing low emission installations operating within the EU ETS:
Euroheat & Power European Association for Promotion of Cogeneration Europe
European Association of Sugar Producers
European Automobile Manufacturers European Envelope Manufacturers Association
European Federation of Local Public Energy Distribution
European Insulation Manufacturers Association European Manufacturers of Gypsum Products Manufacturers
Food Drink Europe
Table 4.6 shows the results of the follow-up engagement process for operators.
July 2016 Doc Ref. 37474 35 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 4.6 Follow-up engagement: Operators
Type of organisation Organisation contacted Date Response contacted
Refineries (Activity 21): 13 April 2016 Declined to participate FuelsEurope
Primary aluminium (Activity 13 April 2016 Unable to participate due to resource constraints 26): AluEurope
Cement (Activity 29): 13 April 2016 Interview completed 26 April 2016 Trade association – key CEMBUREAU sector Ceramics (Activity 32): 06 April 2016 Questions sent, but no interview completed Ceram-Unie
Paper (Activity 36): CEPI 06 April 2016 Interview completed 20 April 2016
Integrated iron & steel: 06 April 2016 Interview completed 28 April 2016 EUROFER
Euroheat & Power 12 April 2016 No response received
European Association for 12 April 2016 Interview completed 22 April 2016 Promotion of Cogeneration Europe
European Association of 12 April 2016 Questions sent, but no interview completed Sugar Producers
European Automobile 12 April 2016 No response received Manufacturers
Trade association – low European Envelope 12 April 2016 Declined to participate emissions installations Manufacturers Association
European Federation of Local 12 April 2016 No response received Public Energy Distribution
European Insulation 12 April 2016 Questions sent, but no interview completed Manufacturers Association
European Manufacturers of 12 April 2016 Interview completed 29 April 2016 Gypsum Products Manufacturers
Food Drink Europe 12 April 2016 After short discussion (14 April 2016), redirected to the European Dairy Association (EDA) but no further interviews completed
Verification bodies As part of the follow-up engagement, the project team also contacted the following organisations to obtain representative views on behalf of verifiers and NAB:
European Cooperation for Accreditation Compliance Forum Accreditation and Verification Taskforce
July 2016 Doc Ref. 37474 36 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 4.7 Follow-up engagement: Verification bodies
Organisation contacted Date Response contacted
European Cooperation for Accreditation 06 April 2016 Interview completed 15 April 2016
Compliance Forum Accreditation and Verification 06 April 2016 Referred study team to European Cooperation for Taskforce Accreditation
4.4 Literature review
A literature review was conducted alongside the stakeholder consultation phase of this study. A systematic web and academic database search was conducted using Google, Google Scholar, Web of Science, Science Direct, Cat. Inist and Scopus. Keyword searches were employed using relevant keywords such as “emissions trading monitoring cost”, “cost of compliance with the EU ETS MRV”, “cost savings in MRV compliance”, etc. in various EU languages including English, French, German and Polish. The following types of documents were included:
Policy evaluation reports (e.g. evaluations of national measures deriving from the implementation of the selected legislation);
Scientific articles;
Grey literature (i.e. research and other materials produced by organisations outside traditional academic or commercial publishing channels. This includes industry or government publications); and
Proceedings of conferences, symposia and meetings.
All identified sources underwent a preliminary screening to determine the most critical to the study, with the relevant quantitative and qualitative information extracted and logged in a data repository. Critical sources were determined as those containing either specific quantitative cost information on monitoring, reporting and verification (MRV), with a large volume of relevant qualitative information, and that provided relevant (up to date) data in terms of scope and costs covered (i.e. the information provided remains relevant to the current operation of the EU ETS even if published before the current phase).
All documents identified as relevant were included in a document register which categorised each source in terms of contextual information (geographic scope, industry/sector scope, scale, timeframe and stakeholder), type of qualitative data (e.g. description of compliance costs, whether they differed by sector or installation size, potential improvements to cost efficiency or administrative procedures etc.), and type of quantitative data (including financial and time costs of MRV). The source of the data was also collected. All sources were also reviewed in terms of the relevance and quality of the data included (including how the data was gathered, the robustness of the assumptions and methodology contained therein, and the likely representativeness of the source i.e. to ensure data included as free from bias and as objective as possible).
The cost analysis parameters employed across the different sources were highly variable, meaning that information and results were often not directly comparable. Therefore, much of the information collected and presented here should serve as a point of comparison for the data gathered from stakeholder consultation within this study rather than as robustly comparable data that is representative of costs incurred throughout Member States. Additionally, a large proportion of critical sources with relevant quantitative cost information was observed to be from earlier phases of the EU ETS. Thus, the project team also reviewed a number of more recent sources, even though these had been deemed non-critical in the initial screening phase given that they did not contain quantitative cost information. These supplementary sources were used to provide up-to date depictions of current monitoring, reporting, and verification practices.
It is also relevant to note that information regarding costs to operators (as opposed to competent authorities and verifiers) was more readily available and formed the bulk of the literature reviewed. All sources analysed as part of the literature review are contained in a table in Appendix E.
July 2016 Doc Ref. 37474 37 © Amec Foster Wheeler Environment & Infrastructure UK Limited
4.5 Data analysis
The initial data analysis for the survey results focused on sense-checking and triangulating the data to determine the completeness and reliability of the responses. For example, there were clear data input errors where respondents added a monthly salary or an hourly wage, as opposed to an annual salary, or where respondents only selected one “other” activity type as opposed to identifying it as the “main” activity type. Where errors could be clearly rectified, these were done so (although all original data as inputted by survey respondents was retained and all such data cleaning remains clearly identified). Where errors were unable to be rectified and these caused significant outliers in the analysis (for example, an operator from Greece identified a junior staff annual salary of €4,366,844 and provided no other salary data, and another operator from Germany identified the annual salary of junior, mid and senior-level staff all as €2), these were discarded from the analysis.
Each quantitative answer was analysed for general descriptive statistics where relevant. Note that the sample average is an estimator of the population mean, measuring the average of all the values observed in the sample. Standard deviation provides a measure of how spread out the observations are in a sample, or in other words a measure of variability across sample observations. The standard deviation is calculated as the square root of the sample variance.
Competent authorities In addition to analysing each quantitative answer for general descriptive statistics where relevant, a number of the questions were designed to be analysed in terms of the Standard Cost Model format:
Total cost - New monitoring plans 2013 Total cost - Approving significant modifications 2013
Total cost - New monitoring plans 2014
Total cost - Approving significant modifications 2014
Total cost - Assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs, including carrying out CBA and estimating uncertainty thresholds 2014
Total cost - Receiving and reviewing annual emissions reports 2014
Total cost - Receiving and reviewing operators' improvement reports 2014 Total costs - site inspections
Cost savings
Equipment (investment and operational costs) Additional costs
The annual salary of junior, mid-level and senior staff provided by the respondents was converted to €/hour.23 These hourly rates were used to calculate total cost per question related to the time spent by junior/mid-level/senior staff, which was aggregated along with fees and other costs reported for each question. In addition, total costs were divided between the number of installations for which the Member States are responsible, in order to enable comparison between Member States (for Q7, Q9 and Q12). Results are presented by Member State, rather than by CA, in order to be as comparable across Member States as possible. While it is possible that this may introduce distortions into the results (e.g. results for a very small Member State are difficult to directly compare with those for a large Member State), the provision
23 Where other currencies have been used, these were converted to Euro using exchange rates from the European Central Bank (the average of the period 01-01-2014 to 30-06-2015). Annual salaries were converted to hourly salaries dividing the annual salaries by 1746 hours per year (1,746 hours according to Eurostat’s ‘Number of hours actually worked and paid per employee’ for all NACE activities (except agriculture, fishing, public administration, activities of households and extra-territorial organizations), updated March 2015).
July 2016 Doc Ref. 37474 38 © Amec Foster Wheeler Environment & Infrastructure UK Limited
of data regarding cost per Member State per installation with which they work is intended to mitigate such distortions.
Qualitative information was analysed predominantly using thematic analysis in order to identify key trends and themes in the data. Information gained from the second phase of consultation was also analysed qualitatively and used as an input into the analysis phase of the study.
Data from operators A similar approach was taken to analysing the responses from operators. Standard Cost Model questions contained information on the following:
Total cost of preparing a new monitoring plan
Total cost of determining the appropriate classification for each relevant source stream
Total cost of carrying out a risk assessment (to provide evidence that the proposed control activities and procedures for control activities are commensurate with the inherent risks and control risks identified)
Total cost of providing evidence for each source stream and emission source
Total costs of calculating whether applying a specific monitoring methodology may incur unreasonable costs
Total cost of making significant modifications to the monitoring plan Total cost of monitoring
Total cost of quality assurance and control
Total cost of preparing an annual emissions report and submitting it for approval
Total cost of verification
Total cost of any necessary improvement reports
Additional important costs The cost data was originally split into several categories:
Total hours spent by junior staff
Total hours spent by mid-level staff Total hours spent by senior staff
Fees
Any other costs
As for Member States, the total costs per question were calculated using the data reported in the Standard Cost Model format and the annual salary reported by the operator (converted to €/hour23); which was aggregated along with the other costs reported in each question (i.e. fees, other costs). Qualitative information was analysed predominantly using thematic analysis in order to identify key trends and themes in the data. Information gained from the second phase of consultation was analysed qualitatively and used as an input into the analysis phase of the study.
In terms of calculating costs per tonne of CO2e, the primary method was to divide the MRV cost averaged across all installations (not weighted) by emissions averaged across all installations, where:
July 2016 Doc Ref. 37474 39 © Amec Foster Wheeler Environment & Infrastructure UK Limited
The average costs of MRV were calculated aggregating the average cost per question reported by operators.24
The average emissions per operator were calculated dividing total CO2e emissions reported by the number of operators that participated in the survey.
This method (a “top-down approach”) was chosen for consistency with other studies, because while not explicit, it appears as if the values presented in other literature sources are based on this approach. Furthermore, this calculation is less distorted by individual outliers25 because the average cost per tonne of CO2e is not calculated for each individual operator, The values obtained using this method provide a representation of MRV costs per tonne of CO2e to the EU ETS as a whole. The value is strongly influenced by high emitters, which account for the majority of emissions.
An alternative “bottom-up” approach is also provided in this report. This is a calculation of cost per tonne for each individual installation obtained by dividing the cost reported by each installation by the amount of emissions that it reported, and then averaged across all installations. This method requires the removal of outliers to minimise distortion. It is presented to provide a better indication of the cost per tonne of CO2e incurred by individual installations, being less influenced by the high emitters.
For each respective method, sub category values are also calculated, applying the equivalent methods using only data for the installations in each category:
Cost per tonne for Group I and Group II countries;
Cost per tonne for A, B and C Category installations.
4.6 Evaluation against the REFIT criteria
In order to guide the analysis contained within this report, evaluation against the European Commission’s Regulatory Fitness and Performance Programme (REFIT) criteria was also conducted. The purpose of the evaluation was to determine whether the current and recommended EU ETS MRV requirements are meeting, and will meet, its “intended goals at minimum cost, achieving the benefits that only EU legislation can bring without unnecessary regulatory burden”. This is in keeping with the rationale behind the European Commission’s drive for “Better Regulation” which aims to design EU policies and legislation that can achieve their objectives at minimum cost. Key to any evaluation within the context of the Better Regulation agenda is determining whether or not the intervention continues to be justified, or in this case, whether or not the costs continue to be justified. Therefore the evaluation was an integral step for drawing out recommendations presented in Section 7.
Evaluation questions This evaluation did not assess the MRR or AVR in their entirety, rather the focus is specifically on identifying the costs of compliance. Thus, while the REFIT criteria of effectiveness, efficiency, relevance, coherence and EU added value were noted, only certain aspects of the criteria were deemed relevant to evaluating the costs of compliance with MRV requirements.
To evaluate the effectiveness of MRV compliance costs would involve assessing the extent to which the objectives of the MRV requirements have been achieved, identifying the effects and drawing a comparison between them and the objectives of the regulation. To deliver this would require evidence of compliance (as the intended effect) so as to then evaluate the effectiveness of the costs needed to achieve it. However, this falls beyond the scope of the current study. Similarly, the assessment of EU added value was also not within the scope of this evaluation, Without a harmonised MRV system such as can be achieved with EU regulation, the integrity of the EU ETS could be called into question (as set out in Section 2).
Thus, the criteria applied here were efficiency, relevance and coherence. To evaluate the efficiency of MRV compliance costs this assessment considered the relationship between the compliance costs and the
24 See Section 6 for a description of what was included as an MRV cost. 25 Some paper producers report low CO2e emissions but high costs as a result of using a high proportion of biofuels
July 2016 Doc Ref. 37474 40 © Amec Foster Wheeler Environment & Infrastructure UK Limited
changes it has led to. To evaluate relevance the relationship between the needs that led to the regulation being implemented and the intended goals of the regulation was examined. To evaluate the coherence the analysis looked at both internal and external aspects of coherence, i.e. how well aligned the compliance costs are with one another, as well as how well aligned the compliance costs are to other compliance costs. Evaluation questions for these three criteria are set out in the table below. Example indicators were also developed against each evaluation question and which guided the analysis presented in Section 6.
Table 4.8 Evaluation questions against the REFIT criteria
REFIT Evaluation question criteria
Efficiency If there are significant differences in costs between Member States (e.g. low/ high GDP), what is causing them? What factors influenced the efficiency achieved? To what extent are the costs involved justified? To what extent are the costs proportionate to the benefits?
Relevance Are the different aspects within the MRR still relevant to just the costs?
Coherence To what extent are the associated MRV costs coherent with one another? To what extent are the associated MRV costs aligned to other compliance costs?
The data used to respond to these evaluation questions were a combination of the findings from the survey, targeted stakeholder consultation and literature review.
4.7 Constraints and data limitations
While every effort was made to identify a robust and rigorous method for this study, a number of constraints and data limitations have occurred. The first was the difficulty faced identifying correct contact details for numerous installations selected as part of the sample population. This indicates a challenge for EUTL in terms of maintaining an accurate and comprehensive database of installations, and which should be noted for any further studies intending to use this data source.
The second significant constraint to this study, particularly in terms of obtaining a statistically representative sample, was the timeframe during which the survey was distributed. The project team received several replies indicating that it was a “a very busy time of year for staff involved in EU ETS compliance activity … so time is limited” and which served as a rationale for many installations to not complete the survey. Another installation summarised this argument:
“…your timing of the survey is very unfortunate. We cannot understand why you sent it out in February with a deadline in March. As I hope you are aware, all the annual GHG verification and reporting is required to take place before the 31st of March. So everyone working with GHG already have their hands full during these two months. In our case we simply had to prioritize the compulsory GHG reporting activities over this survey. This in its own way shows that the burden presented by GHG reporting and verification is considerable.” (Email from a Finnish operator, 13 March 2016).
Third, in terms of the data analysis, as the surveys in Appendix B show, respondents were asked to indicate the average annual salary of a junior, mid-level or senior staff member working on MRV. In order to convert this figure into an hourly rate so that it could be used as part of the standard cost model format, these annual salaries were divided by the number of working hours per year in the EU-28 for a full-time worker (1,746 hours according to Eurostat’s ‘Number of hours actually worked and paid per employee’ for all NACE activities (except agriculture, fishing, public administration, activities of households and extra-territorial organizations), updated March 2015). The use of this figure introduces a certain degree of inevitable bias to these results (as opposed to knowing the actual number of hours worked per year for each different country involved in this study).
July 2016 Doc Ref. 37474 41 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Fourth, as noted above, the low response rate to the survey means the information obtained for certain categories of interest for the analysis is insufficient to achieve statistical representativeness. This means that certain types of analysis are not possible as such results would not be considered statistically robust. This has been especially true when analysing responses by type of activity, as for certain activities only a limited number of responses were obtained.
Finally, other issues to note include challenges in terms of survey population concern in the topic matter (and thus reliance on goodwill for responses), a high complexity of subject matter (also reflected in the questionnaire necessary to gather the required information), and a potential for biased responses and approximate answers due to a lack of MRV cost tracking at CA and installation level.
When the explanation for the anomalies in the sample was clearly discernible and quantifiable, data were corrected. This applies to approximately 10% of the responses. For example, in some cases installations reported cost figures that could clearly be considered as monetary values, rather than number of hours worked. In those cases these values were included directly in the computation of costs, and not multiplied by hourly rates to avoid double counting. In other cases installations reported annual salaries that were in the order of magnitude of monthly salaries. In those cases salary values were multiplied by 12 to obtain a proxy of annual salaries.
Other extreme outliers that could not be clearly explained (for a total of four installations) were removed from the statistical analysis. Finally one installation did not provide sufficient any information on currency so it was also removed. Additional explanation of the methods used in the analysis are described in Section 5.2.
July 2016 Doc Ref. 37474 42 © Amec Foster Wheeler Environment & Infrastructure UK Limited
5. Results: Identifying and quantifying compliance costs
The first and second parts of this section present findings from the stakeholder consultation process (both the first and second phases) and provide results in the two main categories: competent authorities (CA) and operators. Results are presented per survey question, with a final section providing a horizontal overview of the results presented by overarching themes. The third part of this section provides the results from the literature review.
5.1 Stakeholder consultation: Competent authorities
Results are presented here per question. All statistics (e.g. percentages etc.) are provided against the responses provided per question (rather than total responses for the survey as a whole). This means that total counts of answers may be different per question as not all respondents answered every question within the survey. Where more than one CA exists per Member State, those responses have been taken into account together to provide an average cost per Member State. In addition, these costs were divided between the number of installations for which the CA is responsible, in order to enable comparison between CAs (for Q7, Q9 and Q12).
It is critical to note that costs in Group II (lower GDP) countries may be lower than in Group I (higher GDP) countries solely as a result of lower wages. On average, CA salaries in Group II countries are 51% lower (between 38-69% lower according to whether staff are junior, mid-level or senior). This means that average costs relative to GDP per capita must be interpreted with caution. These costs include both hourly costs, and other costs such as outsourced costs.
Also, as noted in relation to Q3 below, CA in Group I countries work with approximately twice as many installations as do CA in Group II countries. This would therefore logically infer that total costs per CA for Group I countries should be four times that of Group II countries, if the cost per installation is the same.
Therefore, only where average costs for Group II countries (not per installation) are more than four times lower should any difference be inferred. This takes account of both the wage differential and the installation number differential. In the subsequent results and analysis sections, only where the difference in cost is higher or lower than expected (e.g. outside the bounds of this differential) is it explicitly discussed and concluding implications drawn.26
For all questions, average costs reported in the text refer to sample averages and are based on survey responses only, unless otherwise specified. The reported averages include all survey responses for those activities that were undertaken by all CA. For questions related to activities that not all CA undertake (such as site inspections), averages are calculated excluding zeros, in order not to distort estimates.
Q1: Country of CA Table 5.1 shows the country of CA. Of the survey respondents, 48% were from Group I countries and 52% were from Group II countries.27
26 Also note that due to the focus of this study on cost data, data in hours has not been presented or analysed. 27 Note that the CA from Norway (the Norwegian Ministry of Climate and Environment) did not reply directly to the survey (and is thus not included in these statistics) as it indicated that its organisational structure was such that it would be unable to quantify time spent and other costs.
July 2016 Doc Ref. 37474 43 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.1 Competent authorities that responded to the survey
Member State GDP category Number of CA responding to the survey
Austria I 1
Belgium I 2
Bulgaria II 2
Croatia I 2
Czech Republic II 1
Denmark I 1
Finland I 1
Greece II 1
Hungary II 1
Iceland I 1
Ireland I 1
Latvia II 1
Liechtenstein I 1
Lithuania II 1
Luxembourg I 1
Malta II 1
Netherlands I 1
Poland II 1
Slovakia II 1
Slovenia II 1
Spain II 5
Sweden I 1
United Kingdom I 2
Q2: Currency The majority of respondents (61%) replied to the survey in Euro (€). The remainder were provided in other currencies, and then converted to Euro for the analysis28.
Q3: Number of installations that the CA works with CA responding to the survey are responsible for 5,222 installations, representing 44% of the total 11,838 installations in the EU ETS.
28 The results may therefore be slightly influenced by the exchange rate applied.
July 2016 Doc Ref. 37474 44 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Based on GDP classification, in Group I countries, CAs that responded work with a total of 2,921 EU ETS installations. In Group II countries, CAs that responded work with a total of 2,301 installations. The average number of EU ETS installations that CA work with in countries classified as Group I is 243, whereas the average is 128 in countries classified as Group II. As noted in the introduction to this section above, thus, as there are twice as many installations per CA in Group I countries, and the wages are also on average 50% higher, this indicates that the anticipated difference in all subsequent costs between Group I and Group II countries should be four times.
Table 5.2 Number of EU ETS installations that CA works with
GDP grouping Total Average Standard Deviation
Group I 2921 243 248
Group II 2301 128 173
Combined 5222 174 214
Q4: Staff involved Based on GDP classification, the majority of CA within Group II (78%) require between 1-5 members of FTE staff for the implementation of MRV. The same trend can be observed among those Member States within Group I (58%), although the proportion is smaller.
Table 5.3 Number of staff involved in the implementation of the EU ETS MRV, by GDP grouping
GDP grouping 0.8 1-5 6-10 11-15 +15
Group I 1 7 2 2 0
Group II 0 14 2 1 1
Total 1 21 4 3 1
Q5: Additional staff required in times of peak workload Very few CA indicated that additional temporary staff are required in times of peak workload.
Table 5.4 Number of additional staff required in times of peak workload by GDP grouping
GDP grouping 1-5 temporary 6-10 temporary More than 10 Required to No employees employees temporary outsource work to employed per employed per employees external year year employed per contractors year
Group I 1 0 0 2 11
Group II 3 0 0 3 16
Q6: Salary This information is used as an input to the standard cost model questions later in the analysis and is not analysed separately.
July 2016 Doc Ref. 37474 45 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Q7: Cost of new monitoring plans (2013) The average cost per Member State of approving and issuing new monitoring plans in 2013 was €72,701.
There is a large difference in average per Member State between GDP category: between €22,934 (Group II) and €152,015 (Group I). The difference between Group I and Group II Member States is thus above the wage and installation number differential. The variability for Group I Member States is however significant, due to two Member States reporting costs close to €0.5 million, whereas three Member States have reported costs below €20,000 (Figure 5.1). The high costs reported by five Group I Member States as shown in the below figure are clearly considerably higher than all other Member States. These costs do not appear to be errors and are the result of the relationship between higher wages within Group I and higher effort in these Member States in terms of hours dedicated to this task due to the higher number of installations that they engage with.
Notes: Values have been anonymised. Each bar corresponds to a Member State and is ordered from smallest figure to highest figure in each graph (i.e. in each graph, the number corresponding to each Member State is different in each graph depending on the results). Within the survey responses received, none of the competent authorities from three Group I Member States and one Group II Member State responded to the question.
Figure 5.1 Average cost to CA of approving and issuing new monitoring plans (2013) – Cost per Member State
As shown in Table 5.5, the cost of new monitoring plans is higher for Group I Member States than for Group II Member States. Also, the variability is significantly higher in Group I countries (€176,784).
Table 5.5 Cost of approving and issuing new monitoring plans (2013) (€)
GDP grouping Average Standard Deviation Cost per installation Standard Deviation
Group I 152,015 176,784 1,155 1,700
Group II 22,934 22,732 506 776
Combined 72,701 127,953 766 1,272
The average cost per installation to Member States for approving and issuing new monitoring plans is €766. If adjusted for wage difference (a factor of two), the cost for Group I countries is only slightly higher than for
July 2016 Doc Ref. 37474 46 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Group II countries. The inconsistency in the relative difference between the average cost per country and the average cost per installation is because the number of installations per each Member State does not correspond with the average cost per Member State, as demonstrated by the relatively high standard deviation in the cost per installation.
Using the average cost per installation, the total cost for new monitoring plans in 2013 for all 11,838 installations in the EU ETS can be estimated to be just above €9 million.
Q8: Cost of approving significant modifications (2013) The average cost per Member State of approving significant modifications to monitoring plans in 2013 was €38,008. The average by GDP classification varies significantly; between €9,721 (Group II) and €80,439 (Group I). It should be noted that the variability for Group I Member States is significant, particularly due to one Member State reporting costs of above €500,000 (Figure 5.2). This Member State reported relatively high costs throughout the survey. However, as the graph shows, even despite the costs incurred by this Member State, where this activity was undertaken by Group I Member States it was estimated as a particularly costly element of MRV and significantly higher than the anticipated wage and installation number29 differential (i.e. costs are more than four times higher in Group I than Group II countries).
Notes: Values have been anonymised. Each bar corresponds to a Member State. Within the survey responses received, none of the authorities from three Group I Member States and four Group II Member States responded to the question.
Figure 5.2 Average cost to CA of approving significant modifications to monitoring plans (2013) – Cost per Member State
As can be observed in Table 5.6, the cost of approving substantial modifications is higher for Group I Member States than for those from Group II. Also, the variability is significantly higher in Group I Member States (€158,967). It has not been possible to identify the cost per installation of this cost element because the number of installations that requested approval to significant modifications to monitoring plans is unknown. It is possible, however, to provide an estimation of the cost for the total EU ETS system. Considering the average cost per Member State and taking into account that there are 31 countries that participate in this system, this would be approximately €1,178,000.
29 If it is assumed that a similar percentage of the total number of installations per country made significant modifications in 2013.
July 2016 Doc Ref. 37474 47 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.6 Cost of approving significant modifications to monitoring plans (2013) (€)
GDP grouping Average Standard Deviation
Group I 80,439 158,967
Group II 9,721 14,567
Combined 38,008 106,938
Q9: Cost of approving and issuing new monitoring plans (2014) The average cost per Member State of approving and issuing new plans was €7,915. When calculated for each GDP classification this is €6,495 and €10,043 for Group II and I respectively. This is within the bounds of the anticipated wage differential. This represents a decrease between 72% (Group II) and 93% (Group I) compared to 2013. The number of new monitoring plans issued in 2014 may therefore have been proportionally lower in Group I countries.
It should be noted that some of the Member States within Group I that reported the highest costs in 2013, reported high outsourced costs that do not seem to have been incurred in 2014. This could have contributed towards the decrease of the average and may indicate increased MRV experience among these CA.
However, the average cost for Group II Member States presents a significant decrease as well, which suggests that, as anticipated due to the difference between the introduction of the MRR and the need to approve a high number of new monitoring plans, and a “standard” compliance cycle, costs have generally been significantly lower in 2014 than in 2013. It should be noted that the authorities of the Member State with the highest cost in 2013 did not reply to this question, which has influenced the result significantly. The higher cost in Group II Member States has been strongly influenced by one of them which indicated that costs were as high in 2013 as in 2014, instead of reporting a significant cost reduction as in the rest of the cases.
It should also be noted that variation has been significant in Group I Member States due to one of them reporting a cost that is a minimum of four times higher than in any other Member State from Group I (Figure 5.3). Again, this result does not appear anomalous because this Member State consistently reported higher than average results.
July 2016 Doc Ref. 37474 48 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Notes: Values have been anonymised. Each bar corresponds to a Member State. Within the survey responses received, none of the competent authorities from five Member States from Group I and five Member States from Group II responded to the question.
Figure 5.3 Average cost to CA of approving and issuing new monitoring plans (2014) – Cost per Member State (€)
Conversely, when analysing the cost per installation, the trend is the opposite. This is because the cost per installation reported by the CA of three Member States in this category is significantly higher than 19 of the 20 other Member States (in both GDP groups) that responded to the survey. The variability of the cost data per installation for Group II Member States is much higher than that of Group I Member States.
If the average cost per installation is projected using the total number of EU ETS installations (11,838), the cost is approximately €1,823,000. This indicative figure is obtained by multiplying the average cost per installation (€154) by the total number of installation (11,838) to provide an indicative scaling for the whole EU ETS.
Table 5.7, variability is relatively high in both GDP categories. Moreover, the country that has reported the highest costs is a Group I country. Conversely, when analysing the cost per installation, the trend is the opposite. This is because the cost per installation reported by the CA of three Member States in this category is significantly higher than 19 of the 20 other Member States (in both GDP groups) that responded to the survey. The variability of the cost data per installation for Group II Member States is much higher than that of Group I Member States.
If the average cost per installation is projected using the total number of EU ETS installations (11,838), the cost is approximately €1,823,000. This indicative figure is obtained by multiplying the average cost per installation (€154) by the total number of installation (11,838) to provide an indicative scaling for the whole EU ETS.
Table 5.7 Cost of approving and issuing new monitoring plans (2014) (€)
GDP grouping Average Standard Deviation Cost per installation Standard deviation
Group I 10,043 23,983 50 109
Group II 6,495 12,852 223 763
Combined 7,915 18,227 154 601
July 2016 Doc Ref. 37474 49 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Q10: Cost of approving significant modifications (2014) The average cost per Member State of approving significant modifications in 2014 was €36,096. Based on GDP classification, the average cost of approving significant modifications was between €7,108 (Group II Member States) and €79,578 (Group I Member States), with a very high variability (a standard deviation of 136,219) for Group I Member States. This is due to three of them reporting a much higher value than the rest (and one country reporting a very high value) (Figure 5.4).
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Within the survey responses received, none of the competent authorities from two Member States from Group I and four Member States from Group II responded to the question.
Figure 5.4 Average cost to CA of approving significant modifications to monitoring plans (2014) – Cost per Member State
Table 5.8 Cost of approving significant modifications to monitoring plans (2014) (€)
GDP grouping Average Standard Deviation
Group I 79,578 136,219
Group II 7,108 11,629
Combined 36,096 93,616
The values reported in 2014 represent a decrease of 12% for Group I countries but a decrease of 27% for Group II countries. This might be linked to the number of modifications made in each case, but this could not be confirmed as the data on the number of modifications was not obtained in the survey conducted for this study.
Q11: Cost of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs, including carrying out CBA and estimating uncertainty thresholds (2014) The average cost per Member State of assessing operators’ claims that applying a specific methodology shall incur unreasonable costs was €1,144 in 2014 (note that refers to the costs incurred over the compliance cycle, not per assessment). Based on GDP classification, the average cost to Group I Member States is €291, whereas the average cost for Group II Member States is €1,713. This is outside the
July 2016 Doc Ref. 37474 50 © Amec Foster Wheeler Environment & Infrastructure UK Limited
anticipated range of the wage differential but is likely to be strongly influenced by the total number of claims made (for which numbers are unavailable).
As can be observed in Figure 5.5, the higher average costs reported by Group II countries was caused by three countries that reported total costs that were significantly higher than any of the other countries (Group II and Group I). These figures appear however to be credible data sources.
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Within the survey responses received, none of the authorities from six Group I Member States and seven Group II Member States responded to the question. One response was considered an outlier as it was an average of 11,000% higher than the rest. As a result, it was excluded from the analysis.
Figure 5.5 Average cost to competent authorities of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs (2014) – Cost per Member State
Table 5.9 Cost of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs (2014) (€)
GDP grouping Average Standard Deviation
Group I 291 581
Group II 1,713 4,321
Combined 1,144 3,438
Note: An outlier was removed (Group I country that reported a cost of over €45,000).
Q12: Cost of receiving and reviewing annual emissions reports (2014) The average cost per Member State of receiving and reviewing annual emissions reports was €16,349 in 2014. Based on GDP classification, this average cost varied significantly between Group II and Group I Member States (€30,746 for Group I and €6,751 for Group II, respectively. Therefore, the average cost reported by Group I countries was over four times higher than that reported by Group II countries. However, it is worth noting that the standard deviation of the data reported by Group I countries is relatively high. As regards the cost per installation, Group I countries reported a cost per installation 93% higher than Group II countries, as also seen in the table below. In this case, the cost per installation in Group I Member States is
July 2016 Doc Ref. 37474 51 © Amec Foster Wheeler Environment & Infrastructure UK Limited
two times higher than in those in Group II, but the variability is so high that it is very uncertain to draw firm conclusions on the difference between Group II and Group I Member States. Considering the average cost per installation and projecting it using the total number of EU ETS installations, the indicative total cost of this task for the totality of EU ETS installations was approximately €4,593,000.
As shown in Figure 5.6, one Group I country reported costs above €220,000, which explains the high variability, given that the rest of the Group I countries reported costs between €2,300 and €36,000. This value was not considered an outlier because that particular CA is responsible for more than 400 installations, hence the cost per installation would not be significantly higher than the average (€375 per installation). On the other hand, Group II values range between just below €400 and €22,000.
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Two Group II countries did not respond to the question.
Figure 5.6 Total cost to competent authorities of receiving and reviewing annual emissions reports (2014)
Table 5.10 Cost of receiving and reviewing annual emissions reports (2014) (€)
GDP grouping Average Standard Deviation Cost per installation Standard Deviation
Group I 30,746 60,111 547 934
Group II 6,751 6,730 282 586
Combined 16,349 40,133 388 756
Q13: Cost of receiving and reviewing operators' improvement reports (2014) The average cost per Member State of receiving and reviewing operators’ improvement reports was €7,492. Based on GDP classification, the average cost was between €1,890 (Group II Member States) and €15,894 (Group I Member States), with a relatively high variability among the responses of Group I Member States.
As shown in Figure 5.7, three Group I Member States reported significantly higher costs than the rest, which has influenced the much higher average of the Member States of this GDP group compared to Group II Member States. These figures are however not regarded as anomalous.
July 2016 Doc Ref. 37474 52 © Amec Foster Wheeler Environment & Infrastructure UK Limited
The average cost per Member State can be extrapolated using the number of EU ETS Member States, obtaining an indicative total cost of €232,252. However, it should be noted that the cost of receiving these reports is strongly influenced by the number of them submitted in each Member State. Since the number of submissions is not known, it is not possible to provide further assessment on the possible reasons for this cost difference.
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Within the survey responses received, none of the CA from one Group I Member States and three Group II Member States responded to the question.
Figure 5.7 Average cost to CA of receiving and reviewing operators’ improvement reports (2014)
Table 5.11 Cost of receiving and reviewing operators’ improvement reports (2014) (€)
GDP grouping Average Standard Deviation
Group I 15,894 22,160
Group II 1,890 3,173
Combined 7,492 15,797
Q14: Cost of site inspections (2014) The average cost per Member State of site inspections was €4,063. Based on GDP classification, the average cost was between €1,354 (Group II) and €8,127 (Group I), with a relatively high variability in the responses from countries classified as Group I. It is worth noting that one Group I Member State reported a cost of over €860,000, which was very high compared to all the other countries that reported data. As a result, this value was considered as an error (particularly given that no information was available regarding the number of site inspections carried out) and has been excluded from the analysis. The average cost of site inspections extrapolated by the total number of EU ETS installations is approximately €48 million. However, this should be interpreted with caution as not all the Member States will have the same inspection system.
As can be observed in Figure 5.8, the CA of three quarters of the Group II Member States did not respond to this question. As for Group I Member States, most reported a cost between €3,000 and €8,000, but two
July 2016 Doc Ref. 37474 53 © Amec Foster Wheeler Environment & Infrastructure UK Limited
reported a cost above €20,000. It is unclear whether this data is anomalous or represents a true cost (the latter is possible given the number of site inspections that may have taken place).
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Within the survey responses received, none of the competent authorities from five Group I Member States and nine Group II Member States with responded to the question. An outlier (Group I Member State reporting €860,000) has been excluded.
Figure 5.8 Average cost to CA of undertaking site inspections (2014)
Table 5.12 Cost of site inspections (2014) (€)
GDP grouping Average Standard Deviation
Group I 8,127 13,075
Group II 1,345 2,455
Combined 4,063 9,111
Note: An outlier was removed (Group I country that reported a cost of over €860,000).
Note that as explained in Section 5.1, not all CAs undertook site inspections, therefore average costs have been computed excluding zeros as well as one outlier in order not to distort estimates.
Q18: Savings related to information exchange practices (2014) This question was only completed by the competent authorities of two Group I Member States and three Group II Member States, with high variability among them. The responses were €3,190 and €180,000 for Group I and €72, €288 and €1,000 for Group II respectively. These figures deliver an average cost of €36,910 per CA. Note that in this case given the low response rate the average is reported as a whole and not by GDP grouping.
July 2016 Doc Ref. 37474 54 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Q19 and 20: Cost of equipment (investment) The competent authorities from fifteen Member States indicated that they had specifically invested in capital equipment to ensure compliance with MRV under the EU ETS. Of these, six were Group I Member States and nine were Group II Member States.
The average investment made per Member State was €63,484. Based on GDP classification, the average cost of equipment specifically purchased reported by CA ranged between €20,634 and €117,932 (for Group II and Group I, respectively). As with the questions related to wage differential, this may relate to a higher cost of capital equipment in Group I Member States.
There was a very high variability between the responses in both Group I and Group II Member States, as can be observed in Figure 5.9, with those in Group I reporting particularly high values. These figures however appear to be legitimate.
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Within the survey responses received, the competent authorities from five Group I Member States and five Group II Member States did not respond to the question.
Figure 5.9 Cost of equipment to CA (investment)
Table 5.13 Cost of equipment (investment) (€)
GDP grouping Average Standard Deviation
Group I 127,760 170,673
Group II 20,634 68,139
Combined 63,484 131,117
Q21: Cost of equipment (Annual operating costs) The average operating cost of equipment per Member State was €8,862. Based on GDP classification, this average cost varied between €3,684 (Group II) and €15,349 (Group I), with a high variability in both cases.
July 2016 Doc Ref. 37474 55 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.14 Cost of equipment (annual operating costs) (€)
GDP grouping Average Standard Deviation
Group I 16,629 24,797
Group II 3,684 6,974
Combined 8,862 17,758
As shown in Figure 5.10, the annual operating costs reported by Group I Member States ranged from €500 to €76,264, whereas those reported by Group II Member States ranged from €10.90 to €25,000.
Notes: Values have been anonymised. Each bar corresponds to a Member State. Member States are ordered from the lowest to the highest and grouped by GDP category. Within the survey responses received, the competent authorities of five Group I Member States and five Group II Member States did not respond to the question.
Figure 5.10 Annual operating cost of equipment - CA
Q23: Additional important costs CA were asked whether there were any additional important costs they had incurred as a result of the EU ETS MRV. This question was not responded to by the CA of many countries. The average additional important costs per Member State reported were €14,850. Based on GDP classification, only the CA of four Member States from Group I and three Member States from Group II responded to this question. The average additional important costs for respondents in the sample ranged from €3,874 (Group II) to €31,314 (Group I). However, there was a high variability in the responses, with the responses from Group I Member States being between €2,720 and €222,700 and those from Group II Member States being between €1,979 and €53,644. Thus, these results should be interpreted with caution both due to the high variability and small sample size.
Nearly all CA who answered this question identified training as an additional important cost; however information exchange (e.g. between CA, to operators, or to verifiers) was also noted by four CA.
July 2016 Doc Ref. 37474 56 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.15 Additional important costs (€)
GDP grouping Average Standard Deviation
Group I 31,314 66,524
Group II 3,874 12,221
Combined 14,850 45,172
Q24: Confidence The majority of CA either had high (29%) or medium (42%) confidence in the quality of the information provided in the survey (Figure 5.11). Note that some responses to this question received via the Excel format varied from the categories above (i.e. the installation inputted text of their own). This text was assessed and allocated into one of the three categories above.
Q24: Confidence
29% 29%
42%
High Medium Low
Figure 5.11 Confidence estimation (competent authorities)
Q25: Least beneficial aspect of MRV Of the 31 CA responses, six did not respond to this question and five indicated that all aspects of MRV are of equal importance. From the other responses, a wide range of aspects were identified by CA as being the least beneficial aspect of MRV. The more common aspects identified include: the level of MRV requirements being perceived as overly onerous for low emitters (four responses) (including that while simplifications are possible for such emitters, the administrative burden is still regarded as significant); approving improvement plans (four responses); and verification more generally (four responses). In addition, overlaps between verification and other aspects within MRV were reported by two CA with regards to reporting and site inspections.
Other elements that were identified by individual CA as being the least beneficial aspects of MRV include:
Contacting installations to request documents related to late submission of information (one response).
Installations required to produce a summary description of procedures in addition to the monitoring plan – this was perceived to have no added value but requires additional effort (one response).
July 2016 Doc Ref. 37474 57 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Chasing de minimis sources (no further information provided (one response).
Preparing and submitting Article 21 reports (while the respondent understood that it is useful for the European Commission and for overarching validation of the EU ETS as a whole, it was perceived to be of little value to the CA in question) (one response).
Monitoring and verification – owing to the equipment and labour needed (no further information provided (one response).
No trends were observed between CA operating in Group I and Group II countries.
Q26: Other overlapping legislation There were limited responses to this question with 14 CA choosing not to respond and four providing unclear responses. Of the CA that did respond, five reported that there are no overlaps with other legislation30, while eight reported that there are overlaps.
Overlaps between MRV requirements and other legislative requirements were most commonly identified by CA with regards to the Industrial Emissions Directive (six responses)/Large Combustion Plant Directive (two responses). Two responses reported that there are overlaps with the reporting obligations under the European Pollutant Release and Transfer Register Regulation. Most CA identified overlaps with just one other piece of legislation; only in two cases were overlaps with multiple pieces of legislation identified, including with combinations of:
GHG mandatory reporting at a national level
Medium Combustion Plant Directive
Large Combustion Plant Directive (note that this is now superseded by the Industrial Emissions Directive)
Industrial Emissions Directive
The European Pollutant Release and Transfer Register (E-PRTR)
Energy Savings Opportunity Scheme and CRC Energy Efficiency Scheme31
The nature of the overlaps between the MRV requirements and other legislative requirements was not disclosed in any detail.
No trends were observed between CA operating in Group I and Group II countries.
Note that there is little consistency between the responses provided for this question and those provided for Q15 (Do you perform inspections solely for the purposes of monitoring, reporting and verification under the EU ETS or do you carry out these inspections jointly for other purposes?). Only one CA responded consistently between the questions which indicates that there may be some issue with the robustness of the responses to these survey questions.
Q27: Differences in costs between trading periods Many CA (14) reported that no differences in costs between the trading periods of the EU ETS (Phases I, II and III) were observed (45% of the responses), with no further explanation provided. As illustrated below, 14 (accounting for 45% of the responses) CA reported that overall costs have increased (43%), and three indicated that costs have decreased (Figure 5.12).
30 Note that in theory, all Member State CA should be aware of some degree of overlap between EU ETS requirements and the IED and the E-PRTR. 31 Domestic UK legislation.
July 2016 Doc Ref. 37474 58 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Note: CA reported in two instances that the cost had both increased and decreased with respect to different aspects of the MRV – in both cases, an overarching increase or decrease was identified and this is what is reflected in the figure above. Note that the detail is recorded below in qualitative terms.
Figure 5.12 CA reporting differences in costs between reporting phases
In general terms, the reason provided for increased costs between the reporting phases was that it is felt that more requirements have fallen upon CA in Phase III, which require greater time and in some cases more staff. Examples of such additional requirements include:
More detailed monitoring requirements that are more complex to review (five responses) More time needed to approve improvement reports (three responses);
Greater administrative burden (three responses);
Meeting new IT requirements (two responses) Additional guidance requiring time for staff to engage with (one response);
Implementation of new requirements (one response).
One CA explained that the higher costs were due to inflation more generally.
In most cases, time was used as a measurement of cost. Only responses by three CA specified that the additional costs was due to the additional staff needed for Phase III, with the number of staff needed doubling in the case of one small CA.
Factors that have reduced costs were identified by four CA but no form of measurement was provided to support these judgements.
Stopped outsourcing costs (i.e. internalised processes previously outsourced to consultants);
Lessons learned;
Use of templates;
Use of online IT systems. No trends were observed between CA operating in Group I and Group II countries.
Q28: Suggestions for simplifications The suggestions provided by respondents for simplification include:
Further simplification for MRV requirements for small installations (eight responses), e.g. “not including small emissions sources in the monitoring plan”, “revising timeframes and further
July 2016 Doc Ref. 37474 59 © Amec Foster Wheeler Environment & Infrastructure UK Limited
simplifying requirements for small or simple emitters”, and to “consider changing the limit for Category A to 100,000 tonnes CO2e”;
Avoid frequent changes to reporting templates at a Member State level – especially where this will require changes to the online IT systems (two responses);
Provide timely guidance documents in the language of the Member State (two responses);
Simplify the criteria of waiving site visits (one response); Reduce the administrative and bureaucratic burden (one response) (no further detail provided).
No trends were observed between CA operating in Group I and Group II countries.
Horizontal overview: Competent authorities As Figure 5.13 indicates, CA from Group I countries incurred substantially higher costs related to MRV across the board than those in Group II countries. Costs related to approving and issuing new monitoring plans in 2013 (Q7) and costs of investment in new equipment (Q20) were particularly high.
Substantially higher costs were also noted for Group I countries for Q8 (approving significant modifications to monitoring plans for the 2013 compliance cycle) and Q10 (approving significant modifications to monitoring plans for the 2014 compliance cycle). These higher costs are all outside the bounds of the wage differential (in the case of operational cost questions).
Figure 5.13 Average costs for all standard cost model questions, by GDP grouping
As noted above, the sample of CA obtained for the survey did not include some CA considered as particularly relevant to this study (such as Germany, which represents a large proportion of emissions covered by the EU ETS). Further engagement with these CA was attempted during the second phase of consultation and a response was received from the German CA. This data has been incorporated, where possible, into the analysis in Section 6 below.
July 2016 Doc Ref. 37474 60 © Amec Foster Wheeler Environment & Infrastructure UK Limited
5.2 Stakeholder consultation: Operators
Results are presented here per question. All statistics (e.g. percentages etc.) are provided against the responses provided per question (rather than total responses for the survey as a whole). This means that total counts of answers may be different per question as not all respondents answered every question within the survey. All data in this section, as with the previous section, relates to information provided by survey respondents and only includes data that is statistically representative.
For each question relating to costs (Q9 to Q13, Q16 to Q20, Q22 and Q32), estimates for the overall average costs and costs per tonne of CO2e are reported in the main text. Tables are also included showing a breakdown of costs according to the three categories of analysis adopted in this study32. Indicative estimates for total MRV costs were also computed where possible in relation to costs that apply to all ETS installations. These have been obtained by multiplying the average cost estimates by 11,383, which is the total number of installations in the scope of this study. While the figures reported for aggregate costs can give an indication of the scale of these costs, they should not be interpreted as a statistically significant estimate of the true costs, mainly due to the limitations already described in Section 4.6.
The average costs per tonne of CO2e reported in this section were computed using the “top down” method as explained in Section 4.5. The costs per tonne of CO2e have been included to facilitate comparison with results from other literature, and were obtained by dividing costs by the reported verified emissions for 2014. 33 Total reported verified emissions in the survey are approximately 130 million tonnes CO2e, representing 7% of the total verified emissions of 1,812 million tonnes of CO2e for stationary installations in 2014. A breakdown of average emissions by the categories analysed in the report (by GDP, size category and activity type) is shown in the Table 5.16 below.
As indicated above, for each question sample averages are also reported separately in tabular format based on the three key variables identified as important and where representativeness has been achieved (by GDP grouping, emissions category, and combustion and refineries), both for average costs per installation34 and costs per tonne of CO2e . In order to better highlight differences between the analysed categories, costs per tonne of CO2e are presented to the third decimal place, however results with this level of precision should be treated with caution given the uncertainty associated with survey responses.
For all questions, apart from Q16, 22 and 32, the calculated averages include zero values from the questionnaire responses. For these questions, it is not possible to distinguish whether the operator provided a zero answer because there is no cost (and thus the question was skipped) or because no data on the cost was available. This potentially leads to the calculated average costs being understated and so the chosen data analysis strategy was thus implemented.
Table 5.16 Average verified emissions by GDP, category size and activity type
Category of installation Average verified emissions Standard deviation of (tonnes of CO2e) verified emissions (tonnes of CO2e)
Overall average All installations 361,339 1,076,643
Average emissions by GDP Group I 401,979 1,294,150
Group II 286,811 483,170
Average emissions by size Category A 86,398 269,574 category Category B 153,886 106,750
Category C 1,505,560 2,077,243
32 Note that throughout the text the “combined” averages are reported only once, in the first table of each subsection (costs by GDP) 33 With an average of approximately 360,000 tonnes CO2e per installation. 34 While for average costs standard deviations are also reported, standard deviations are not reported for costs per tonne of CO2e due to the use of the “top down” method which is explained in Section 6.2
July 2016 Doc Ref. 37474 61 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Category of installation Average verified emissions Standard deviation of (tonnes of CO2e) verified emissions (tonnes of CO2e)
Low emissions 13,712 22,472
Average emissions by Act 20 - Combustion 391,791 1,271,483 activity type Act 21 - Refineries 1,653,449 1,401,537
Again, as with CA, it is critical to note that costs in Group II countries may be lower than in Group I countries solely relating to lower wages. On average, salaries in Group II countries are 56% lower (between 53-60% lower according to whether staff are junior, mid-level or senior). This means that average costs relative to GDP per capita must be interpreted with caution. These costs include both hourly costs, and other costs such as outsourced costs. Therefore, only where average costs for Group II countries are more than 50% lower should any important difference be inferred.
In the analysis conducted in this section, it is important to note that activity refers only to the producers’ main activity (i.e. it does not include where it has been indicated as an “other” activity). This has been done in order to ensure that trends relating to activity type are able to be as clearly identified as possible.
Each table is preceded by a short descriptive text highlighting relevant trends in the data. Reported cost figures relating to the monitoring plan (Q9 to Q13, and Q16) refer to total one-off incurred costs, while the remaining figures refer to costs incurred during the 2014 compliance cycle (01 January 2014 to 30 June 2015) which are recurrent costs, unless otherwise specified. All figures are provided in Euro (€).
A number of outliers were excluded from these summary statistics. Approximately 10% of the responses have been excluded or modified when considered to be wrongly reported based on a defined set of criteria, as discussed above in Section 4.7.
Q1: Country of installation Figure 5.14 shows that the responses per country. More than 25 installations replied from Belgium, Germany, Sweden, the UK and Spain. Among Group II countries Poland had the highest response rate with more than 20 installations completing the survey.
July 2016 Doc Ref. 37474 62 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.14 Operator survey responses per country
Q2: Currency The majority of respondents (59%) replied to the survey in Euro (€). The remainder were provided in other currencies, and then converted to Euro for the analysis35.
Q3: Category of installation 197 installations identified themselves as Category A, of which 74 identified themselves as an installation of low emissions. 94 installations defined themselves as Category B and 69 as Category C.
Q4: Emissions
Respondents were asked to identify the verified annual emissions in tonnes of CO2e of their installation for 2014. The total sum of emissions represented by respondents to the survey was approximately 130 million tonnes. This represents 7% of the total verified emissions of 1,812 million tonnes of CO2e for stationary installations in 2014 as noted at the beginning of this section.36
Overall, average verified emissions for installations were 361,339 tonnes. For Group I countries, average emissions per installation were 401,979 tonnes, while for Group II countries average emissions per installation were 286,811 tonnes. Table 5.17 shows the average emissions per installation per installation category.
35 The results may therefore be slightly influenced by the exchange rate applied. 36 See http://europa.eu/rapid/press-release_IP-15-4987_en.htm.
July 2016 Doc Ref. 37474 63 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.17 Emissions per installation per installation category (tonnes of CO2e)
Category Average emissions per installation
Low emissions 13,712
Category A 86,435
Category B 152,402
Category C 1,505,560
Q5: Full-time equivalent (FTE) staff The average number of FTE per installation was 514 employees. For Group I country installations the average was 618 and for Group II country installations the average was 336 (Table 5.18). Average FTE per installation as expected is higher for Category C installations.
Table 5.18 Average FTE per installation
Category / GDP grouping Average FTE per installation
GDP: Group I 613
GDP: Group II 356
Category A 504
Category B 476
Category C 778
Q6: Activity type Responses were received from operators undertaking every ETS activity, except adipic acid. The vast majority of respondents indicated that their main activity type was Activity 20, combustion of fuels, as anticipated given that the vast majority of ETS installations fall under this activity (Table 5.19). Of all respondents to the survey, 25 also indicated that they conduct one or more “other” activity types at the installation.
Table 5.19 Activity types
Activity type code Activity Main Other Total
Act 20 All combustion of fuels 180 26 206
Act 21 All refining of mineral oil 16 4 20
July 2016 Doc Ref. 37474 64 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Activity type code Activity Main Other Total
Act 22 All production of coke 2 5 7
Act 23 All metal ore roasting or sintering 4 3 7
Act 24 All production of pig iron or steel 13 4 17
Act 25 Production or processing of ferrous metals 7 6 13
Act 26 Production of primary aluminium 5 2 7
Act 27 Production of secondary aluminium 1 2 3
Act 28 Production or processing of non-ferrous metals 4 3 7
Act 29 All production of cement clinker 23 2 25
Act 30 Production of lime, or calcination of dolomite/magnesite 8 8 16
Act 31 All manufacture of ceramics 21 1 22
Act 32 All manufacture of ceramics 39 2 41
Act 33 Manufacture of mineral wool 3 2 5
Act 34 Production or processing of gypsum or plasterboard 4 2 6
Act 35 Production of pulp 9 4 13
Act 36 All production of paper or cardboard 28 3 31
Act 37 Production of carbon black 1 2 3
Act 38 Production of nitric acid 3 4 7
Act 39 Production of adipic acid 0 2 2
Act 40 Production of glyoxal and glyoxylic acid 0 2 2
Act 41 Production of ammonia 2 3 5
Act 42 Production of bulk chemicals 8 7 15
Act 43 Production of hydrogen and synthesis gas 1 5 6
Act 44 Production of soda ash and sodium bicarbonate 0 3 3
Q7: Salary This information is used as an input to the standard cost model questions later in the analysis and is not analysed separately. However, as stated in the introduction to this section above, it is critical to note that costs in Group I countries may be higher than in Group II countries solely relating to higher wages. On average, salaries in Group I countries are 56% higher (between 53-60% higher according to whether staff are junior, mid-level or senior). This means that average costs relative to GDP per capita must be interpreted with caution. These costs include both hourly costs, and other costs such as outsourced costs. Therefore,
July 2016 Doc Ref. 37474 65 © Amec Foster Wheeler Environment & Infrastructure UK Limited
only where average costs are more than 50% higher between the two groups should any important difference be inferred.
Q8: Year of monitoring plan approval The majority of installations indicated that their new monitoring plan was approved in 2013 (Figure 5.15). A further five installations indicated dates before 2012 (one in 2008, one in 2010 and three in 2011) indicating some confusion regarding either the wording of this question or the recognition that a new monitoring plan was required due to the transition from the MRG (2007) to the MRR (2012).
Figure 5.15 Year of new monitoring plan approval
Q9: Monitoring plan preparation and approval Average costs per installation for preparing and approving a monitoring plan were €10,870, with a standard deviation of €19,180. These average costs lead to an indicative estimate of about €124 million for total costs related to monitoring plan preparation and approval. As explained in the introduction to this section, this indicative figure has been obtained by multiplying the average costs above by the total number of installations falling under the scope of this survey (11,383) and should not be considered to be a statistically significant estimate of the true aggregate costs. Average costs per tonne of CO2e were €0.029 per installation.
As expected, installations from Group I countries reported a higher cost of preparing and approving a monitoring plan compared to those from Group II countries (€14,104 compared to €5,079 respectively), with a high standard deviation indicating high variability especially among Group II country installations. As noted in terms of the wage differential as discussed in Q7 above, this nearly threefold difference is over the threshold of difference as related to wage costs in the two country groupings. It is unclear as to why Group I countries’ costs were significantly higher.
July 2016 Doc Ref. 37474 66 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.20 Monitoring plan approval costs by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 14,104 21,771 0.034
Group II 5,079 11,288 0.017
Combined* 10,870 19,180 0.029
Note that as explained at the beginning of this section, average costs per tonne of CO2e are reported here up to the third decimal number in order to better highlight differences among the analysed categories.
According to size category, respondents reported an average cost of preparing and approving a monitoring plan between €7,394 (Category A) and €16,670 (Category C). In terms of cost per tonne of CO2e, and as anticipated, costs are inversely proportional to installation size.
Table 5.21 Monitoring plan approval costs by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 7,394 14,921 0.121
Low emissions installations 8,073 19,477 0.549
Category B 14,039 20,623 0.090
Category C 16,670 25,329 0.011
Finally, based on the main activity type, combustion installations reported an average cost of preparing and approving a monitoring plan of €10,655 and refineries of €19,621.
Table 5.22 Monitoring plan approval costs by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 10,655 19,786 0.026
Act 21 - Refineries 19,621 23,615 0.012
Q10: Determining the classification of source streams The costs for determining the classification of source streams were on average €2,353 per installation, with a standard deviation of €8,298, which delivers an indicative aggregate figure of about €27 million for the whole
July 2016 Doc Ref. 37474 67 © Amec Foster Wheeler Environment & Infrastructure UK Limited
population involved with the EU ETS. These are extremely high figures as compared to what may have been anticipated, given that identifying source streams should be a one-off cost. It is thus possible that either there was confusion regarding what classification of source streams entails (e.g. as per Article 3(4) and Article 19(3) of the MRR) or that this question has itself been misinterpreted in the survey. Average costs per tonne of CO2e were € 0.006 per installation.
These costs appear to change based on country GDP, with reported average value as low as €865 for Group II and €3,184 for Group I countries. Again, this is significantly beyond the approximately 50% difference anticipated due to wage differences between Group I and II countries.
Table 5.23 Costs of determining the classification of source streams by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 3,184 10,202 0.008
Group II 865 1,627 0.003
Combined 2,353 8,298 0.006
As in the previous question, size category appears to influence cost figures for determining the appropriate classification for each relevant source stream. Respondents reported average costs per installation between €1,727 (Low emissions) and €3,963 (Category C), with costs showing partial proportionality to installation size.
Table 5.24 Costs of determining the classification of source streams by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 2,032 9,806 0.033
Low emissions installations 1,727 3,832 0.117
Category B 1,839 4,764 0.012
Category C 3,963 7,063 0.003
Based on the main activity type, refineries reported lower average costs (€1,535) than combustion installations (€2,914). A very high standard deviation for combustion was identified; this is likely due to the high number of responses received in this category. As shown in the table, below the costs per tonne of CO2e for refineries (Activity 21) were also low and is related to the high average emissions reported by refineries (as shown in Table 5.16, with a value of 1,653,449 on average). Note that this affects the results for costs per tonne of CO2e for refineries also relative to other questions throughout this section.
July 2016 Doc Ref. 37474 68 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.25 Costs of determining the classification of source streams by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 2,914 10,930 0.007
Act 21 - Refineries 1,535 1,850 0.001
Q11: Risk assessment The average costs of risk assessment were on average €1,767 per installation, with a standard deviation of €4,212. The relatively high standard deviation may relate to different complexities of installations or a variation in the interpretation of the requirements if the level of risk assessment produced in different installations. This delivers an indicative figure of about €20 million for the total risk assessment costs of all ETS installations. Average costs per tonne of CO2e were € 0.005.
In the case of estimated costs of performing the risk assessment, respondents from Group II countries reported lower average costs (€1,227) compared to Group I countries (€2,069), with large variation for both. However, these averages are likely to be explained predominantly by wage differential. The cost per tonne of CO2e is also quite similar.
Table 5.26 Costs of performing risk assessment by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 2,069 4,547 0.005
Group II 1,227 3,486 0.004
Combined 1,767 4,212 0.005
The average costs of performing risk assessment in the sample are related to size category, with low emission installations display the lowest costs (€803) compared to other categories, while the highest costs are reported by Category C installations (€2,774). Category C installations also display the highest variability compared to other categories. The cost per tonne of CO2e is nearly proportional to size category, with low emissions installations displaying substantially higher costs than other categories of installations.
Table 5.27 Costs of performing risk assessment by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 1,179 3,242 0.019
Low emissions installations 803 1,604 0.055
July 2016 Doc Ref. 37474 69 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category B 2,285 5,539 0.015
Category C 2,774 4,409 0.002
When looking at the costs by type of activity, in the case of risk assessment, refineries reported higher average costs (€2,434) as compared to combustion installations (€1,748).
Table 5.28 Costs of performing risk assessment by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 1,748 4,491 0.004
Act 21 - Refineries 2,434 2,852 0.001
Q12: Evidence for each source stream Question 12 related to the costs of providing evidence for each source stream and emission source demonstrating compliance with the uncertainty thresholds for activity data and calculation factors. The average cost of finding evidence for each source stream was €2,495 per installation, with a relatively high standard deviation of €6,191. As discussed later in this report, identifying and providing evidence for source streams (particularly de minimus source streams) appears to be a challenging activity for certain installations, thus potentially contributing to these results. This delivers an indicative figure for total costs of about €28 million for all EU ETS installations. Average costs per tonne of CO2e were € 0.004.
Based on survey responses, GDP per capita seems to have some influence on average costs, which are more than double for Group I compared to Group II countries respondents (€3,171 compared to €1,283).
Table 5.29 Costs of providing evidence for source stream by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 3,171 7,413 0.007
Group II 1,283 2,540 0.008
Combined 2,495 6,191 0.004
For this question, both the costs and variability are highest for Category C installations (€5,056). Low emissions installations and Category A installations display similar costs of €1,449 and €1,430 respectively.
July 2016 Doc Ref. 37474 70 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.30 Costs of providing evidence for source stream by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 1,430 4,926 0.023
Low emissions installations 1,449 6,820 0.099
Category B 2,878 6,315 0.018
Category C 5,056 8,234 0.003
Refineries reported the highest figure (€4,103) and degree of variation for the costs related to this task. Combustion plants reported average costs of €2,933.
Table 5.31 Costs of providing evidence for source stream by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 2,933 7,489 0.007
Act 21 - Refineries 4,103 4,869 0.002
Q13: Calculating whether specific monitoring methodologies may incur unreasonable costs The average costs of calculating whether specific monitoring methodologies may incur unreasonable costs was €997 per installation, with a high standard deviation of € 4,235. This high standard deviation may be the result of a lack of clarity due to the scope of this question or variation in interpretation of the requirements for this activity. This delivers an indicative figure for total costs of about €11 million for all EU ETS installations (even though unreasonable cost calculations will only apply to certain installations). Average costs per tonne of CO2e were € 0.003.
These costs were reported to be very low for installations in Group II countries (€305), while for installations in Group I countries costs were €1,384 on average. This cost differential far exceeds the anticipated wage difference. These results may thus be anomalous and/or heavily influenced by a few installations in Group I countries.
Table 5.32 Costs of calculating specific monitoring methodologies by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 1,384 5,199 0.003
Group II 305 991 0.001
July 2016 Doc Ref. 37474 71 © Amec Foster Wheeler Environment & Infrastructure UK Limited
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Combined 997 4,235 0.003
According to size category these costs are higher for Category C installations (€1,875). Category A installations reported the lowest costs (€699), while reported costs for low emissions and category B respondents are very similar and just below €1,000.
Table 5.33 Costs of calculating specific monitoring methodologies by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 699 3,750 0.011
Low emissions installations 956 5,736 0.065
Category B 984 2,739 0.006
Category C 1,875 6,516 0.001
Also in this case, refineries reported substantially higher costs (€3,961) and standard deviation compared to combustion (€946). However, their average cost per tonne of CO2e was the same.
Table 5.34 Costs of calculating specific monitoring methodologies by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 946 4,276 0.002
Act 21 - Refineries 3,961 11,796 0.002
Q14 and Q15: Significant modifications to the monitoring plan Of respondents to this question, 164 installations (or 46%) indicated that they had been required to make significant modifications to their monitoring plan since it had been approved. Of these, the majority (65%) were from Group I. Examining by category, there is an even distribution across all categories with Category A representing 27%, Category B 30%, Category C 23% and low emissions installations 19%.
For those installations that made significant modifications to their monitoring plan and which indicated a year (one installation did not indicate the year that the monitoring plan was modified), 20 occurred in 2013, 85 in 2014 and 59 in 2015 (Figure 5.16).
July 2016 Doc Ref. 37474 72 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.16 Year in which significant modifications to the monitoring plan were submitted to the competent authority for approval
Q16: Cost of making significant modifications to the monitoring plan Costs were €7,212 on average for each installation who reported to have submitted significant modifications to the monitoring plan (with standard deviation of € 15,829). Average costs per tonne of CO2e were €0.012 per installation.
Making significant modifications to the monitoring plan cost installations in Group I countries on average more than three times as much as those in Group II countries (€9,193 and €2,813 respectively). The cost per tonne of CO2e was twice as large for Group I than for Group II installations.
Table 5.35 Costs of making specific modifications to the monitoring plan by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 9,193 18,204 0.014
Group II 2,813 7,125 0.007
Combined 7,212 15,829 0.012
Category B installations reported the highest average costs of making significant modifications to their monitoring plan (€12,560), and which was substantially higher compared to other categories. Costs for Category A installations were the lowest (€3,128). For this element of MRV, the range of costs by category is wider than for other tasks previously analysed, thus suggesting that these costs may be more sensitive to installation size. This may be the result of differences in the specific nature of the modifications carried out, or of the presence of economies of scale.
July 2016 Doc Ref. 37474 73 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.36 Costs of making specific modifications to the monitoring plan by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 3,128 10,176 0.032
Low emissions installations 5,690 16,119 0.486
Category B 12,560 21,241 0.083
Category C 8,098 15,278 0.004
There was high variability between the results for combustion and refineries for this question, with the table below clearly showing a high standard deviation for combustion, and higher average costs per tonne of CO2e as compared to refineries. However, as in the analysis by category, costs related to this task also fall within a wide range of values suggesting that the actual type of modifications implemented may be substantially different for different types of activities. For this question costs per tonne of CO2e do not follow the same size pattern as for other questions, with Category B installations having higher costs compared to both Category A and C installations.
Table 5.37 Costs of making specific modifications to the monitoring plan by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 9,679 19,510 0.015
Act 21 - Refineries 5,140 4,565 0.003
Q17: Cost of monitoring activities (monitoring according to the approved monitoring plan) The cost of monitoring in accordance with the approved monitoring plan over the 2014 compliance cycle was, on average, €15,671 per installation with a standard deviation of €31,828. This delivers indicative aggregate costs of about €178 million for all EU ETS installations. Average costs per tonne of CO2e were €0.042.
This is the highest cost category in the sample, with similar average costs were for installations in Group I countries €16,177 and Group II countries €14,764. This is especially evident when compared to previously analysed questions, which showed higher sensitivity of costs to country GDP. However, cost of monitoring per tonne of CO2e was substantially higher in Group I countries (€2.12 versus €0.34). It is however important to recognise that for this question cost per tonne of CO2e are higher for Group II countries as compared to Group I.
July 2016 Doc Ref. 37474 74 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.38 Cost of monitoring activities by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 16,177 33,010 0.039
Group II 14,764 29,696 0.050
Combined 15,671 31,828 0.042
In terms of emissions category, Category A installations displayed the lowest costs (€9,146), even as compared to low emissions installations (€10,460). As anticipated, costs for Category C were substantially higher compared to other categories (€33,210) with a relatively low degree of variation. However, costs per tonne of CO2e were substantially higher for low emissions installations.
Table 5.39 Cost of monitoring activities by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (excluding low emissions installations) 9,146 25,074 0.149
Low emissions installations 10,460 30,509 0.711
Category B 16,629 31,012 0.107
Category C 33,210 42,226 0.021
Refineries reported substantially higher costs than combustion installations for this question; however the table below also shows very high standard deviations, suggesting that total monitoring costs also appear to be highly sensitive to activity type.
Table 5.40 Cost of monitoring activities by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 15,629 33,878 0.038
Act 21 - Refineries 35,613 51,227 0.022
Q18: Quality assurance and quality control Average costs for quality assurance and quality control (QAQC) were €12,021 per installation with a standard deviation almost three times higher (€34,590). This high standard deviation is important to note and
July 2016 Doc Ref. 37474 75 © Amec Foster Wheeler Environment & Infrastructure UK Limited
it may indicate that certain installations were unclear as to what QAQC may have included in the context of the survey. This figure leads to an indicative estimate of approximately €137 million for all EU ETS installations. Average costs per tonne of CO2e were €0.032.
QAQC costs reported by installations in Group II countries were half the value of those in Group I countries (€7,055 compared to €14,793) for the 2014 compliance cycle, thus broadly in line with the anticipated wage differential. Reponses from Group I countries show a relatively higher degree of variability, which could relate to the broad GDP categorisation that was used.
Table 5.41 Quality assurance and quality control costs by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 14,793 40,936 0.036
Group II 7,055 17,487 0.024
Combined 12,021 34,590 0.032
For the same year and activity the highest average costs were reported by Category C installations (€26,584), while the lowest also in this case were incurred by Category A installations (€4,057), which also have a relatively high variability compared to other categories. It is worth noting that these costs per tonne of CO2e do not follow the same size pattern as for other questions, with Category B installations displaying higher costs as compared to Category A and C.
Table 5.42 Quality assurance and quality control costs by GDP grouping (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 4,057 11,042 0.066
Low emissions installations 4,403 9,896 0.299
Category B 18,322 49,965 0.118
Category C 26,584 46,521 0.017
As in other cases refineries reported substantially higher costs (€43,212), which may suggest that the cost of QAQC activities may relate to the overall complexity of the activity type in question (as refineries are included here as an example of a highly complex activity type).
July 2016 Doc Ref. 37474 76 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.43 Quality assurance and quality control costs by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 8,989 20,086 0.022
Act 21 - Refineries 43,212 83,208 0.026
Q19: Annual emissions report The average cost of preparing an annual emissions report was €4,355 per installation, with standard deviation of €10,933. These average costs lead to about €50 million of estimated aggregate costs as an indication of total costs for all EU ETS installations. Average costs per tonne of CO2e were €0.012 per installation.
The average cost of preparing an annual emissions report shows relatively little dependence on GDP, with values of €2,424 and €5,434 for installations in Group II and I countries respectively. This is in line with the anticipated wage differential. Also cost per tonne of CO2e is within the bounds of this anticipated differential.
Table 5.44 Annual emissions report costs by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 5,434 11,814 0.013
Group II 2,424 8,868 0.008
Combined 4,355 10,933 0.012
Average costs for annual emissions report were proportional to installation size, ranging between €2,921 and €8,198 for low emissions and Category C installations respectively.
Table 5.45 Annual emissions report costs by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions 2,962 8,078 0.048 installations)
Low emissions installations 2,921 9,020 0.199
Category B 9,376 4,486 0.029
Category C 17,209 8,198 0.005
July 2016 Doc Ref. 37474 77 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Average costs for the annual emissions report were quite similar between combustion and refineries, despite the higher standard deviation for combustion.
Table 5.46 Annual emissions report costs by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 4,446 11,629 0.011
Act 21 - Refineries 5,719 7,680 0.003
Q20: Verification Average costs for verification were €6,789 with standard deviation of € 12,962 per installation. This cost leads to an indicative figure of €77 million of aggregate costs for all EU ETS installations. Average costs per tonne of CO2e were € 0.018.
These costs show average values of €8,190 and €4,280 for installations in Group II and I countries respectively, and thus correspond to the anticipated wage differential. Similarly, cost per tonne of CO2e were not substantially different among the two groups, with values of 0.020 and 0.015 for Group I and II respectively.
Table 5.47 Verification costs by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 8,190 12,860 0.020
Group II 4,280 12,531 0.015
Combined 6,789 12,962 0.018
For verification, costs were related to size category, ranging between €4,614 and €9,870 for low emissions and Category C installations respectively. Costs were also higher, as anticipated, per tonne of CO2e for Category A and especially for low emissions installations, as compared to Category B and C installations.
Table 5.48 Verification costs by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 5,010 12,811 0.082
Low emissions installations 4,614 12,136 0.314
July 2016 Doc Ref. 37474 78 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category B 8,325 11,231 0.054
Category C 9,870 14,227 0.006
Refineries reported higher average verification costs as compared to combustion installations, but a lower average cost per tonne of CO2e (€0.007).
Table 5.49 Verification costs by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 7,221 13,662 0.018
Act 21 - Refineries 11,096 9,988 0.007
Q21 and 22: Improvement report Of respondents to this question, 138 (or approximately 38%) indicated that they had to submit an improvement report for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
The costs were €4,109 on average for each installation which reported to have submitted an improvement report (with standard a high standard deviation of €12,962), while average costs per tonne of CO2e were €0.009 per installation. Of these respondents, the costs of submitting an improvement report were substantially higher for installations in Group I countries compared to those in Group II ones (€6,170 compared to €1,126). The high standard deviation may be explained by the different complexities in improvement reports required.
Table 5.50 Improvement report costs by GDP grouping (€ and €/tonne of CO2e)
GDP grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 6,170 16,486 0.013
Group II 1,126 2,804 0.003
Combined 4,109 12,962 0.009
Submitting an improvement report was particularly costly for low emissions installations with a value of €8,206 which is almost twice the costs for Category B and C installations (both around €4,800) and more than twice regarding Category A installations (€3,086). This difference in cost was even more accentuated when analysed in terms of cost per tonne of CO2e. This value may be erroneous, but may also relate to the
July 2016 Doc Ref. 37474 79 © Amec Foster Wheeler Environment & Infrastructure UK Limited
lack of specialised staff to conduct such activities in low emissions installations (and thus this specific task may take more hours to complete).
It is important here to note that for this question, zeros have been excluded from the summary statistics as explained in the introduction to Section 5.2.
Table 5.51 Improvement report costs by emissions category (€ and €/tonne of CO2e)
Size Category Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions installations) 3,086 10,985 0.027
Low emissions installations 8,206 20,921 0.555
Category B 4,894 13,033 0.029
Category C 4,825 15,634 0.004
Based on activity type, combustion plants reported substantially higher costs as compared to refineries (which reported lower costs compared to previous tasks and relative to other activities).
Table 5.52 Improvement report costs by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 6,555 18,666 0.015
Act 21 - Refineries 2,333 2,398 0.001
Q23-25: Low emissions installations During the 2014 compliance cycle, 95 installations indicated that they continued as an installation of low emissions and 11 indicated that they became an installation of low emissions. A further six installations replied that they were no longer an installation of low emissions. Of the 106 continued or new installations of low emissions, 48 (or 45%) had applied a simplified monitoring plan.
In response to the question regarding the helpfulness of the detail provided in the MRR or AVR for installations of low emissions, 47 installations considered the detail provided to be either very or somewhat helpful. Only five respondents who became an installation of low emissions during the 2014 compliance cycle were unaware of, or uncertain regarding, the helpfulness of the detail in the MRR or AVR for such installations.
July 2016 Doc Ref. 37474 80 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Q25: Helpfulness of detail in MRR and AVR for installations of low emissions 50 40 30 20 10 0 Very helpful Somewhat Not very helpful I don't know NA helpful
Figure 5.17 Helpfulness of detail in MRR and AVR for installations of low emissions
Of those installations who provided further comment, opinion was varied. One Dutch installation remarked that the “standard monitoring plan and emission report template was very easy to use”; however the majority did not provide positive feedback. A Spanish installation commented that they “see no real advantage in being qualified as low emissions installation, at least to date” and a Swedish installation suggested that the work and cost involved in being a low emissions installation was disproportionate in terms of the work required regarding permits and yearly reports.
Q26-27: Electronic reporting tools The vast majority of installations (297 out of 360 or 83%) who responded to this question replied that they made use of electronic reporting tools provided by their CA during the 2014 compliance cycle (approximately half in each GDP grouping). The majority of installations considered the cost savings arising from making use of these tools to be small; however, 200 installations (56%) considered that the cost savings were positive (i.e. as opposed to incurring costs) (Figure 5.18).
Figure 5.18 Costs saved or spent using electronic reporting tools
Q28-30: Capital equipment Of the 350 respondents to the question regarding whether the installation had been required to specifically purchase any capital equipment in order to ensure compliance with MRV under the EU ETS, only 79 (23%)
July 2016 Doc Ref. 37474 81 © Amec Foster Wheeler Environment & Infrastructure UK Limited
had done so. Of those who indicated a value to these costs, the average was €28,990 (Table 5.53). Note however that a large number of installations reported zero costs.
Table 5.53 Capital equipment average costs and standard deviation (€ and €/tonne of CO2e)
Question Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Q29: Total one-off costs of all equipment 28,990 145,215 0.39 purchased
Q30: Average annual operating costs of 1,662 6,311 0.12 all equipment purchased
Q31-32: Additional important costs Of respondents to this question, 55 (or 15%) indicated that they had incurred additional important costs during the 2014 compliance cycle (01 January 2014 to 30 June 2015) as a result of MRV activities under the EU ETS that had not previously been covered in the survey. Of those who provided a description of these costs37, a substantial proportion (13 out of 45, or 28%) indicated that training and other learning activities were the most important additional cost faced.
Other types of costs identified included data analysis (4), costs from engaging with their CA (3), maintaining registry documents (3), and participating to meeting or workshops (3). Two installations also indicated that keeping up to date with changes in legislation represented a significant additional cost. Two other installations identified that buying CO2 market allowances was an additional important cost but as this falls outside the scope of MRV, these costs were excluded.
The average values for additional important costs in the sample is € 9,052, with a standard deviation of € 19,439. Average costs per tonne of CO2e were €0.017.
Table 5.54 Additional important costs by GDP grouping (€ and €/tonne of CO2e)
GDP Grouping Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Group I 10,943 22,524 0.021
Group II 4,589 7,160 0.008
Combined 9,052 19,439 0.017
Additional important costs in the sample are partly proportional to size category, with values between €6,130 (category A) and €11,582 (Category C installations).
37 Example additional costs provided in the survey included “training for staff on monitoring, reporting and verification best practice, or costs for storing information or providing information to your competent authority”.
July 2016 Doc Ref. 37474 82 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 5.55 Additional important costs by emissions category (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Category A (including low emissions 6,130 13,754 0.254 installations)
Low emissions installations 9,526 20,528 0.354
Category B 10,495 15,168 0.056
Category C 11,582 26623 0.008
Based on available responses, the highest costs were incurred by combustion plants (€12,816).
Table 5.56 Additional important costs by activity type (€ and €/tonne of CO2e)
Main activity Costs per installation Average costs per tonne of CO2e
Average Standard Deviation
Act 20 - Combustion 12,816 24,980 0.018
Act 21 - Refineries 2,750 n/a 0.001
Q33: Confidence The majority of installations providing a response (189, equal to 55% of installations) had medium confidence in the quality of the information provided in the survey. 23% (77 installations) had high confidence and 22% (75 installations) had low confidence38. It is worth noting that this type of qualitative question may be susceptible to response bias, as respondents could easily choose the medium value when unsure about the actual confidence level.
38 Note that some responses to this question received via the Excel format varied from the categories above (i.e. the installation inputted text of their own). This text was assessed and allocated into one of the three categories of high, medium and low.
July 2016 Doc Ref. 37474 83 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.19 Confidence estimation (operators)
Q34: Least beneficial aspect of MRV Among the 226 responses received to this question, 23 either didn’t know, or didn’t identify any specific element (e.g. responded “none in particular”). Three respondents identified that all elements are important or have the same value.
Of the other respondents, a wide range of aspects were identified by operators as being the least beneficial of MRV. The level of detail provided also varied considerably. For example some respondents pinpointed an activity within monitoring (such as sampling) while others just stated monitoring more generally. For the purposes of this study, and where possible, all aspects identified have been grouped by monitoring, reporting and verification – providing additional detail where useful and where available.
The most commonly identified aspect of MRV perceived as being the least beneficial were issues related to monitoring (as identified in 28% of the responses). Among these respondents, the majority are located in Group I countries (75 versus 28 Group II responses). The specific activities within monitoring that were perceived as being the least beneficial aspects include:
Identifying and/or monitoring de minimus source streams (47):
With respect to source streams, the issue reported by operators is that the process of identifying and monitoring de minimis source streams is onerous in comparison to the actual quantity of emissions reported. Among these respondents, the majority are located in Group I countries (39 versus eight Group II responses).
Comments received most commonly focused on the fact that including de minimus source streams (such as cylinders of propane or emergency fire pumps) was regarded as an unnecessary additional administrative burden. Suggestions in this regard related to exclusions for sources with limited emissions (e.g. less than 10-50 tonnes per year) so that they may be either withheld from reporting, or reported less frequently. It is however also important to note here that Article 26(3) of the MRR already provides for a conservative estimate of emissions from de minimus source streams rather than having to apply conventional monitoring in accordance with tier requirements. It may thus be important that this provision is further communicated to EU ETS installations.
Calculating uncertainties (20):
July 2016 Doc Ref. 37474 84 © Amec Foster Wheeler Environment & Infrastructure UK Limited
This includes demonstrating compliance with uncertainty thresholds, and perceived lack of suitability of emissions thresholds for certain sectors.
Monitoring in general (18) (i.e. no further commentary provided)
Submitting improvement reports (13)
Determining emission factors and tiers (4) Drafting risk assessments (3)
The second most commonly identified aspect of MRV as being the least beneficial is the cost of verification (as identified in 13% of the responses). Where operators provided detailed responses to justify their response, it appears that the main issue is that the costs for verification are high and that there is a perception that very little comes out of the process. In addition, some respondents raised concerns that there are overlaps between the verification requirements and the checks that the CA conduct (note that this issue was also raised by several CA). In a few cases, operators clarified that while they regard verification as the least beneficial aspect, they do recognise its importance, but maintain that more transparency in the current process is needed to reduce the amount of resources needed to comply. Among these respondents, the majority are located in Group I countries (32 versus 14 Group II responses).
The costs of both monitoring and verification were identified as the least beneficial aspect for low emitters by only three operators. Reporting was identified as being the least beneficial aspect of MRV among 7% of the responses. Among these respondents, the majority are located in Group I countries (21 versus three Group II responses).
Lastly, among 13% of the responses, no one aspect of MRV was identified as being the least beneficial. In several cases the respondent specifically elaborated that all aspects of MRV are necessary. Among these respondents, the majority are located in Group II countries (29 versus 19 Group I responses), and operate category A installations (40 operators out of 48 responses). Furthermore, it is unclear why slightly more than a third of the operators that responded to the survey chose not to reply to this question (37%) - a likely explanation is that they did not regard any one aspect of MRV as being the least beneficial.
Q35: Overlap The majority of respondents identified either some, or a little overlap between activities regarding monitoring, reporting and verification for the EU ETS with reporting activities for other pieces of legislation (Figure 5.9).
July 2016 Doc Ref. 37474 85 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.20 Overlap between EU ETS MRV and other reporting requirements
Many comments were received attempting to quantify this overlap, ranging from half a day to 60 days; or from 10% extra work to 100% extra work for particular elements such as the “procedure to evaluate energy consumption in process”. In some cases, rather than quantify the overlap, the respondent specified which pieces of legislation have led to the overlap; namely these have been identified as the Industrial Emissions Directive and E-PRTR. Due to the lack of consistency among the responses received it was not possible to identify any commonalities or trends in the responses given to quantify any overlap.
Q36: Detail in MRR on calculating unreasonable costs As illustrated in the figure below, one third of respondents indicated that the detail in the MRR on calculating unreasonable costs was considered helpful to some degree (124 respondents out of the 366 that responded to this question). Slightly more than a half of respondents indicated that the detail in the MRR on calculating unreasonable costs was either not helpful, unbeknown to them, or not used (195 responses out of 366). The remaining respondents chose not to respond to this question.
Figure 5.21 Helpfulness of detail in MRR in calculating unreasonable costs
Among the respondents reporting that the detail is to some extent useful, no trends were identified between GDP groupings (78 respondents in Group I countries versus 52 in Group II countries). Among the respondents reporting that the detail is either not useful or not used, the majority are located in Group I countries (132 versus 63 in Group II countries).
Q37: Other suggestions and final comments In response to whether or not the respondents have any other suggestions for possible improvements to the monitoring, reporting and verification requirements of the EU ETS, two thirds chose either not to respond or responded that they had no such suggestions.
Of the 126 responses with suggestions for improvements, 29% related to simplifying aspects within monitoring. In most cases the respondents called for simplification of processes within monitoring (from determining emission factors, complying with quality assurance requirements to the monitoring plan itself). Another common suggestion concerned the frequency of submission of improvement reports with one suggestion to remove the requirement once the stated levels of quality are attained. Other suggestions for improvements are summarised below:
July 2016 Doc Ref. 37474 86 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Simplify guidance to make it clearer and more accessible, and ensure that technical experts are involved in writing the translations (16, of which nine operate in Group I countries and the remaining seven operate in Group II countries).
Simplify the process for determining de-minimis source streams – with a few suggestions to remove it altogether (12, of which 11 operate in Group I countries).
Greater harmonisation between countries and between sectors (11, of which seven operate in Group I countries).
Simplify the process for low emitters by either introducing derogations or removing their reporting obligations altogether (11, of which nine operate in Group I countries).
Reduce the frequency of verification, or simplify the procedures (seven of which all operate in Group I countries, and all responded in the same way to Q34 of the survey).
Simplified reporting through the improvement of online reporting systems (five, of which four operate in Group I countries).
Reduce the bureaucracy involved with reporting (four, of which all operate in Group I countries) (no further detail given).
Lastly, although not statistically representative, one suggestion for improvement called for added value by establishing a new reporting template that includes historic data alongside the new data to enable installations to readily compare datasets over the years.
It is important however to note that many of these improvement suggestions are already in place and therefore awareness of this should be raised so as to improve application. In terms of the suggestion to remove the requirement to submit improvement reports once stated levels of quality are attained, this is already the case. An operator is only required to submit an improvement report in accordance with Article 16(1) and/or 69(4) of the MRR where the corresponding requirements are not met. In terms of simplifying guidance to make it clearer and more accessible, the European Commission is currently drafting quick guide roadmaps to clarify requirements. In terms of simplifying the process for determining de minimus source streams, conservative estimate provisions are available as per Article 26(3) of the MRR. Other relevant considerations are the existence of the Compliance Forum and Emissions Trading Groups which assist in intra-EU harmonisation, and the establishment of an EU ETS MRV module within its electronic reporting platform DECLARE. This is designed to facilitate Member State (including operator, CA and verifier) responsibilities regarding EU ETS monitoring plans, annual emission reports, verification reports and improvement reports.
Horizontal overview: Operators As the above sections show, there was substantial variability in responses. Differences according to GDP grouping and category size display regular trends in the average values for different types of costs, while this does not occur when analysing the data by activity.
It is also important to note that due to the average wages difference between Group I and Group II, inference should be drawn from these costs only where average costs for Group II countries is greater or less than 50% of the average costs for Group I countries. This is the case for the total cost of monitoring (Q17), for example. The results in terms of cost per tonne of CO2e are therefore also worth noting, as these provide additional insight behind the observed costs.
Figure 5.22 shows the responses for all standard cost model questions in terms of Group I and Group II. As is clearly shown, certain types of costs were substantially higher in Group I countries and above the 50% wage differential. This is the case for Q9, Q10, Q12, Q13, Q16 and Q22. Conversely, for Q17 costs were fairly similar showing independence from GDP as already noted in the results presented per question.
July 2016 Doc Ref. 37474 87 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.22 Average costs for all standard cost model questions, by GDP grouping
In Figure 5.23, average costs per installation for each standard cost model question are shown by emissions category. The substantially higher figure for Q17 (cost of monitoring) for Category C installations is considered to represent valid costs due to the exclusion of outliers from the dataset. Another observation worth noting from this figure is the high costs for Q18 (cost of QAQC) for Category B and C installations. However given the limited representativeness of Category B and C installations in the sample, these results are only indicative as discussed in earlier sections of the report.
Note that in order to be consistent with other sections in the report, Category A data includes low emissions installations. Low emissions installations are however also presented separately.
Figure 5.23 Average costs for all standard cost model questions, by emissions category
Finally Figure 5.24 shows average costs for all standard cost model questions by activity type (combustion and refineries). Again, Q17 and Q18 show the highest average costs. It is also interesting to note that refineries (Activity 21) have reported substantially higher costs for Q9, Q17 and Q18. Such costs are not unreasonable given the inherent complexity of refineries in terms of their operation.
July 2016 Doc Ref. 37474 88 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.24 Average total costs for all standard cost model questions, by activity type
The following set of graphs report a horizontal overview of costs per tonne of CO2e for each standard cost model analysed in this section (Q9-Q13, Q16-Q19, Q20, Q22 and Q32). The costs per tonne of CO2e appear consistently higher for installations in Group I countries as compared to Group II countries across questions as shown in Figure 5.25.
Figure 5.25 Costs per standard cost model question, per tonne of CO2e, by GDP
When looking at cost per tonne of CO2e by size category, as expected low emissions installations show overall higher costs per tonne of CO2e (Figure 5.26).
July 2016 Doc Ref. 37474 89 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 5.26 Costs per standard cost model question, per tonne of CO2e, by size category
Figure 5.27 shows the horizontal overview by activity type. It shows that in general, combustion (Activity 20) reports higher costs as compared to refineries (excluding Q18 which asks about QAQC costs).
Figure 5.27 Costs per standard cost model question, per tonne of CO2e, by activity type
July 2016 Doc Ref. 37474 90 © Amec Foster Wheeler Environment & Infrastructure UK Limited
5.3 Literature review
This section provides the results of the literature review. It should however be clearly stated at this point that many of the sources included do not precisely state the nature of the costs included as part of monitoring, reporting and verification. Where costs have been explicitly related to certain activities, this has been noted.
Costs to operators39 Jacquier and Bellassen (in Bellassen and Stephan (eds), 2015) reviewed the costs data from several sources (including Aether (2010), Jaraite et al. (2010) and, from Phase II, Heindl (2012)) and calculated an estimate for the average cost of compliance with MRV requirements by installation for the period 2005-2011. The reported average by installation was €22,000 per annum, within an average range of €15,000 to €32,000. The average annual cost per tonne of CO2 was €0.07, with an average range of €0.04 to €0.08. This is higher than the average reported in the Commission Impact Assessment (2008). The impact assessment reports that the anticipated average cost of meeting MRV requirements in Phase III is €8,500 per operator/year (with a range between €2000 and €15 000) (SEC(2008)52). As mentioned above, it is unclear what the precise nature of these costs are, and it assumes that compliance costs will decrease in Phase III as result of an expected “learning-by-doing effect”.
Jacquier and Bellassen (in Bellassen and Stephan (eds), 2015) also found that verification costs accounted for the highest proportion of these costs (on average accounting for 40% of MRV costs), while reporting and monitoring activities accounted for 34% and 26%, respectively (Jacquier, 2014). Jacquier and Bellassen highlight that this estimated average does not factor in any uncertainties or variations in cost according to the size of the installation or activity.
Prior to the revision of the MRG to MRR, other research has indicated that, in terms of verification costs incurred by installations, the annual average verification cost was £9,000 in the UK in 2008 (NAO, 2009). More recently in 2012, a European Commission assessment estimated verification costs at around €10,000 per year (Bellassen and Stephan (eds), 2015). The figures provided by the two reports, one published in 2009 and the other in 2012, indicate that verification costs for operators have not significantly increased over time.
Costs relative to installation size A dominant theme across the literature surveyed is that the operator’s scale of emissions is an important factor in determining relative MRV costs (approximately half of the literature surveyed made mention of this point). For example, according to one study (with 114 respondents participating across Sweden), the average time needed to comply with the EU ETS was 27 hours/month (the average includes the time reported by all installation sizes). This translates to approximately 4 days a month (7 hours = 1 work day). Compliance costs in this respect relate to the cost of implementation, MRV and trading. Moreover, the survey results showed that the average time needed according to the size of the emitter was 17, 18 and 42 hours for small, medium and large emitters, respectively (Venmans, 2012).
Total costs incurred for complying with MRV regulations are clearly much higher for large emitters; however, per tonne of CO2, this pattern is reversed and small emitters are shown to have a disproportionately higher cost. Although this finding has previously been observed and led the European Commission to propose various mechanisms in the MRR to account for these disproportionate costs, the disproportionality of costs to small emitters has been highlighted in literature across all three phases and across Member States. The recurrence of this finding in later studies reinforces its importance as well as relevance to the current study.
Jaraite et al. (2010) found that costs incurred by small emitters in Ireland amounted to €1.51 per tonne of CO2 in MRV costs compared to €0.02 for large emitters over the three year period of Phase I. Another study (with respect to costs to operators in Sweden for the year 2012) found that this disproportionality in MRV costs between small and large emitters of per tonne of CO2 increased to €54.1 for smaller emitters and €0.10 for large emitters (Coria and Jaraite, 2015). However, in subsequent analysis, it is suggested that the unusually large discrepancy observed in Sweden could be due to “the structure of small installations in
39 Note that a UK Department of Energy and Climate Change (DECC) study has also recently been conducted among UK operators. Results of this study are unable to be included in this report as the study is yet to be published.
July 2016 Doc Ref. 37474 91 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Sweden which often use fuels with a high share of biomass. With a low fossil share of CO2 emissions they appear as small installations while at the same time they are not small in terms of capacity. Therefore their absolute MRV costs per installation are comparable with larger installations, and only the relative costs per tonne fossil CO2 appear unusually high” (Fallmann et al., 2015). Nonetheless, this economy of scales was also observed in a separate survey, with 114 respondents participating across Sweden, which reported in qualitative terms that many SMEs responded that the cost of complying with MRV requirements was too high (~40% of survey respondents) (Venmans, 2012).
This trend (to a lesser extent) was also observed in two surveys conducted in Germany. One survey, which included 816 respondents operating 1,668 installations, found that the median MRV cost per tonne of CO2 was €0.47 for operators with installations with emissions below 25,000 p.a. and €0.06 for operators with installations with emissions above this threshold (Löschel et al., 2013). In another survey, which included 841 respondents operating 1686 installations, found that the median MRV cost per tonne of CO2 was €0.73 for operators with installations with emissions below 25,000 p.a. and €0.07 for operators with installations with emissions above this threshold (Löschel et al., 2010).
According to a Netherlands-based study (SIRA Consulting, 2007), higher monitoring costs for high-emitting installations can be explained by the tiered approach of maximum uncertainties, whereby large emitters are often in a higher tier and required to have lower uncertainty levels which requires more expensive measurement methods such as the direct measurement method. However, it should be noted that the study was published almost ten years ago and does not take into account any recent technological developments that have increased the efficiency of measurement methods – both in terms of costs and performance. A US EPA study in 2010 found that systematically using direct measurement methods in all installations could reduce uncertainty up to 65% but would multiply costs by a factor of 10. A different study found that a hybrid approach, whereby emitters that already applied the direct measurement method (generally large emitters) were mandated to, would reduce uncertainty by 50% and double costs (Bellassen and Stephan (eds), 2015).
Similar economies of scale are also observed within other carbon emission scheme, such as in relation to the REDD (Reducing Emissions from Deforestation and Forest Degradation) programme which is somewhat comparable to the EU ETS. The REDD operates in developing countries, and compliance costs for monitoring per tonne of CO2 were found to decline as the area of land under the scheme increased (Plugge et al., 2013).
Low emissions installations A voluntary opt-out option for small emitters was introduced to the EU ETS for Phase III to counter this high cost burden to small emitters; however, only seven Member States chose to introduce it in 2013 (Fallmann et al., 2015). The opt-out option requires the Member State to establish equivalent measures to the EU ETS to incentivise emission abatement for installations that have opted out, which generally entail costs for the installations. For example, in Germany since 2013 small emitters are permitted to opt-out through participation in a voluntary emissions scheme, or alternatively they could be permitted to report on a two year period instead of annually (Heindl, 2012). More generally it is also reported that the equivalent measures for small emitters have resulted in overall reductions in transaction costs by the small emitters who were excluded from having to comply with the EU ETS requirements. However, it is important to note that monitoring and reporting requirements for the opt-out option are typically the same, with the cost savings resulting from the lack of requirements to verify emissions, open and maintain Registry accounts, and the trading of emission allowances (Fallmann et al., 2015).
Additionally, the MRR includes simplified provisions for low-emitting installations which have not opted out of the EU ETS. In 2014, the EEA reported that nine out of 29 countries used the simplified monitoring requirements for low-emissions installations. Based on this finding, the EEA suggested that more could be done to reduce the administrative and cost burdens for small emitters (European Environment Agency, 2015). For those small emitters still within the scheme, it is suggested that because the verification cost comprises the bulk of MRV fixed costs, the tier approach is more efficient at reducing costs for small emitters. The tier approach allows to adapt the strictness of requirements according to the emissions at stake. Consequently, low emitters with lower stakes will be subject to less stringent requirements reducing unreasonable costs related to emissions’ verification works. (Bellassen and Stephan (eds), 2015).
According to the literature reviewed, the efficiencies and advantages of scale were also applicable in terms of other compliance costs, including early implementation costs and trading costs where factors such as
July 2016 Doc Ref. 37474 92 © Amec Foster Wheeler Environment & Infrastructure UK Limited
having multiple installations were found to reduce search and information costs (Jaraite and Kažukauskas, 2012).
Process complexity The complexity of the processes within each installation is identified in the literature reviewed as a factor affecting cost. As observed in a Netherlands-based study, the more complex the process systems, the more costly it is for the installation to determine the emission calculations, thus driving up the overall MRV compliance costs (SIRA Consulting, 2007). That study considered monitoring costs as drafting of the monitoring plan, checking and adjustment of the plan, and recording the data. Costs for these activities were found to be on average €4,100, €9,300, and €86,200 respectively for small, medium, and high complexity installations. Within these monitoring costs, the most costly activity for all levels of installations was the recording of the data itself, ranging from 80% of all monitoring costs for low complexity installations to 71% for high complexity ones. For small installations, the average cost of calculating emissions and drafting the emissions report was €4,300; a cost on par and slightly higher than that of their monitoring costs. On the other hand, for medium and large installations, the costs for calculating emissions and drafting the emissions report were €8,200 and €12,800 respectively. These costs were found to decrease in proportion to their monitoring costs, with the reporting costs of high complexity installations found to be 6.7 times less than their monitoring costs (SIRA Consulting, 2007). Unfortunately, more recent information on costs related to process complexity was not identified in the literature. As mentioned earlier, this report was published even before Phase II started, therefore does not take into account any potential cost savings due to recent technological developments and knowledge that may have rendered processes more efficient and less costly. Furthermore, the scope and coverage of the EU ETS at the time the report was published has evolved considerably.
Costs per sector The literature review also revealed that some sectors face disproportionately higher costs and challenges than others. A 2010 Aether report found that costs have been most significant for refineries and electricity producers. Refineries face the highest costs due to site and process complexity. For electricity producers, disproportionately higher costs were found to arise from the need to coordinate multiple plants and installations, as well as the costs required for fuel sampling (Aether, 2010). However, Bellassen and Stephan (eds) (2015) argues that the findings by Aether (2010) do not provide an accurate representation of the costs incurred by electricity producers as the installation included in the analysis had greatly invested in fuel sampling and that this was not the norm in the sector. Rather, the authors argued that MRV costs in refining and cement production is much more costly (Bellassen and Stephan (eds), 2015).
Costs of non-compliance Costs associated with non-compliance are also important to consider when analysing overall costs as they serve as an incentive for compliance. The costs of fines can be potentially very high. Within the Directive 2003/87, Article 16(3), the penalty for each tonne of emissions for which no allowance has been surrendered is set at €100. In 2005, the largest fine was reported in the UK of £564,000 for surrendering allowances after the compliance year (NAO, 2009). It should be noted that these figures refer to the pilot for Phase I that took place in 2005-2007. In terms of more recent fines, in 2013 the largest fine recorded across Member States was €36,363 in Romania for an operator who failed to submit their verified emissions report on time (European Environment Agency, 2015).
Costs to verifiers In 2006, an analysis of the first year of the EU ETS (before accreditation of verifiers was a mandatory requirement under the EU ETS) found that for verifiers across six Member States, the most time consuming of all tasks was the on-site auditing. On site auditing represented close to 30% of the total time spent on compliance activities. Other tasks included in the study were dealing with nonconformities, misstatements, independent technical reviews, reviewing of IT systems, off site data audits, management system or compliance audits, preparing the verification, and a category for ‘other’ tasks. In this first year, time spent on verification by verifiers ranged from 0 to 8 days (Price Waterhouse Coopers, 2007a).
July 2016 Doc Ref. 37474 93 © Amec Foster Wheeler Environment & Infrastructure UK Limited
The new requirement for accreditation of verifiers is very important because some of the compliance burden is shouldered by verifiers to meet accreditation requirements. It is suggested that this allows for a level playing field with more fair and improved competition (Fallmann et al., 2015). Furthermore, accreditation according to harmonised standards as the case under the AVR allows for mutual recognition of accredited verifiers in all EU ETS countries, promoting greater availability and competition.
Verifiers from 21 Member States stated that independent reviews were already in place and processes had not especially changed. For those that had not carried out independent reviews before the AVR came into force, increased costs of bringing practices in line with the AVR requirements were noted (Ecofys, 2015). These accreditation costs are also ultimately borne by the operators through annual verification fees (Bellassen and Stephan (eds), 2015).
Costs to competent authorities The European Commission Impact Assessment (2008) reports that the anticipated annual average cost of meeting MRV requirements for CA in Phase III is €6,500 per installation (with a range between €3000 and €11 000) (SEC(2008)52). Of note, it is unclear what the precise nature of these costs are, and it assumes that compliance costs will decrease in Phase III as result of an expected “learning-by-doing effect”. This range provided by the European Commission Impact Assessment (2008) is again referred to more recently by the European Court of Auditors (2015); while the 2014 Impact Assessment on the monitoring, reporting and verification requirements of fuel and emissions in maritime transport, reported that the total cost to each respective CA was €95,500 per annum (Nelissen and Faber, 2014). However, it should be noted that the latter figures are specific to costs for CA and operators working in the maritime sector and for ships of 5,000 GT and above. Further, these are estimates of “additional administrative costs”, which consist mainly of personnel expenditures and “equipment costs” for national authorities and CA regarding the design of information material. Finally, the impact assessment also specifies that these costs are set off against the expected fuel expenditure savings expected from MRV regulation.
Preliminary recommendations arising from the literature A recommendation highlighted in the literature is to align MRV procedures and requirements under the EU ETS with other climate policy schemes, whether at national or EU level. Although policies do not necessarily have the same focus, keeping reporting requirements harmonised e.g. formats, methods of calculation, and units as well as keeping similar verification requirements, were proposed by operators to be useful for streamlining procedures (Aether, 2010).
The possibility of reducing costs through use of electronic systems was also highlighted in several sources. In the UK, the electronic system of forms for reporting has reduced administrative costs significantly for the competent authority, which was reflected in the decreased cost of subsistence fees (Aether, 2010). Through the years, there has been a gradual shift towards implementing more electronic-based documents and systems in Member States. Several Member States use a mix of both printed and electronic methods, especially to keep records and signatures on file. As established by Ecofys and Ricardo AEA (2015) (Ecofys, 2015), 16 Member States have electronic systems in place for monitoring plan approvals and reporting purposes. A significant number of Member States also perform automated checks through their IT systems but this remains small in proportion. As such, although there has been progress made in using IT, there is still a large potential for increased use of electronic reporting. In theory, a wider implementation of IT would improve consistency and could also reduce costs for operators and CAs (Ecofys and Ricardo AEA, 2015) (Ecofys, 2015).
Of note, it is unclear from the literature how much opportunity there is for reducing MRV costs under the EU ETS through sharing best practices. It was found that companies subject to multiple MRV requirements across different policies did not show any “learning by doing” efficiencies. As an example, fulfilling the MRV requirements of the carbon tax did not reduce the time and costs of EU ETS MRV requirements (Coria and Jaraite, 2015).
More generally (with respect to monitoring and verification costs under the CDM in South Africa), there is some research to indicate that the average cost to operators should not exceed 8% of total project costs – anything in excess of this was considered to be unprofitable for the company (Boyda and Rennkampa, 2014). Several recommendations emerged from this research, many of which are also likely to be applicable
July 2016 Doc Ref. 37474 94 © Amec Foster Wheeler Environment & Infrastructure UK Limited
to the MRV requirements under the EU ETS, including the importance of developing the following aspects in relation to monitoring and verification costs under the CDM:
Capacity building with the provision of guidance and training to operators;
Coordination between relevant government departments; and
Links with other international requirements – particularly so as to avoid duplicating efforts that may result in reporting fatigue.
July 2016 Doc Ref. 37474 95 © Amec Foster Wheeler Environment & Infrastructure UK Limited
6. Analysis: Evaluation of compliance costs
This section provides an analysis of MRV compliance costs for both competent authorities (CA) and operators. Analysis is presented with regard to the requirements for the Commission’s Regulatory Fitness and Performance Programme (REFIT) (as discussed in Section 4.6). It combines information gathered from the stakeholder consultation process with that from the literature review, as presented in Section 5 above, and provides commentary on the relative confidence of the data throughout
6.1 Overview of EU ETS MRV costs affecting competent authorities and operators
This section provides a brief, high-level overview of MRV costs affecting CA and operators as gathered through the survey data. It examines total operational costs for both CA and operators, distinguishing standard and variable costs, as well as reporting costs against the key separate elements of monitoring, reporting and verification.40
Compliance costs have been categorised according to the following categories:
The MRV activity (M/R/V) identifies which overarching MRV activity the cost relates to. This enables a calculation of the total operational cost each for monitoring, reporting and verification.
Total operational costs is the sum of all operational costs reported against the survey questions in the tables below.
Capital costs were reported by respondents as a total one-off cost. Therefore this cost is presented as a separate cost to the operational costs occurring per compliance cycle.
Note that certain costs may be regarded as standard costs that occur each and every compliance cycle, particularly in terms of MRV requirements for operators. For example, monitoring in accordance with the approved monitoring plan (Q17) is unlikely to change from compliance cycle to compliance cycle (unless, of course, changes in the installation’s operations occur). Other costs may be regarded as more variable. For example, the number of operator improvement reports that CA are required to review (Q13) may change between different compliance cycles. Preparing a new monitoring plan is also variable, as while it represents a standard part of the MRV process in which every operator must partake, it should be seen more as a one- off cost rather than one which the operator incurs each and every compliance cycle (noting nonetheless that operators are required to review their monitoring plans regularly).
Thus, the totals below seek to provide the MRV costs for an indicative representative year of phase III operation of the EU ETS. Accordingly, costs relating to 2014 have been averaged to provide this representative year. Note that costs relating to making significant modifications to monitoring plans that were submitted to CA in 2015 have been included as part of this representative year. This is because if costs relating to plans that were submitted in 2014 were included, this would over-estimate costs that relate to the new MRV requirements that are not related to a representative year.
Costs for other years, particularly in terms of CA costs for approving and issuing new monitoring plans for 2013 (Q7) and approving significant modifications for 2013 (Q8), and operator costs for preparing new monitoring plans for any year other than 2014, have not been included in this average. Costs for 2013 are, as shown above, higher due to the transition between phases and the need to develop, and approve and issue, a substantially higher number of new monitoring plans than would be expected during a representative compliance cycle. It is to be expected that costs for future years may also decrease, given greater efficiencies and learning achieved year on year.
40 It must be emphasised that the survey asked respondents to identify costs relating to specific elements of MRV (see the rationale in Section 4.1 as to which costs were prioritised for inclusion in this study). The category 'other costs' was intended to capture any other costs but it may be that some costs were nonetheless not captured.
July 2016 Doc Ref. 37474 96 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Each cost has been drawn from the survey responses (Section 5.1 and 5.2). The question number and cost are set out in the tables below. Note that question numbers differ between the surveys for CA and operators.
Table 6.1 Categories of total operational costs for CA in the 2014 compliance cycle
MRV Q # Cost description
M 9 Approving and issuing new monitoring plans for 2014
M 11 Assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs
R 12 Receiving and reviewing annual emissions reports
M 13 Receiving and reviewing operator improvement reports
V 16 Carrying out site inspections
Other 23 Any other costs
Total operational costs The sum of all costs reported against the survey questions outlined above
Table 6.2 Categories of total operational costs for operators in the 2014 compliance cycle
MRV Q # Cost description
M 16 Preparing significant modifications to your monitoring plan (Note: 2015 data only)
M 17 Monitoring in accordance with the approved monitoring plan
M 18 Quality assurance and quality control procedures
R 19 Preparing an annual emissions report and submitting it to your competent authority
V 20 Verification
M 22 Preparing improvement reports
Other 32 Any other costs
Total operational costs The sum of all costs reported against the survey questions outlined above
Overview of average CA costs Table 6.3 provides the actual operating costs as reported by CA for the 2014 compliance cycle.
July 2016 Doc Ref. 37474 97 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 6.3 Reported average operational costs for CA in the 2014 compliance cycle (€)
MRV Q Cost description Average Average cost Average cost Average cost per Average cost per MS Average cost per MS # cost per MS per MS (Group per MS (Group MS per installation per installation (Group per installation (Group I) II) I) II)
M 9 Approving and issuing new monitoring 7,915 6,936 5,834 344 631 486 plans for 2014
M 11 Assessing operators’ claims that applying 1,144 317 1,309 50 29 109 a specific monitoring methodology shall incur unreasonable costs
R 12 Receiving and reviewing annual 16,349 32,352 7,510 711 2,941 626 emissions reports
M 13 Receiving and reviewing operator 7,492 14,556 1,362 326 1,323 114 improvement reports
V 16 Carrying out site inspections 4,063 6,820 1,400 177 620 117
Other 23 Any other costs 14,850 28,719 3,183 646 2,611 265
Total operational costs 51,813 89,700 20,598 2,253 8,155 1,717
Notes: If the costs relating to Q10 (approving significant modifications for 2014) are included as a standard MRV cost (€38,008), the average cost per MS increases to €89,821. This results in an average cost for Group I of €72,414 and for Group II of €8,836. Average cost per MS per installation for Q10 is €1,653 (€6,538 for Group I and €736 for Group II). These costs were not included because they were considered to be higher than the costs anticipated within a standard year (i.e. costs incurred in 2014 are inflated because they are influenced by the change to the regulatory regime).
July 2016 Doc Ref. 37474 98 © Amec Foster Wheeler Environment & Infrastructure UK Limited
The average cost per Member State is €51,813 and an average cost per Member State per installation of €2,253. The results indicate that for CA, monitoring and reporting represent the most substantial elements of MRV. The average cost breakdown per MS is as follows:
Monitoring: 32% of MRV
Reporting: 31% of MRV
Verification: % of MRV Other: 29% of MRV
In terms of capital expenditure, as shown in Section 5.1 above, the average investment in capital equipment made per Member State was €63,484. Based on GDP classification, the average cost of equipment specifically purchased reported by CA ranged between €20,634 and €117,932 (for Group II and Group I, respectively). The average operating cost of equipment per Member State was €8,862. Based on GDP classification, this average cost varied between €3,684 (Group II) and €15,349 (Group I), with a high variability in both cases.
Overview of average operator costs Table 6.4 provides the actual operating costs as reported by operators for the 2014 compliance cycle. The average cost per installation is €59,207. The average cost per installation by tonne of CO2e per installation is €0.16.
The results clearly indicate that for operators, monitoring is the most substantial element of MRV. The cost breakdown is as follows:
Monitoring: 61% of MRV Reporting: 9% of MRV
Verification:13% of MRV
Other: 17% of MRV
In terms of capital expenditure, as noted above, only 23% of installations indicated that they had been required to purchase capital equipment in order to ensure compliance with MRV. The average value was €28,990 and the average annual operating costs of all equipment purchased was €1,622.
July 2016 Doc Ref. 37474 99 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Table 6.4 Reported average operational costs for operators in the 2014 compliance cycle
MRV Q Cost description Average cost per Average cost Average cost Average cost per Average cost per Average cost per # installation (Group I) (Group II) tonne of CO2e tonne of CO2e (Group tonne of CO2e (Group I) II)
M 16 Preparing significant modifications to 7,212 9,193 2,813 0.1 0.2 0.05 your monitoring plan (Note: 2015 data only)
M 17 Monitoring in accordance with the 15,671 16,177 14,764 1.5 2.1 0.3 approved monitoring plan
M 18 Quality assurance and quality control 12,021 14,793 7,055 1.2 1.6 0.4 procedures
R 19 Preparing an annual emissions report 4,355 5,434 2,424 1.0 1.3 0.5 and submitting it to your competent authority
V 20 Verification 6,789 8,190 4,280 1.6 2.4 0.2
M 22 Preparing improvement reports* 4,109 6,170 1,126 0.2 0.3 0.03
Other 32 Any other costs* 9,052 10,943 4,589 0.1 0.1 0.03
Total operational costs 59,207 70,900 37,052
* These two figures are likely to cause exaggerations to the costliness of MRV as they do not apply to all installations. While these averages were computed only taking into account those installations that conducted such activities, adding them to the total cost may overstate average annual costs. When these two activities are excluded, the average cost per installation (total operational costs) is €46,048.
July 2016 Doc Ref. 37474 100 © Amec Foster Wheeler Environment & Infrastructure UK Limited
6.2 EU ETS MRV costs: Competent authorities
This section analyses the costs incurred by CA as shown above. It analyses differences according to GDP per capita grouping, how economies of scale may impact CA compliance costs and potential cost savings. Note that, as per the rest of this report, and unless otherwise specified, costs are shown per Member State, rather than per CA.
Main costs As described in Section 5.3, annual estimated costs to CA as reported in the literature varied between €3,000 and €10,000 per installation in 2008, with an average of €6,500. However, requirements for MRV have changed substantially since this time. The information captured in this study is also not directly comparable as it records information for an 18 month compliance cycle, rather than per annum, and focuses on costs to Member States, rather than specific CA (due to the substantial differences between sizes and responsibilities of CA).
Nonetheless, the average cost per Member State per installation figure of €2,250 per 18 month compliance cycle is low in comparison to the 2008 figures which may suggest a much higher degree of efficiency over time. This may be a consequence of learning from previous phases of the EU ETS or revisions made to the MRV requirements, or a combination thereof.
As discussed in Section 6.1 above, monitoring activities represent the highest proportion of costs for CA. In the literature review, verification costs were also found to account for approximately 40% of MRV costs (Jacquier, 2014).
Differences according to GDP per capita grouping As Table 6.3 shows, while there are cost differences between Group I and Group II Member States (approximately four times), these fall within the anticipated differential (resulting from wage differential and number of installations per CA). The expenses related to investment in equipment in Group I countries were also on average almost twice as high as in Group II countries.
In terms of specific MRV activities, for Q12, Q13 and Q23, costs are substantially lower in Group II countries. These differentials are substantially greater than can be accounted for solely by the wage differential and the number of installations that each CA works with (i.e. costs in Group I countries are more than four times the cost of those in Group II countries).
In terms of approving new monitoring plans, costs are relatively similar between Group I and Group II, although there was high variability in terms of costs from countries classified as Group I. In 2013, five CA in the Group I category reported costs over €100,000, with one CA reporting costs of over €450,000. As commented by one CA, “monitoring costs have increased from phase II to III due to more detailed monitoring plan and new elements in the MRR”. The costs incurred by these specific CA have increased the average costs, but as many be anticipated, these CA work with a larger number of installations on average than other Group I CA. Average costs for approving new monitoring plans reduced significantly in 2014, by an average of 91% for Group I Member States and by 63% for Group II Member States, and in general the average cost of approving significant modifications for monitoring plans remained stable between 2013 and 2014.
For Q11 (assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs), costs are approximately four times lower in Group I countries; however given that no information is provided as to the number of claims assessed, no clear message can be drawn from this data. There was also significant variability in answers reported by Group II countries, with Figure 5.5 above showing that three Group II countries reported much higher costs than any other. The small sample size and high variability make it very difficult to draw any solid conclusions from this data.
Average costs for receiving and reviewing annual emissions reports per Member State per installation are signficantly higher in Group I countries than for Group II countries when wage differential and number of installations per CA is taken into account. This difference can partly be explained by the very high reported costs by one CA (over €220,000). While this CA does not provide further explanation regarding these costs,
July 2016 Doc Ref. 37474 101 © Amec Foster Wheeler Environment & Infrastructure UK Limited
as explained in relation to Figure 5.6, this value is not considered an outlier because that particular CA is responsible for more than 400 installations, hence the cost per installation is not be significantly higher than the average (€375 per installation).
Cost savings or spending as a result of information exchange The majority of CA participated in information exchange practices41 in 2014; however it was difficult for CA to assess time and cost spent or saved on these activities, resulting in highly variable estimations of the costs. Among Group I countries, the majority estimated having spent additional costs for these practices (a little, some or high) and two noticed some cost savings, although in many cases it is not possible to quantify precisely the time and cost spent or saved. Most CA in Group II countries reported a little or some costs related to exchange of information, and where it was specified, this spending was only in the order of hundreds of euros. However, as noted in Section 5.1 above, the low response rate to this question means these data should be interpreted with caution.
Additional costs Additional costs were mostly related to training and the exchange of information (the organisation of training and workshops for operators and regional CA as well as participation in other workshops or working groups), preparing Article 21 reports, enforcement, and communication costs (including translation). One CA in particular indicated costs of providing regular guidance to other authorities, operators and verifiers on monitoring plans, which falls outside their competence. These costs range from a few to several thousand euros, although one CA reported spending of over €53,000 for additional costs. However, a description of what this spending was in relation to was not reported.
Number of CA staff per installation in their jurisdiction No clear pattern was found in terms of CA staff per installation. Most CA dedicate one to five full time staff members per year to deal with installations in their jurisdiction but the number per single installation varies considerably between countries since the number of installations in data reported ranges from 2 to 768 depending on the country.
Economies of scale and scope The average number of EU ETS operators among CA that responded to the survey was 169 operators per CA, and 228 operators per Member State. Article 21 reports show that most Member States have more than one CA that are responsible for implementing and enforcing the EU ETS, with the exception of Denmark, France, Ireland, Iceland and Liechtenstein. No clear trend was able to be discerned regarding whether costs were less for Member States with only one CA. In terms of costs and CA dispersion within Member States, unfortunately, insufficient information is available from this study to draw any conclusions.
Cost savings Centrally provided guidance, templates or trainings, all representing measures to simplify compliance, exist in Belgium, France, Croatia, the Netherlands and the United Kingdom. Comparing MRV costs of Member States in which these elements exist to other Member States also indicates no clear trends. It is however important to note that most CA providing centralised guidance and training are in Group I countries, with only one Group II Member State that provides provided guidance, templates or training responded to the survey.
The analysis of Article 21 reports indicates that an electronic reporting system is in place in one third of the Member States (Austria, Belgium, Germany, Denmark, Spain, Finland, Hungary, Ireland, Norway and the United Kingdom). In Group I countries reporting costs are 74% lower compared to Member States where no electronic reporting is in place. Although there are also other influencing factors, the large reduction in cost suggests that the existence of an electronic reporting system results in the desired effect.
41 It is important to emphasise here that this includes informal information exchange practices.
July 2016 Doc Ref. 37474 102 © Amec Foster Wheeler Environment & Infrastructure UK Limited
For Group II Member States, on the other hand, reporting costs are 35% higher in countries with an electronic reporting system. A possible explanation is that in Group II countries the lower wage costs mean the time saving associated with electronic report requires a longer time to offset the investment in IT systems. This is however based only on a comparison of Spain and Hungary against the remaining countries, and other influencing factors may over shadow the impact of electronic reporting.
Evaluation analysis
Efficiency The findings indicate clear differences between costs incurred by different Member States. Notably, that the total operating and capital MRV costs of dealing with one installation for Group I countries are on average consistently higher compared to Group II countries (beyond anticipated differences in salaries and numbers of installations that each CA works with). A number of different factors were suggested as influencing the efficiency achieved:
Updating IT systems Recruiting more staff
More complicated/detailed monitoring plans
New requirements in the MRR, including more detailed reporting templates
In general, increasingly complex legislation relevant for MRV, and higher perceived administrative burden in phase III, hence activities are more time consuming
Some CA however suggested that their costs decreased in 2014 compared to the first cycle of phase III or between EU ETS phases. This may be related to the experience gained in the first year/first phases that allowed being more efficient and saving costs.
Also relevant to note is that approximately half the Member States implemented additional national legislation to assist in the application of the MRR and almost all CA carried out checks on verified emissions reports. Furthermore, and particularly in Group I countries, operating costs per installation reported by CA in those countries were lower than in those that did not develop such systems. As also noted in the results section above, five CA reported that there were no overlaps with other legislation, while eight indicated the presence of overlaps. This uncertainty regarding overlap may represent an opportunity for further clarity both in terms of Commission communication with CA, and of CA communication with operators.
Only five countries reported implementing measures to simplify compliance for installations. The CA in those countries reported on average significantly lower operating costs per installations that the average in their GDP category, although some variations exist.
The majority of countries undertook the following measures to ensure that operators have complied with permits: spot checks and inspection of implementation and compliance by installations with the monitoring plan and MRR and AVR, regular meetings with industry and/or verifiers and ensuring that selling of emission allowances is prohibited in the case of irregularities. About half of countries published the names of operators that are not in compliance with MRR.
Some of the open-ended responses received from CAs included suggestions for increasing efficiency, which are summarised below. It should be noted that each of the suggestions reflect the feedback received from one or two CA for each aspect. A total of 16 CA provided the suggestions below:
Further simplify requirements for small operators, especially monitoring, including providing simplified monitoring plan template for small installations
Simplify monitoring plans for simple emitters (with few source streams and simple monitoring methodology)
Exclude small installations and/or back-up installations from the EU ETS
July 2016 Doc Ref. 37474 103 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Improve standard reporting forms for MRV (especially small emitters), for example provide forms with the minimum reporting requirements
Enhance electronic reporting and monitoring
Consolidate and clarify the guidance documents related to MRV
Eliminate the approval of the improvement report (already approving the same issues in the mandatory modification of the monitoring plan)
Consider changing the threshold for Category A to 100,000 t CO2e per year
Simplify criteria of waiving site visits
Provide a centralised IT-system from the beginning of a new phase Provide guidance in other languages
Twenty one CA provided feedback from the survey on elements of the MRV activities conducted by the CA that were estimated to have the least benefit compared to its cost. The most relevant responses are summarised below:
MRV of small and very small emission sources is disproportionate compared to the level of emissions given the significant administrative burden they entail
Approval of improvement reports is not regarded as contributing to increased compliance
Summary of the description of procedures provides no value to the monitoring plan as many operators provide very general description
Validation of verification done by accredited and independent verifiers is seen sometimes as duplication of effort and unnecessary work
Preparation of Article 21 reports are seen to have low benefit for CA
Notification of non-significant changes
Site inspections
Relevance More than one third of Member States reported having observed non-material misstatements and non- conformities which did not exert an influence on the verification statement or recommendations for improvement in verification reports, nor lead to the conclusion of non-compliance with MRR. In about half of the reports, recommendations for improvement were made and almost one third of the reports identified non- conformities. The fact that these misstatements, non-conformities and recommendations are being reported underpin the on-going importance of verification checks.
Coherence According to provided responses, several CA mentioned the overlap between the EU ETS and the Industrial Emission Directive (IED) as well as the E-PRTR. Many elements reported by the operators under the IED requirements are overlapping with EU ETS obligations. However, some elements differ, and as results information gathered in the framework of one obligation cannot be easily reused for another purpose by the operator. Above all, it is important for MRR and AVR requirements to remain fit for the purpose of the EU ETS.
6.3 EU ETS MRV costs: Operators
This section analyses the costs incurred by operators as shown above. It analyses differences according to GDP per capita grouping, and how scale of operation and activity type may impact compliance costs.
July 2016 Doc Ref. 37474 104 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Main costs When monitoring costs are broken down into their component parts, actual monitoring in accordance with the monitoring plan is the most costly element and QAQC procedures are the second most costly element. This trend was similar for both Group I and Group II countries. This may suggest that costs that may have previously been spent on verification in previous phases of the EU ETS are shifting earlier along the compliance cycle, and internally to operators’ QAQC. It is also vital to note that good internal QAQC procedures will reduce costs further downstream in the MRV process and is therefore a worthwhile upfront investment. This is particularly the case that part of the costs associated with QAQC are expected to be one- off establishment costs (e.g. in terms of setting up procedures and purchasing equipment), rather than on- going expenditure. Indeed, CEMBUREAU commented that it had been informed by a German operator that many cement installations now have in-house laboratory facilities in order to help to reduce costs being spent on analyses with external consultants. It may however also suggest that operators may benefit from better information on minimum requirements for QAQC procedures to ensure that costs are not being incurred unnecessarily.
Table 6.5 Breakdown of monitoring costs for operators in the 2014 compliance cycle
Q# Cost description Percentage of total
16 Preparing significant modifications to your monitoring plan 18%
17 Monitoring in accordance with the approved monitoring plan 40%
18 Quality assurance and quality control procedures 31%
22 Preparing improvement reports 11%
In terms of a comparison with the literature, Jacquier and Bellassen (in Bellassen and Stephan (eds), 2015) found a reported average by installation of €22,000 per annum, within an average range of €15,000 to €32,000, based on their literature review of six studies. Given the years covered by the literature (up to 2011), it is assumed that this covers EU-27. The data presented here suggests an average cost of approximately €59,000 per 18 month compliance cycle.
The same source suggested an average annual cost per tonne of CO2 of €0.07. The data from this study shows an average cost per tonne of CO2e of €0.16 (over the 18 month compliance cycle).
Differences according to GDP per capita grouping Average costs are somewhat different between Group I and Group II countries (although approximately half the difference is accounted for by the wage differential). In terms of specific elements of MRV, in most cases apart from Q17 (monitoring in accordance with the approved monitoring plan), Q18 (QAQC) and Q32 (any other costs) average costs are higher (above the wage differential) for Group I countries. The very similar cost for Q17 indicates that this element of MRV may be interpreted as more costly in Group II countries than in Group I countries.
With regards costs related to approval and issue of permits and monitoring plans, results from Q8/Q9 show that, while the majority of installations in the sample submitted their monitoring plan in 2013 (as already discussed based on Figure 5.15), average costs related to the preparation and approval of a monitoring plan were only slightly higher in 2014 (see Figure 6.1 below). Of the 64 installations that submitted their monitoring plan in 2014, 40 (or about 60%) are located in Group I countries while the remaining are in Group II countries, and a similar proportion applies to 2013, when 68% of the installations were from Group I countries. Average costs in 2015 were lower with a value of about €8,000.
July 2016 Doc Ref. 37474 105 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Figure 6.1 Q9: Average costs of preparing and approving a monitoring plan, by year of approval
Overall, results from Q9 (monitoring plan preparation and approval) show that costs in Group I countries installations were almost three times (or 74%) higher than that for those located in Group II ones, with average costs of approximately €14,500 compared to €5,300 on average respectively (as reported in Table 6.5). This difference appears to be related to more than the 56% salary differential identified earlier in the analysis (see Q7 for operators) although the cause of this is not evident. The average cost per tonne of CO2e is also dramatically higher in Group I countries. In terms of substantial modifications to monitoring plans, 90 out of the 133 operators that reported substantial modifications to their monitoring plan (roughly 68%) were located in Group I countries. Average costs in Group I countries were approximately €9,200 compared to the value of approximately €2,800 for Group II countries. This difference is in the same order of magnitude and is in line with the results from Q9 related to the submission of new monitoring plans, which indicates a similarity in the cost structure of these two activities.
Analysing QAQC costs, some operators reported that this is cost is particularly difficult to estimate, accounted for the fact that this is a cross cutting activity performed by people spread out throughout each organisation. Eight installations further reported that calibration costs are included in this measure and that these represent a large proportion of QAQC costs. A few installations indicated the inclusion of verification and risk assessment costs in this category, while others indicated to have separately reported these costs as part of other questions such as Q9. One installation provided an estimate of five senior employees working on QAQC with the addition of (lower) outsourced costs. The submission of verified annual emission reports as per Q19 shows consistency with the cost patterns already identified, with Group I average costs being slightly more than double those of Group II (€5,400 compared to €2,400 respectively). This is therefore not outside the bounds of the anticipated wage differential. Similarly, findings from Q20 show that verification costs on average are almost twice as high in Group I countries than in Group II countries (€8,200 and €4,300 respectively). These values are slightly below those identified in the literature. Research indicates that in terms of verification costs incurred by installations, the annual average verification cost was £9,000 (about €11,380) in the UK in 2008 (NAO, 2009). More recently in 2012, a European Commission assessment estimated verification costs at around €10,000 per year (Bellassen and Stephan (eds), 2015).
As far as other costs are concerned, costs related to the submission of improvement reports (Q21 and 22) are clearly differentiated by GDP grouping (€6,200 for Group I and €1,100 for Group II). Capital costs were on average €9,100 per installation (€10,900 and €4,600 for Group I and Group II operators respectively). Costs related to risk assessment (Q11), while of relatively small magnitude, show on average only a little
July 2016 Doc Ref. 37474 106 © Amec Foster Wheeler Environment & Infrastructure UK Limited
variance between Group I and Group II countries. This indicates that these costs are comparatively higher in Group II countries. Any differences identified between Group I and Group II installations of more than 50-60% cannot be entirely explained by salary differentials between the two groups. These differences may thus result from a combination of additional factors, such as activity type or multiple activity types within a single installation, both of which are discussed in more detail below.
Differences according to scale of EU ETS operation MRV costs vary significantly according to the type of installation and their complexity. Table 6.6 shows average costs per tonne of CO2e according to the different categories of emissions. This has been calculated as per the “top down” method as explained in Section 4.5. As can be observed in the table, the highest costs are borne by low emitters, with around €3.34/t CO2e. This is followed by category A, B and C installations with €0.56/t CO2e, €0.49/t CO2e and €0.07/t CO2e, respectively. This general trend of higher costs the smaller the emissions category is in keeping with the findings of the literature review, whereby smaller emitters incur higher MRV costs per tonne of CO2e.
Table 6.6 Average costs per tonne of CO2e per installation category (“top down” method)
Category Average cost per Average cost per tonne of CO2e Average cost per tonne of CO2e tonne of CO2e (Group I countries) (Group II countries)
Low emissions 3.34 4.25 0.80
Category A (including low 0.56 0.82 0.31 emissions)
Category B 0.49 0.64 0.26
Category C 0.07 0.07 0.06
As described in Section 4.5 however, this report also calculated the cost per tonne of CO2e figures using an alternative, “bottom up” method (Table 6.7). While the top down method better identifies MRV costs across the EU ETS as a whole (and appears to be the method that enables the most accurate comparison with the literature), the bottom up method is important to also present as it enables an alternative picture that may be more representative of the costs incurred by individual installations.
Table 6.7 Average costs per tonne of CO2e per installation category (“bottom up” method)
Category Average cost per Average cost per tonne of CO2e Average cost per tonne of CO2e tonne of CO2e (Group I countries) (Group II countries)
Low emissions 4.0 5.0 1.7
Category A (including low 6.0 8.5 0.9 emissions)
Category B 0.7 0.8 0.6
Category C 4.9 5.0 4.6
These figures are clearly different, and do not follow the anticipated pattern related to economies of scale. The findings above also show higher relative costs as compared to the 2010 and 2013 German studies (Löschel et al., 2010 and Löschel et al., 2013), but smaller costs for low emissions installations as compared to the 2012 Sweden study (where low emissions installations showed a cost of €54.10 per tonne of CO2e) (Coria and Jaraite, 2015).
July 2016 Doc Ref. 37474 107 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Low emissions installations As Table 6.6 shows, based on the top down method, low emissions installations have substantially higher total costs than Category A installations in Group I countries (more than double), in particular in terms of preparation and modification of the monitoring plan, monitoring, quality assurance, verification and improvement reports. They also have much more significant additional costs than Category A installations. Considering this important gap, the suggestions for improvement of the system from low emission operators may seem reasonable and justified. In relation to solutions that could reduce the cost for compliance, they propose for example to:
Lower the requirements in terms of monitoring (for example reduce the number of tiers), verification (for example reduce site visits) and reporting.
Remove some types of installations (for example district heating and/or biomass42).
Introduce standard values for emissions from standard fuels43, simplify methodology for determination of fuel or material, and simplify the correction factors.
As these examples show, certain provisions that are requested by low emissions installations are already available to them within the existing regulatory framework. Therefore it seems sensible to conclude that further informing installations of such provisions is required.
Regarding the adoption of simplified monitoring plans by low emissions installations, out of 74 low emissions installations in Group I and Group II countries which participated in the survey, 39% adopted a simplified monitoring plan, while 47% confirmed that they did not and 14% did not provide any information on this aspect. Consequently, the efficiency increase from the simplified monitoring plan seems limited.
As for the usefulness of additional provisions in MRR or AVR for the 74 installations of low emissions which replied to the survey, about 42% of installations consider provisions to be “somewhat” or even “very helpful”, while 18% think that this is not the case. Furthermore, 12% of low emissions installations expressed that they welcomed the simplification of the tier system and non-requirement to submit an uncertainty assessment. The others 28% either did not know (12%) or considered it as not applicable (16% of low emissions installations).
Regarding installation views of which cost has the least benefit compared to its cost, this point is especially relevant in the case of small emitters given the comparatively larger burden MRV activities represent. Approximately 22% of respondents stated that monitoring and reporting activities have the least benefits and another 22% consider this true for verification activities under EU ETS. Furthermore, 15% are of the opinion that activities related to process-emission would lead to unreasonable costs, while the remaining 41% are attributed to other costs.
Differences according to activity type As outlined above, a representative sample of EU ETS activities was chosen in order to investigate differences related to relative process complexity and other issues that may be identified as a function of activity type. Representative data was achieved for:
Combustion (Activity 20)
Refineries (Activity 21)
The results from the survey with regard to these activities show that the average total cost per installation ranges from €7,044 (Combustion) to €11,460 (Refineries).
As noted within the literature review, other efforts have been made to explore cost differences between sectors. Aether (2010) concluded that the electricity sector bore the highest costs, whereas Bellassen and Stephan (eds. 2015) identified the oil refining and cement sectors as incurring the highest costs. Another source, ICF (2012), concluded that energy intensive industries in general were bearing the highest costs.
42 Note however that 100% biomass installations are already excluded. 43 Note that this is already the case.
July 2016 Doc Ref. 37474 108 © Amec Foster Wheeler Environment & Infrastructure UK Limited
There was substantial variability between average costs, particularly for Q13 (calculating whether specific monitoring methodologies may incur unreasonable costs) and Q18 (QAQC) that were significantly higher for refineries as compared to combustion. Costs for monitoring according to the monitoring plan (Q17) and preparing a monitoring plan (Q9) were also twice as costly for refineries as compared to combustion, which is to be anticipated given the relatively complexity of the operations. The average costs for preparing a monitoring plan (€10,655 for combustion and €19,621 for refineries) are less than the high end of the results obtained by SIRA Consulting (2007), which were between €4,100 and €86,200 for the drafting, checking and adjusting depending on the complexity of the installation. Although this study covered the Netherlands only, it can be observed that the average cost per installation of preparing and submitting the monitoring plan seems to have decreased significantly, especially if the results for the medium and high complexity sectors are compared.
Also, the SIRA Consulting (2007) study highlights that 50% of the costs were to do with the classification and quantification of ‘de minimis’ sources. The results from the survey indicate that the classification of sources and providing evidence for each source stream (Q10 and Q12) represent a relatively low proportion of the overall MRV costs (below 5% in all cases).
Another element that has generally represented high costs in proportion to the total cost per installation is quality assurance and quality control (QAQC). This was particularly costly for refineries (representing approximately 30% of the total MRV costs). According to one operator, the quality assurance requirements for continuous emissions measurement are “too high” compared to measuring the fuel rates, which suggests that emissions monitoring could be one of the elements that influence the cost difference compared to installations from other EU ETS activities.
Finally, these results can be compared to literature investigating the costs of preparing and submitting the annual emissions report. In this case, SIRA Consulting (2007) estimated that the cost was between €4,300 and €12,000 for Dutch installations (low and high complexity, respectively). In the case of the survey conducted for this study, combustion reported average costs of €4,446 and refineries reported average costs of €5,719 which are comparable (albeit at the lower end). Despite the fact that the distribution of installations in the Netherlands and the EU might differ, the indicative trend observed is that costs may however have reduced somewhat over time.
Average cost per installation per tonne of CO2e
With regard to the average cost per installation per tonne of CO2e, despite the relative levels of complexity (and excluding the results for Q18 relating to QAQC and Q13, Calculating whether specific monitoring methodologies may incur unreasonable costs), combustion consistently reported higher cost per tonne results. This is likely due to the larger sample achieved for combustion (as shown by the higher standard deviation figures presented in Section 5 above), indicating that there is high variability within activity types.
In terms of a breakdown between types of MRV costs, results for follow the general trend found in the overall study, with monitoring representing the highest cost.
Costs for single or multiple activity installations When comparing average costs for installations involved in one activity only against those for installations involved in multiple activities, the data in the sample show that costs are higher for the latter. Note that single activity installations are only those installations explicitly reporting one main activity and no other activities, while multiple activity installations report one main activity and one or more other activities (ranging from two to six other activities).
Installations that have reported to be involved in two to six main and other activities on average have total costs 43% higher compared to installations involved in one activity only, with average values of €56,800 and €98,900 respectively. When focusing only on MRV costs as identified in Table 6.4 (Q9 and Q16-32), the above figures become respectively €50,400 and €86,200 indicating a similar difference of 42% higher for multiple-activity installations.
These findings indicate higher costs for installations with greater complexity. This is in line with findings from the literature review according to which the complexity of the processes within each installation is identified as a factor affecting cost. For instance as observed in a Netherlands-based study, the more complex the
July 2016 Doc Ref. 37474 109 © Amec Foster Wheeler Environment & Infrastructure UK Limited
process systems, the more costly it is for the installation to determine the emission calculations, which drives up the overall MRV compliance cost (SIRA Consulting, 2007). It also suggests some degree of economies of scope (with multiple activity installations only seeing a 42% increase in costs, rather than a doubling in costs).
Improvement reports and significant modifications The results indicate that a significant proportion of the installations from activities 20 and 21 have had to make substantial modifications to their monitoring plans and had to submit improvement reports. Moreover, in the case of activity 21, more than two thirds of the operators that responded to the survey stated that they had to submit an improvement report. It should be noted oil refining has been linked to higher costs in the literature (Aether, 2010; Bellassen and Stephan eds., 2015). Additional commentary provided by the operators this activity type suggests that they would benefit from the reduction of the frequency of submission of these improvement reports.
Evaluation analysis
Efficiency Significant differences have been observed in average costs between Group I and Group II countries’ installations. Costs such as capital equipment costs and other costs are also highly variable between countries. These differences cannot entirely be explained by salary differentials or sample characteristics suggesting that the degree of harmonisation and consistency achieved by the MRR across Member States may be improved.
Average costs of preparing and submitting a new monitoring plan have been fairly similar across different submission years, with a decrease in 2015 which suggests an efficiency improvement. Engagement in training activities and participation to workshops/exchange of best practices may also be regarded as contributing towards increased efficiency. However, in some cases the costs incurred by operators do not seem to be entirely proportional to perceptions of the corresponding benefits. The use of IT tools for data exchange and reporting using automated systems have been encouraged however most of the respondents have reported that using these has only resulted in limited or little cost savings.
QAQC costs have been shown here as a substantial component of MRV costs. This may also represent an increase in efficiency, as these costs may be replacing high external verification costs. Nonetheless, in spite of the importance of QAQC for the EU ETS system, this suggests there may be potential for improvement regarding clearer understanding regarding proportional requirements for QAQC.
Finally the MRR seeks to provide transparency and consistency in determining unreasonable costs, however respondents have indicated that the details provided may benefit from further clarity or elaboration.
The analysis above also shows clear differences in efficiency between Member States in Group I and Group II categories. The findings concerning the differences in efficiency regarding scale of EU ETS operation between Group I and Group II countries strongly suggest that further effort is required to both understand and address these differences.
As commented above, there is a substantial difference in the costs per installation per tonne of CO2e for the combustion (activity 20) and refineries (activity 21). Given that costs for refineries (as a complex activity) were anticipated to be higher than for combustion (as a simple activity), no clear conclusions can be therefore be drawn regarding efficiency in terms of activity types in general.
When examining particular elements of MRV, the majority of operators indicate that they use electronic reporting systems (71-93%) which is a strategy to reduce costs. Refineries (Activity 21) reported particularly high usage of such systems, although both combustion and refinery installations reported that they find this system useful and recognise that it implies cost savings. The methodology for the calculation of unreasonable costs has also been considered useful mainly by the operators of activity 21 (refineries).
July 2016 Doc Ref. 37474 110 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Relevance It has not been possible to quantify the relevance of the MRV compliance costs based on the information gathered as part of this study, therefore this evaluation takes a qualitative approach. An important consideration when looking at the relevance of the MRV system is that the need to deliver accurate and robust monitoring data is pivotal for the success of the EU ETS (see Section 4.6). Therefore, although operator costs may be regarded as significant, the qualitative comments made within the survey show that operators largely appreciate that the need outweighs the cost.
Nonetheless, and as shown above in Section 5.2, of the 126 responses to Q37 (suggestions for improvements), 29% related to simplifying aspects within the monitoring process. This finding is consistent with the large proportion that monitoring contributes to overall MRV costs, as highlighted in Section 6.1 above. Other suggestions included the simplification of guidelines, greater harmonisation between countries and sectors, simplification of process for low emitters, and to reduce the frequency of verification and other (perceived) bureaucratic requirements. These results do suggest that there remains scope for further simplification of MRV processes and costs.
Moreover, approximately 46% of operators (and about 19% of low emissions installations) declared having made significant modifications to the approved monitoring plan. Few respondents provided the reasons for modification, but where examples are mentioned they include: approval of new uncertainty level, approval of emission factors used, ensuring all small sources properly captured, purchase of measurement equipment, adding or removing emission sources, and modifying fuel streams. Approximately 38% of respondents indicated that they had to submit an improvement report for the 2014 compliance cycle.
Commentary from the survey suggests that operators would benefit from the reduction of the frequency of submission of improvement reports and that there is confusion regarding the guidance documents provided, and national interpretation of the MRR. Operators also suggested that there should be a certain amount of flexibility to allow operators to incorporate their own approaches to the rules if they provide a justification based on robust data and proportionality. Given the MRR was drafted as a Regulation and not a Directive to avoid these interpretation issues, this is a subject that may benefit from further investigation.
Coherence While many comments related to simplification were noted, very few related to a lack of coherence or inconsistency within the MRV system. Some overlaps were noted however with other pieces of legislation (e.g. IED and EPRTR) therefore this is an area for potential improvement which could contribute to the improved delivery of a harmonised monitoring framework for the EU ETS. The first step towards improving external coherence of MRV compliance costs with other compliance costs will be to further clarify overlaps.
July 2016 Doc Ref. 37474 111 © Amec Foster Wheeler Environment & Infrastructure UK Limited
7. Conclusions and recommendations
7.1 Conclusions
This section identifies the key conclusions of the study as a whole. These have been developed from the analysis contained within the previous section, and with specific reference to the evaluation analysis (against the evaluation criteria of efficiency, relevance and coherence).
Competent Authorities Below are the key conclusions of the study as related specifically to the MRV costs identified by CA.
Average total costs of MRV per 18 month compliance cycle are approximately €52,000 per Member State
The average annual cost per Member State per installation per 18 month compliance cycle is €2,250
This is substantially lower than the estimated average cost of approximately €6,500 per CA as shown in the 2008 impact assessment.
No clear trends exist regarding whether costs are higher or lower for CA in different Member States
For most different elements of MRV, average costs per installation that CA work with are highly variable between Group I and Group II countries, and when considering the number of installations for which CA are responsible. For the most part, costs are higher per installation in Group I countries (as could be expected due to higher wages), although there are clear exceptions. Activities such as approving and issuing new monitoring plans for 2014, or assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs, are substantially more costly per installation in Group II countries.
Costs to approve monitoring plans decreased substantially between 2013 and 2014
The shift to the new reporting requirements related to the MRR in 2013 resulted in substantially higher costs to CA than in a “standard”, subsequent reporting year. This is shown by a decrease of costs of between 63% for Group II Member States and 91% for Group I Member States for approving and issuing new monitoring plans between 2013 and 2014. This indicates that the costs for amending regulatory requirements is high and must be taken into account when any future changes are recommended.
Monitoring activities represent the highest operational costs for CA in 2014
Monitoring activities represent 61% of Member States’ total operational costs. The average costs for Member States’ monitoring-related activities also differed according to GDP category. Average cost for monitoring per Member State per installation was approximately €8,600 in Group I countries and €1,500 in Group II countries.
Operators Below are the key conclusions of the study as related specifically to the MRV costs identified by operators.
Average total costs of MRV per 18 month compliance cycle are approximately €59,000 per installation
The average annual cost per tonne of CO2e per 18 month compliance cycle is €0.16
July 2016 Doc Ref. 37474 112 © Amec Foster Wheeler Environment & Infrastructure UK Limited
The data from this study shows an average cost per tonne of CO2e of €0.16 (over the 18 month compliance cycle). This figure is similar to the literature (with the most recent data suggesting average costs of between €0.07 and €1.52 per tonne of CO2e).
Approximately two thirds of MRV costs are spent on monitoring
This study found that monitoring represents 68% of total MRV costs. This is a larger proportion (as opposed to reporting, and in particular, verification) than suggested by the literature which suggests that verification accounted for the largest proportion of costs (approximately 40%) (Jacquier, 2014). This suggests that the MRR is clearly changing the pattern of costs as opposed to regulatory regimes under previous phases of the EU ETS.
No clear trends exist regarding whether average costs are higher or lower for operators in different Member States, but costs per tonne of CO2e are consistently higher in those Member States with higher GDP per capita
While certain components of MRV were clearly more expensive in Group I countries when examining average costs (such as preparing new monitoring plans, or preparing operator improvement reports), other costs were able to be accounted for by anticipated differences in wages. Conversely, the very similar cost for the total cost of monitoring, also indicates that this element of MRV may be interpreted as more costly in Group II countries than in Group I countries. In terms of average costs per tonne of CO2e, these are however consistently higher in Group I countries. Interestingly, monitoring according to the approved monitoring plan showed a very large difference between Group I and Group II countries, despite the similar average cost.
Costs are, in general, proportionately higher the smaller the volume of emissions
As anticipated in the literature, this study shows that, in general, the smaller the operator, the higher the cost of emissions per tonne of CO2e. However, this study shows that Category B installations have higher average costs per tonne of CO2e as compared to Category C installations which is counter-intuitive. Given that these category types achieved statistical representativeness, further work is recommended to investigate this result in the future.
QAQC costs account for a high proportion of monitoring costs
When monitoring costs are broken down into their component parts, monitoring in accordance with the monitoring plan is the most costly element and QAQC procedures are the second most costly element. In light of the conclusion above, this may suggest that costs that may have previously been spent on verification in previous phases of the EU ETS are shifting earlier along the compliance cycle, and internally to operators’ own QAQC procedures. It may however also suggest that there could still be room for improvement regarding the establishment of proportional requirements, or further guidance, for QAQC.
Operators largely appreciate that the need for robust MRV outweighs compliance costs
While many suggestions for improvements were made, and compliance costs were regarded as significant by many operators, this study finds that operators largely appreciate that the need for consistency in emissions reporting in order to provide for a robust EU ETS as a whole. MRV costs should therefore continue to be regarded as a relevant cost. It is however important to note that the external coherence of the MRV system compared with overlaps for other compliance costs may benefit from improvement.
7.2 Limitations and recommendations for further work
The results and analysis presented are subject to a number of limitations in terms of the scope of the study, the methodology applied and the quality of the survey results assessed.
Compliance costs are explicitly defined in this study – thus, there is a risk that other compliance costs, not defined by the study, were overlooked. While gaps were minimised by asking survey respondents to identify ‘any other costs’, the success with which this has incorporated all other costs cannot be guaranteed. As
July 2016 Doc Ref. 37474 113 © Amec Foster Wheeler Environment & Infrastructure UK Limited
such, the costs identified in this study must be limited in terms of the comparison that is able to be made with EU ETS costs more widely.
In addition, while the evaluation analysis is in keeping with the rationale behind the European Commission’s drive for “Better Regulation”, it is not a full evaluation of the Regulation nor an impact assessment of recommendations indicated. As clarified with the Commission throughout this project, the purpose of the study is to identify MRV compliance costs, with the evaluation analysis a subsidiary component.
The methodological limitations are clearly set out in Section 4.7. In summary, issues were encountered with the completeness of the contact details in the EUTL, the study timeframe was relatively short and clashed with other MRV requirements, there was high reliance on goodwill for responses (itself related to survey population concern in the topic matter), high complexity in terms of subject matter (and the questionnaire required to gather the necessary data), and incorrect data entry and potential for biased responses due to lack of MRV cost tracking. Together, these factors made it difficult to achieve statistical representativeness in the survey sample – this was particularly an issue for presenting the survey results by activity type. Moreover, a number of outliers were identified in the survey results which also affected the study findings. The way in which these issues were addressed is set out in more detail in Section 4.7.
Several recommendations for further work can be drawn from these limitations, as follows:
The EUTL (such as its associated contact details) should be assessed for completeness and accuracy.
Future similar surveys could be conducted over a longer timeframe (and with greater notification to operators and CA) and at a different time of the year so as to encourage a better response rate.
Further analysis on the use of electronic reporting systems in Group II Member States could be carried out to better understand utilisation behaviour of electronic reporting systems and related efficiency considerations.
7.3 Recommendations
This section provides a series of recommendations on possible cost reduction measures related to EU ETS MRV compliance costs. These recommendations are evidence based, deriving from the study results, and include identification of opportunities for cost savings and common implementation problems.
Simplification and reporting
Opportunities exist regarding further simplification of requirements, particularly as regards small emitters both for CA and for operators Both CA and operators indicated that the MRV for small emitters (including low emissions installations) was perceived to be disproportionately high. This is supported by the high cost per tonne of CO2e incurred by low emissions installations (3.34 €/t CO2e on average, and 4.25€/t CO2e in Group I countries). CA also indicated that their requirements for dealing with small emitters could be further simplified. This could take the form of simplified and standardised guidance (possibly available in all EU languages and translated by experts in the field of MRV and the EU ETS to minimise interpretation errors). However, it is also important to note that suggestions made for simplifications for low emissions installations are sometimes already available (for example, standard values for emissions from standard fuels). Therefore better informing both Member State CA and installations of all the provisions for simplification that are available for them may be necessary.
In general, further simplification may reduce compliance costs across all installations. As stated in Section 6.2, CA in Member States that implemented simplification measures reported on average lower operating costs per installation than the average in their GDP category. However, it is also important to note that any further simplification must be balanced against ensuring the overall credibility of the EU ETS as a whole.
July 2016 Doc Ref. 37474 114 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Simplify the process of determining de minimis source streams, particularly for small emitters Numerous operators indicated that the process of identifying and monitoring de minimis source streams is onerous in comparison to the actual quantity of emissions reported. While this is a relatively small proportion of overall costs, the results of this study suggest that these costs may still potentially be regarded as disproportionate.
Improve standard reporting forms As seen in Section 6.2, for Member States where frequent inconsistencies and non-conformities in improvement reports were observed in about half of the reports, recommendations for improvement were made and almost one third of the reports identified non-conformities, which might have been avoided if initial monitoring and reporting forms were better adapted. It is understood that Member States are able to develop simplified reporting forms (Article 13 of the MRR), but that this provision may not be as fully employed as possible. Encouraging the use of standard and/or simplified reporting forms (for example, clearly specifying minimum reporting requirements) may encourage better upfront monitoring procedures and thus reduce the need for improvement reports in the longer term.
Increase the support and guidance relating to electronic reporting systems, particularly in Group II countries As noted in Section 6.3, many Group II countries do not realise such efficiency gains from implementing electronic reporting systems as achieved by Group I CA and as anticipated would be achieved within in the literature. For Member States where automated systems for electronic data exchange are in operation, operating costs reported by CA per installation were lower than in those Member States that did not employ such systems (noting however that the payback period may be longer in countries where relative wages are lower). Sharing of information between Group I and Group II countries in terms of the benefits gained by using electronic reporting systems may therefore also be useful.
Information exchange and education
Further promote participation in information exchange practices As stated in Section 6.2, the majority of CA participated in such activities. Although it is difficult to estimate direct cost savings, benefits from information exchange are perceived, and could bring also downstream savings for operators based on good practice implementation across Member States.
Better education regarding the required scope of QAQC costs to operators As noted in Section 6.1, QAQC costs are a substantial proportion of monitoring costs (second only to actual monitoring in accordance with the monitoring plan). While this may possibly suggest that costs that may have previously been spent on verification in previous phases of the EU ETS are shifting earlier along the compliance cycle, and internally to operators, it also indicates that operators may benefit from better information on minimum requirements for QAQC procedures to ensure that costs are not being incurred unnecessarily.
Further promote and explain the methodology relating to calculating unreasonable costs Many respondents to the survey did not know whether this methodology was applicable to them, or did not consider it useful. Increasing awareness of this element of the MRR may reduce negative economic impact. This could take the form of direct communications to CA (to then disseminate to operators), distributed via trade associations, or information available electronically.
July 2016 Doc Ref. 37474 A1 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Appendix A References
European legislation Commission Decision (EC) No 2004/156/EC of 29 January 2004 establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council. Official Journal of the European Communities OJ L 59, 26.2.2004, p. 1–74. Available online at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32004D0156.
Commission Decision (EC) No 2007/589/EC of 18 July 2007 establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council (notified under document number C(2007) 3416). Official Journal of the European Communities OJ L 229, 31.8.2007, p. 1–85. Available online at: http://eur-lex.europa.eu/legal- content/en/ALL/?uri=CELEX:32007D0589.
Commission Regulation (EU) No 1210/2011 of 23 November 2011 amending Regulation (EU) No 1031/2010 in particular to determine the volume of greenhouse gas emission allowances to be auctioned prior to 2013. Official Journal of the European Communities OJ L 308, 24.11.2011, p. 2–14. Available online at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32011R1210.
Commission Regulation (EU) No 600/2012 of 21 June 2012 on the verification of greenhouse gas emission reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council Text with EEA relevance. Official Journal of the European Communities OJ L 181, 12.7.2012, p. 1–29. Available online at: http://eur-lex.europa.eu/legal- content/EN/TXT/?uri=CELEX:32012R0600.
Commission Regulation (EU) No 601/2012 of 21 June 2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council Text with EEA relevance. Official Journal of the European Communities OJ L 181, 12.7.2012, p. 30–104. Available online at: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32012R0601.
Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC. Official Journal of the European Communities OJ L 275, 25.10.2003, p. 32–46. Available online at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32003L0087.
Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol's project mechanisms. Official Journal of the European Communities OJ L 338, 13.11.2004, p. 18–23. Available online at: http://eur-lex.europa.eu/legal- content/EN/TXT/?uri=celex%3A32004L0101.
Directive 2009/29/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community. Official Journal of the European Communities OJ L 140, 5.6.2009, p. 63–87. Available online at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32009L0029.
Other references Abrell, J., Ndoye Faye A. and Zachmann, G. 2011. Assessing the impact of the EU ETS using firm level data. Bruegel Working Paper 2011/08. Available online at: http://bruegel.org/wp- content/uploads/imported/publications/WP_2011_08_ETS_01.pdf.
Aether (2010) Assessing the cost to UK operators of compliance with the EU Emissions Trading System. Report for DECC and Environment Agency.
July 2016 Doc Ref. 37474 A2 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Bellassen, V. and Stephan, N. (eds). 2015. Accounting for carbon: Monitoring, reporting and verifying emissions in the climate economy. Cambridge University Press: Cambridge. Boyda, A. and Rennkampa, B. (2014) Current approaches to MRV in South Africa: a scoping study.
Coria, J. and Jaraite, J. 2015. Carbon pricing: Transaction costs of emissions trading vs. carbon taxes. Working Papers in Economics No. 609. University of Gothenburg: Sweden. Available online at: https://gupea.ub.gu.se/bitstream/2077/38073/1/gupea_2077_38073_1.pdf.
DG CLIMA, n/d. EU ETS Compliance Forum [brochure]. Available online at: http://ec.europa.eu/clima/events/docs/0100/brochure_en.pdf. DG CLIMA. 2015a. 2030 climate and energy package [website]. Available online at: http://ec.europa.eu/clima/policies/strategies/2030/index_en.htm.
DG CLIMA. 2015b. Structural reform of the European carbon market [website]. Available online at: http://ec.europa.eu/clima/policies/ets/reform/index_en.htm.
DG CLIMA, 2015c. Consultation on the revision of the EU Emission Trading System (EU ETS) Directive [website]. Available online at: http://ec.europa.eu/clima/consultations/articles/0024_en.htm. DG CLIMA, 2015d. Revision for phase 4 (2021-2030) [website]. Available online at: http://ec.europa.eu/clima/policies/ets/revision/index_en.htm.
DG CLIMA, 2015e. Monitoring, reporting and verification of EU ETS emissions [website]. Available online at: http://ec.europa.eu/clima/policies/ets/monitoring/documentation_en.htm.
DG CLIMA. 2015f. European Union Transaction Log [website]. Available online at: http://ec.europa.eu/environment/ets/. Ecofys (2015) Fourth ETS MRAV Compliance Review Final Report.
Environment Agency et al (2015) European Union Emissions Trading System (EU ETS) Phase III. Guidance for installations. How to comply with the EU ETS, including the Small Emitter and Hospital Opt-Out Scheme.
Eurelectric, 2015. Consultation on the revision of the EU ETS Directive: A EURELECTRIC consultation response. Eurelectric: Brussels. Available online at: http://www.eurelectric.org/media/169877/20150316_revisionetsconsultation-eurelectric-final-2015-030- 0170-01-e.pdf. European Commission, 2012. Commission Staff Working Document, Impact Assessment accompanying the document: Commission Regulation (EU) No …/.. of XXX on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council; Commission Regulation (EU) No …/.. of XXX on the verification of greenhouse gas emission reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council, SWD(2012) 0177 final. Available online at: http://eur- lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52012SC0177&from=EN.
European Commission, 2014. Reducing regulatory burdens: Standard cost model (SCM) [website]. Available online at: http://ec.europa.eu/smart-regulation/refit/admin_burden/scm_en.htm.
European Commission, 2015a. Commission Staff Working Document, Impact Assessment accompanying the document: Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments, SWD(2015) 135 final. Available online at: http://ec.europa.eu/clima/policies/ets/revision/docs/impact_assessment_en.pdf. European Commission, 2015b. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Better regulation for better results: An EU agenda. COM(2015) 215 final. Available online at: http://ec.europa.eu/smart-regulation/better_regulation/documents/com_2015_215_en.pdf.
European Commission, 2015c. Better regulation: REFIT – making EU law lighter, simpler and less costly [website]. Available online at: http://ec.europa.eu/smart-regulation/refit/index_en.htm.
July 2016 Doc Ref. 37474 A3 © Amec Foster Wheeler Environment & Infrastructure UK Limited
European Commission, 2015d. Regulatory Fitness and Performance Programme (REFIT) state of play and outlook: "REFIT scoreboard". European Commission: Brussels. Available online at: http://ec.europa.eu/smart-regulation/better_regulation/documents/swd_2015_110_en.pdf. European Commission, 2015e. Better regulation: Better Regulation guidelines [website]. Available online at: http://ec.europa.eu/smart-regulation/guidelines/toc_guide_en.htm.
European Council. 2014. Council conclusions of 24 October 2014 EUCO 169/14. Available online at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/145397.pdf.
Eurostat, 2015. National accounts and GDP [website]. Available online at: http://ec.europa.eu/eurostat/statistics- explained/index.php/National_accounts_and_GDP#Further_Eurostat_information. Fallmann et al (2015) Evaluation of the EU ETS Directive.
Heindl, P. 2012. Transaction costs and tradable permits: Empirical evidence from the EU Emissions Trading Scheme. ZEW Discussion Paper No. 12-021, Centre for European Economic Research. Available online at: ftp://ftp.zew.de/pub/zew-docs/dp/dp12021.pdf.
ICF International. 2012. An international comparison of energy and climate change policies impacting energy intensive industries in selected countries. Report for UK Department for Business, Innovation and Skills. Available online at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31768/12-527- international-policies-impacting-energy-intensive-industries.pdf.
Jacquier, G. and Bellassen, V. Trendsetter for companies and industrial sites: The EU Emissions Trading Scheme. In Bellassen, V. and Stephen, N. (eds). Accounting for carbon: Monitoring, reporting and verifying emissions in the climate economy, Cambridge University Press: Cambridge, pp. 139-189.
Jacquier, G. 2014. MRV requirements in emission trading systems worldwide. Paper presented at Centre Interprofessionnel Technique d’Etudes de la Pollution Atmosphérique MRV workshop, 03 June 2014, Bonn. Available online at: https://www.thepmr.org/system/files/documents/4-%20Jacquier%20- %20ETS%20-%20CITEPA.pdf.
Jaraite, J., Convery, F.J. and Di Maria, C. 2010. Transaction costs for firms in the EU ETS: Lessons from Ireland, Climate Policy 10(2): 190-215.
Jaraite, J. and Kažukauskas, A. 2012. Firm trading behaviour and transaction costs in the European Union’s Emission Trading System: An empirical assessment. CERE Working Paper, 2012:9, Centre for Environmental and Resource Economics: Umeå. Available online at: http://www- sekon.slu.se/~gbost/CERE_WP2012-9.pdf.
King, K., Pye, S. and Davison, S. 2010. Assessing the cost to UK operators of compliance with the EU Emissions Trading System. AETHER: Oxford. Available online at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/47953/895-cost-euets-uk- operators-compliance.pdf. Krey (2005) Transaction costs of unilateral CDM projects in India: Results from an empirical survey.
Larkin, J., Sachweh, C., Hazrat, M., Eaton, R., and Rankin, E. 2015. Fourth ETS MRAV compliance review. Final report: For distribution to Member States. Ricardo-AEA and ECOFYS. Available at: http://ec.europa.eu/clima/policies/ets/monitoring/docs/report_4th_ets_mrav_compliance_en.pdf.
Löschel, A., Brockmann, K. L., Heindl, P., Lutz, B., & Schumacher, J. (2013) KfW/ZEW CO2 Barometer 2011: Hoher Anpassungsbedarf im EU-Emissionshandel ab 2013 – deutliche Defizite bei der Vorbereitung in den Unternehmen. Frankfurt am Main.
Löschel, A., Kiehl, K., Heindl, P., Lo, V., Koschel, H., & Koesler, S. (2010). KfW/ZEW CO2 Barometer 2010: Effizienzpotenziale des Emissionshandels noch nicht ausgeschöpft – Strategien und management deutscher Unternehmen. Frankfurt am Main.
July 2016 Doc Ref. 37474 A4 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Merrill Brown, L., Hanafi, A. and Petsonk, A. 2012. The EU Emissions Trading System: Results and lessons learned. Environmental Defense Fund: Washington D.C. Available online at: https://www.edf.org/sites/default/files/EU_ETS_Lessons_Learned_Report_EDF.pdf.
NAO (2009), European Union Emissions Trading Scheme, A Review by the National Audit Office, March 2009.
Nelissen, D. and Faber, J. (2014) Economic impacts of MRV of fuel and emissions in maritime transport.
Plugge, D., Baldauf, T. & Köhl (2013) The global climate change mitigation strategy REDD: monitoring costs and uncertainties jeopardize economic benefits.
Price Waterhouse Coopers (2007a) ECCP Meeting "Robust Compliance and Enforcement" - Status of Verification and Policy Options. Brussels, 27 April 2007.
Price Waterhouse Coopers (2007b) ECCP Meeting "Robust Compliance and Enforcement" - Policy Options on Enforcement. Brussels, 27 April 2007.
PricewaterhouseCoopers. n/d. Review of permits, monitoring plans and verification reports in the EU greenhouse gas emission trading scheme at the level of the member states. PricewaterhouseCoopers.
SIRA consulting (2007) Actal V: Actualiseren ACTAL-rapportage emissiehandel
Venmans, F. (2012) A literature-based multi-criteria evaluation of the EU ETS. Renewable and Sustainable Energy Reviews, 16, 5493–5510.
July 2016 Doc Ref. 37474 B1 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Appendix B Stakeholder consultation: Surveys
Surveys were developed for competent authorities and operators. Both surveys were delivered in an online version (with an accompanying Excel spreadsheet for information purposes, or as an alternative completion mechanism). These versions are for information purposes only. Competent authorities
Activity under the EU ETS
1. In which country is this competent authority situated?
Choose an item.
2. This survey asks questions about costs. What currency will you use when responding to all questions within this survey?
Choose an item.
3. How many installations operating under the EU ETS does your organisation currently work with on monitoring, reporting and verification? Please answer in whole numbers (e.g. 200, 3078).
4. In your competent authority, how many people are currently required for the overall implementation of EU ETS monitoring, reporting and verification on a permanent (i.e. annual) basis? This includes all tasks related to EU ETS monitoring, reporting and verification, including administration, checking, compliance support activities and enforcement. Please answer in terms of total numbers of full time equivalent (FTE) employees.
☐ 1-5 ☐ 6-10 ☐ 11-15 ☐ 16-20 ☐ 21-25 ☐ 26+
5. In your competent authority, are additional people required for overall implementation of EU ETS monitoring, reporting and verification in times of peak workload? Please answer in terms of total numbers of full time equivalent (FTE) employees and select all that apply.
☐ Yes: Between 1-5 temporary employees are employed per year ☐ Yes: Between 6-10 temporary employees are employed per year ☐ Yes: More than 10 temporary employees are employed per year ☐ Yes: We are required to outsource work to external contractors ☐ No ☐ Other (please specify):
July 2016 Doc Ref. 37474 B2 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Staff costs In order to better understand the value of the time spent on monitoring, reporting and verification activities under the EU ETS, it is important for us to identify costs associated with different staff grades.
6. What is the average annual salary for each of the following groups of employees in your organisation who work on EU ETS monitoring, reporting and verification tasks? Please enter the figures as accurately as you are able and use whole numbers (e.g. 10000, 25500, 67400).
Employee group Average annual salary Junior-level staff (e.g. data entry clerks, administrators) Middle-level staff (e.g. managers, technical energy analysts) Senior-level staff (e.g. directors or heads of departments)
Information The next few pages will ask questions related to your costs for specific activities. Unless otherwise specified (i.e. for the questions about the monitoring plan), please provide answers for costs incurred during the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Please provide answers in whole numbers e.g. 5, 10, 26, 114 etc. without decimal places. Enter 0 if you don't spend anything on that specific activity (e.g. if junior staff don't work on a particular task, just enter 0 in the text box).
For all following questions related to costs, please indicate the total costs for the activity across all stationary installations you work with, not the cost per stationary installation. Please do not include costs related to aircraft operators.
Monitoring plan The monitoring plan is a core element of the monitoring, reporting and verification system. Operators are also required to submit supporting documents to their competent authority demonstrating compliance with uncertainty thresholds as well as a risk assessment. Monitoring plans may be revised and require further competent authority approval where significant changes are necessary.
7. What was your estimated total cost of approving and issuing new monitoring plans for 2013? Due to the transition from the Monitoring and Reporting Guidelines (2007) to the Monitoring and Reporting Regulation (2012), all installations had to prepare a new monitoring plan for 2013.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Total fees charged by your organisation to approve and issue new monitoring plans for 2013
Comment:
8. What was your estimated total cost of approving significant modifications to monitoring plans affecting the 2013 compliance cycle (01 January 2013 to 30 June 2014)? Significant modifications are as specified in Article 15(3) of the Monitoring and Reporting Regulation.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
July 2016 Doc Ref. 37474 B3 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Total fees charged by your organisation to approve significant modifications to monitoring plans affecting the 2013 compliance cycle
Comment:
9. What was your estimated total cost of approving and issuing new monitoring plans for 2014? These are the monitoring plans approved for new entrant installations for 2014.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Total fees charged by your organisation to approve and issue new monitoring plans for 2014
Comment:
10. What was your estimated total cost of approving significant modifications to monitoring plans affecting the 2014 compliance cycle (01 January 2014 to 30 June 2015)? Significant modifications are as specified in Article 15(3) of the Monitoring and Reporting Regulation.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Total fees charged by your organisation to approve significant modifications to monitoring plans affecting the 2014 compliance cycle
Comment:
11. For the 2014 compliance cycle (01 January 2014 to 30 June 2015), please estimate the total cost of assessing operators’ claims that applying a specific monitoring methodology shall incur unreasonable costs, including carrying out cost-benefit analyses and estimating uncertainty thresholds. Articles 18(1) and 18(2) of the Monitoring and Reporting Regulation
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Any fees charged by your organisation to operators for this specific task
Comment:
Annual emissions report
Installations operating under the EU ETS are required to submit verified annual emissions reports to their competent authority by 31 March of each compliance cycle. Competent authorities may then also carry out spot checks or other reviews of these annual emissions reports.
12. What is your estimated total cost of receiving and reviewing annual emissions reports? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
July 2016 Doc Ref. 37474 B4 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Total fees charged by your organisation to operators to receive and review annual emissions reports
Comment:
Operator improvement reports
Operators are required to report on possible improvements to their monitoring methodology between once per year (for category C installations) and once every four years (for category A installations). These reports include justification of the technical feasibility of reaching particular tiers and the technical feasibility of applying particular methodologies (Articles 69(1-3) of the Monitoring and Reporting Regulation).
13. What is your estimated total cost of receiving and reviewing operator improvement reports? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Total fees charged by your organisation to operators to receive and review operator improvement reports
Comment:
Site inspections
14. Does your competent authority carry out site inspections for the purposes of ensuring compliance with monitoring, reporting and verification under the EU ETS?
☐ Yes ☐ No
If you answered No, please skip to question 17.
15. Do you perform inspections solely for the purposes of monitoring, reporting and verification under the EU ETS or do you carry out these inspections jointly for other purposes (e.g. for requirements under the Industrial Emissions Directive)?
☐ Solely for the purposes of monitoring, reporting and verification under the EU ETS ☐ Mostly for the purposes of monitoring, reporting and verification under the EU ETS, but sometimes jointly for other purposes ☐ Always jointly for other purposes ☐ Other (please specify):
16. What is your estimated annual cost of carrying out site inspections?
July 2016 Doc Ref. 37474 B5 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Any fees charged by your organisation to operators for this specific task
Comment:
Information exchange
The European Commission, the EU ETS Compliance Forum and other bodies (including at Member State level) organise events to share best practices.
These include events like the 6th EU ETS Compliance Conference, the EU ETS Accreditation and Verification Forum, or the 5th EU ETS Compliance Conference. Competent authorities also participate in, or organise, information sharing practices and events with other competent authorities, verifiers and National Accreditation Bodies.
17. In the 2014 compliance cycle (01 January 2014 to 30 June 2015), did your organisation participate in any information exchange practices?
☐ Yes ☐ No
If you answered No, please skip to question 19.
18. Can you estimate the costs saved or spent as a result of participating in these information exchange practices? This includes time spent as well as any other expenses e.g. travel costs. Please think about the costs saved or spent for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
☐ High cost savings ☐ Some cost savings ☐ A little cost savings ☐ A little costs spent ☐ Some costs spent ☐ High costs spent
Please provide an approximate quantification of your answer (e.g. if you answered “high cost savings”, how much does that represent in time and/or expenses?):
Equipment costs
19. To ensure compliance with monitoring, reporting and verification under the EU ETS, has your organisation specifically purchased any capital equipment? This includes equipment purchased at any point in time, but that was used during the 2014 compliance cycle (01 January 2014 to 30 June 2015). Examples of capital equipment may include those things used to produce a service, including computers, software, desks and offices.
☐ Yes
July 2016 Doc Ref. 37474 B6 © Amec Foster Wheeler Environment & Infrastructure UK Limited
☐ No
If you answered No, please skip to question 22.
20. Please indicate the total one-off costs of all equipment purchased: Please provide your answer as a whole number e.g. 150, 362, 14589.
21. Please indicate the average annual operating costs of all equipment purchased: Please provide your answer as a whole number e.g. 150, 362, 14589.
Any other costs
22. Are there any additional important costs that you have incurred as a result of monitoring, reporting and verification activities under the EU ETS that have not been covered in this survey? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015). This may include things like training for staff on monitoring, reporting and verification best practice, or costs incurred to make emissions reports publicly available (Article 71 of the Monitoring and Reporting Regulation).
☐ Yes ☐ No
If you answered No, please skip to question 24.
23. What are the additional important costs that you have incurred as a result of monitoring, reporting and verification activities under the EU ETS that have not been covered in this survey? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Type of cost Description / Cost Description of additional costs
Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Any other costs
Comment:
Confidence
24. Thinking about all the data you have provided above, how confident do you feel about the quality of the information?
☐ High: The data provided is based on actual data (e.g. from HR, timesheets, invoices etc.) and there is a very high level of confidence in the information provided. ☐ Medium: The data provided is based on a confident estimate of time and other costs and there is a good level of confidence in the information provided.
July 2016 Doc Ref. 37474 B7 © Amec Foster Wheeler Environment & Infrastructure UK Limited
☐ Low: The data provided is based on a rough estimate of time and other costs and there is a lower level of confidence in the information provided.
Open questions
Robust, transparent, consistent and accurate monitoring and reporting of GHG emissions is essential for the effective operation of the EU ETS. The basic premise that “a tonne is a tonne” enables the system to work as cost-effectively as possible.
25. Which element of the monitoring, reporting and verification activities that you conduct do you estimate has the least benefit compared to its cost?
26. What other pieces of legislation do you think overlap the most with the monitoring, reporting and verification requirements of the EU ETS in terms of compliance costs, and how do you think these overlapping compliance costs could be reduced?
27. Have you observed a difference in costs for your competent authority between the different reporting phases of the EU ETS? Are you able to identify causes for these differences? (Phase I: 2005-2007; Phase II: 2008-2012; Phase III: 2013-2020)
28. Do you have any other suggestions for possible improvements to the monitoring, reporting and verification requirements of the EU ETS?
Thank you for completing this survey.
To enable us to follow up should we have any questions about your survey responses please provide your details below.
Name of competent authority: Contact person: Email:
Do you have any final comments you would like to add?
July 2016 Doc Ref. 37474 B8 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Operators
Activity under the EU ETS 1. In which country is this installation situated?
Choose an item.
2. This survey asks questions about costs. What currency will you use when responding to all questions within this survey?
Choose an item.
3. What is the category of your installation? Please select all that apply. Categories are as defined in Article 19 of the Monitoring and Reporting Regulation. Note that the definitions below exclude CO2 stemming from biomass and before subtraction of transferred CO2.
☐ Category A (average verified annual emissions of 50,000 tonnes of CO2e or less in the 2008-2012 trading period)
☐ Category B (average verified annual emissions between 50,001 to 500,000 tonnes of CO2e in the 2008-2012 trading period)
☐ Category C (average verified annual emissions of more than 500,001 tonnes of CO2e in the 2008-2012 trading period) ☐ Low emissions (average annual verified emissions of less than 25,000 tonnes of CO2e in the 2008-2012 trading period and as defined by Article 47(2) of the Monitoring and Reporting Regulation)
4. What were the verified emissions in CO2e of this installation for 2014? Please answer in whole numbers (e.g. 200, 3078).
5. How many people (full-time equivalent, FTE) are employed at this installation? Please provide your answer in whole numbers (e.g. 200, 3078). Please include all staff, not just those working on EU ETS.
6. Please indicate the main, and any other activity type, from Annex I of the EU ETS Directive, under which your installation reports.
Activity Main activity Other activities (select one) (select all that apply) Combustion of fuels in installations with a total rated thermal input ☐ ☐ exceeding 20 MW (except in installations for the incineration of hazardous or municipal waste Refining of mineral oil ☐ ☐ Production of coke ☐ ☐ Metal ore (including sulphide ore) roasting or sintering, including ☐ ☐ pelletisation Production of pig iron or steel (primary or secondary fusion) including ☐ ☐ continuous casting, with a capacity exceeding 2,5 tonnes per hour Production or processing of ferrous metals (including ferroalloys) where ☐ ☐ combustion units with a total rated thermal input exceeding 20 MW are operated. Processing includes, inter alia, rolling mills, re-heaters, annealing furnaces, smither Production of primary aluminium ☐ ☐ Production of secondary aluminium where combustion units with a total ☐ ☐ rated thermal input exceeding 20 MW are operated Production or processing of non-ferrous metals, including production of ☐ ☐ alloys, refining, foundry casting, etc., where combustion units with a total rated thermal input (including fuels used as reducing agents) exceeding 20 MW are operated
July 2016 Doc Ref. 37474 B9 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Activity Main activity Other activities (select one) (select all that apply) Production of cement clinker in rotary kilns with a production ☐ ☐ capacity exceeding 500 tonnes per day or in other furnaces with a production capacity exceeding 50 tonnes per day Production of lime or calcination of dolomite or magnesite in rotary kilns ☐ ☐ or in other furnaces with a production capacity exceeding 50 tonnes per day Manufacture of glass including glass fibre with a melting ☐ ☐ capacity exceeding 20 tonnes per day Manufacture of ceramic products by firing, in particular roofing ☐ ☐ tiles, bricks, refractory bricks, tiles, stoneware or porcelain, with a production capacity exceeding 75 tonnes per day Manufacture of mineral wool insulation material using glass, rock or slag ☐ ☐ with a melting capacity exceeding 20 tonnes per day Drying or calcination of gypsum or production of plaster boards and other ☐ ☐ gypsum products, where combustion units with a total rated thermal input exceeding 20 MW are operated Production of pulp from timber or other fibrous materials ☐ ☐ Production of paper or cardboard with a production capacity ☐ ☐ exceeding 20 tonnes per day Production of carbon black involving the carbonisation of organic ☐ ☐ substances such as oils, tars, cracker and distillation residues, where combustion units with a total rated thermal input exceeding 20 MW are operated Production of nitric acid ☐ ☐ Production of adipic acid ☐ ☐ Production of glyoxal and glyoxylic acid ☐ ☐ Production of ammonia ☐ ☐ Production of bulk organic chemicals by cracking, reforming, partial or full ☐ ☐ oxidation or by similar processes, with a production capacity exceeding 100 tonnes per day Production of hydrogen (H2) and synthesis gas by reforming or ☐ ☐ partial oxidation with a production capacity exceeding 25 tonnes per day Production of soda ash (Na2CO3) and sodium bicarbonate (NaHCO3) ☐ ☐
Staff costs
In order to better understand the value of the time spent on monitoring, reporting and verification activities under the EU ETS, it is important for us to identify costs associated with different staff grades.
7. What is the average annual salary for each of the following groups of employees in your organisation who work on EU ETS monitoring, reporting and verification tasks? Please enter the figures as accurately as you are able and use whole numbers (e.g. 10000, 25500, 67400).
Employee group Average annual salary Junior-level staff (e.g. data entry clerks, administrators) Middle-level staff (e.g. managers, technical energy analysts) Senior-level staff (e.g. directors or heads of departments)
Information The next few sections will ask questions related to your costs. Unless otherwise specified (i.e. for the questions about the monitoring plan), please provide answers for costs incurred during the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Please provide answers in whole numbers e.g. 5, 10, 26, 114 etc. without decimal places. Enter 0 if you don't spend anything on that specific activity (e.g. if junior staff don't work on a particular task, just enter 0 in the text box).
July 2016 Doc Ref. 37474 B10 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Monitoring plan The monitoring plan is a core element of the monitoring, reporting and verification system. Operators are also required to submit supporting documents to their competent authority demonstrating compliance with uncertainty thresholds as well as a risk assessment. Monitoring plans may be revised.
Due to the transition from the Monitoring and Reporting Guidelines (2007) to the Monitoring and Reporting Regulation (2012), all installations had to prepare a new monitoring plan for 2013. New entrant installations must also prepare monitoring plans.
8. In which year was your new monitoring plan approved by your competent authority? ☐ 2012 ☐ 2013 ☐ 2014 ☐ 2015
9. What was your estimated total cost of preparing your new monitoring plan, including supporting documents, and submitting it for competent authority approval?
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Fees e.g. fees paid to your competent authority to submit the monitoring plan for approval
Comment:
Within the monitoring plan preparation process, there are a number of specific tasks that occur. Within the total cost of preparing your monitoring plan and supporting documents and submitting it for approval as provided above, please estimate the cost of these specific tasks if applicable:
10. What was your estimated total cost of determining the appropriate classification for each relevant source stream (into de minimus, minor and major source streams)? See Article 19 of the Monitoring and Reporting Regulation.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
Comment:
11. What was your estimated total cost of carrying out a risk assessment that provides evidence that the proposed control activities and procedures for control activities are commensurate with the inherent risks and control risks identified? See Article 12(1)b of the Monitoring and Reporting Regulation.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
Comment:
July 2016 Doc Ref. 37474 B11 © Amec Foster Wheeler Environment & Infrastructure UK Limited
12. What was your estimated total cost of providing evidence for each source stream and emission source demonstrating compliance with the uncertainty thresholds for activity data and calculation factors, where applicable, for the applied tiers as defined in Annex II and Annex IV? See Article 12(1)a of the Monitoring and Reporting Regulation
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
Comment:
13. What was your estimated total cost of calculating whether applying a specific monitoring methodology may incur unreasonable costs and if so, providing justification to the competent authority? See Article 18 of the Monitoring and Reporting Regulation
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
Comment:
14. Since this monitoring plan was approved, have you made any significant modifications to your monitoring plan? Significant modifications are as specified in Article 15(3) of the Monitoring and Reporting Regulation.
☐ Yes ☐ No
If you answered No, please skip to question 17.
15. In which year did you submit your significantly modified monitoring plan to your competent authority for approval?
☐ 2013 ☐ 2014 ☐ 2015
16. What was the estimated total cost of making significant modifications to your monitoring plan? Significant modifications are as specified in Article 15(3) of the Monitoring and Reporting Regulation.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Fees e.g. fees paid to your competent authority to submit your significantly modified monitoring plan for approval
Comment:
Monitoring Once the monitoring plan has been approved, it is necessary to monitor emissions that occur.
17. What is your estimated total cost of monitoring according to the approved monitoring plan?
July 2016 Doc Ref. 37474 B12 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015). This includes extracting the data required from your monitoring and reporting systems e.g. sampling, analysis of fuel inputs, effort required in internal preparation of information for reporting.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
Comment:
Quality assurance and quality control Depending on the monitoring methodology approved, certain quality assurance and quality control measures need to be taken by operators to ensure that emissions are reliably recorded and that data collected conforms to the monitoring plan (for example Chapter V, and Articles 32(2), 34(3)j, or 42 of the Monitoring and Reporting Regulation).
18. What is your estimated total cost of quality assurance and quality control procedures? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015). This includes maintaining systems e.g. quality assurance provisions such as auditing and maintenance of any necessary accreditations, calibrating meters, maintaining written procedures, or maintaining reporting systems such as automatic data acquisition systems.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors
Comment:
Annual emissions report Operators are required to submit an annual emissions report (Article 67 and Annex X(1) of the Monitoring and Reporting Regulation).
19. What is your estimated total cost of preparing an annual emissions report and submitting it to your competent authority? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015). Please note that the next question asks about verification costs separately.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Fees (Note, please only include fees paid to your competent authority and NOT those paid to verifiers – this will be covered in a later question)
Comment:
Verification and improvement Operators are required to ensure that the information submitted to the competent authority (e.g. in the annual emissions report) is verified.
20. What is your estimated total cost of verification?
July 2016 Doc Ref. 37474 B13 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015). This includes the effort required to support the verifier e.g. to provide information or address verifier queries as part of a verifier visit.
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Fees paid to verifiers
Comment: 21. Where the verification report states outstanding non-conformities or recommendations for improvements, operators are required to submit an improvement report to the competent authority. Did you have to submit an improvement report for the 2014 compliance cycle (01 January 2014 to 30 June 2015)?
☐ Yes ☐ No
If you answered No, please skip to question 23.
22. What is your estimated total cost of any necessary improvement reports? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Type of cost Cost Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Fees paid to verifiers Fees paid to your competent authority
Comment:
Low emissions installations 23. During the 2014 compliance cycle (01 January 2014 – 30 June 2015), did this installation either become an installation with low emissions, or stop being an installation with low emissions?
A. ☐ It was already an installation of low emissions B. ☐ It became an installation with low emissions C. ☐ It is no longer an installation with low emissions D. ☐ None of the above
If you answered C or D, please skip to question 26.
24. Did this installation apply a simplified monitoring plan for the 2014 compliance cycle? See Article 13 of the Monitoring and Reporting Regulation
☐ Yes ☐ No
25. How helpful do you consider the additional provisions in the Monitoring and Reporting Regulation or in the Accreditation and Verification Regulation to be for installations of low emissions?
☐ Very helpful ☐ Somewhat helpful ☐ Not very helpful
July 2016 Doc Ref. 37474 B14 © Amec Foster Wheeler Environment & Infrastructure UK Limited
☐ I don’t know
Comment:
Electronic reporting According to the Article 74 of the Monitoring and Reporting Regulation, Member States may require operators to use electronic templates or specific file formats for submission of monitoring plans and changes to the monitoring plan, as well as for submission of annual emissions reports, tonne-kilometre data reports, verification reports and improvement reports.
26. In the 2014 compliance cycle (01 January 2014 – 30 June 2015), did you make use of electronic reporting tools provided by your competent authority?
☐ Yes ☐ No
If you answered No, please skip to question 28.
27. Can you estimate the costs saved or spent as a result of using these electronic templates or specific file formats?
☐ High cost savings ☐ Some cost savings ☐ A little cost savings ☐ A little costs spent ☐ Some costs spent ☐ High costs spent
Please provide an approximate quantification of your answer (e.g. if you answered “high cost savings”, how much does that represent in time and/or expenses?):
Equipment costs 28. To ensure compliance with monitoring, reporting and verification under the EU ETS, have you specifically purchased any capital equipment? This includes equipment purchased at any point in time, but that was used during the 2014 compliance cycle (01 January 2014 to 30 June 2015). Examples of capital equipment may include metering equipment for temperature or pressure measurement, online gas chromatographs, or other sampling or data processing equipment such as IT systems or software. Note this does not include equipment specifically for emissions abatement.
☐ Yes ☐ No
If you answered No, please skip to question 31.
29. Please indicate the total one-off costs of all equipment purchased: Please provide your answer as a whole number e.g. 150, 362, 14589.
30. Please indicate the average annual operating costs of all equipment purchased: Please provide your answer as a whole number e.g. 150, 362, 14589.
July 2016 Doc Ref. 37474 B15 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Any other costs 31. Are there any additional important costs that you have incurred during the 2014 compliance cycle (01 January 2014 to 30 June 2015) as a result of monitoring, reporting and verification activities under the EU ETS that have not been covered in this survey? This may include things like training for staff on monitoring, reporting and verification best practice, or costs for storing information or providing information to your competent authority.
☐ Yes ☐ No
If you answered No, please skip to question 33.
32. What are the additional important costs that you have incurred as a result of monitoring, reporting and verification activities under the EU ETS that have not been covered in this survey? Please answer for the 2014 compliance cycle (01 January 2014 to 30 June 2015).
Type of cost Description / Cost Description of additional costs Junior-level staff (time in hours) Middle-level staff (time in hours) Senior-level staff (time in hours) Total outsourced costs e.g. money paid to contractors Fees (please specify to whom the fees are paid) Any other costs
Comment:
Confidence 33. Thinking about all the data you have provided above, how confident do you feel about the quality of the information?
☐ High: The data provided is based on actual data (e.g. from HR, timesheets, invoices etc.) and there is a very high level of confidence in the information provided. ☐ Medium: The data provided is based on a confident estimate of time and other costs and there is a good level of confidence in the information provided. ☐ Low: The data provided is based on a rough estimate of time and other costs and there is a lower level of confidence in the information provided.
Open questions Robust, transparent, consistent and accurate monitoring and reporting of GHG emissions is essential for the effective operation of the EU ETS. The basic premise that “a tonne is a tonne” enables the system to work as cost-effectively as possible.
34. Which element of the monitoring, reporting and verification activities that you conduct do you estimate has the least benefit compared to its cost? Please explain why you have identified any element in particular.
35. How much overlap do you identify for your activities regarding monitoring, reporting and verification for the EU ETS with reporting activities for other pieces of legislation?
☐ A lot of overlap
July 2016 Doc Ref. 37474 B16 © Amec Foster Wheeler Environment & Infrastructure UK Limited
☐ Some overlap ☐ A little overlap ☐ No overlap ☐ I don’t know
Please provide an approximate quantification of your answer (e.g. if you answered "a lot of overlap", which pieces of legislation overlap the most and how much does that overlap represent in time and/or expenses?)
36. How helpful do you consider the detail provided in the Monitoring and Reporting Regulation to be on calculating unreasonable costs? For example, Article 18 of the Monitoring and Reporting Regulation explains that unreasonable costs relating to improving an installation’s monitoring methodology may be considered to be over €2000 (or €500 for low emissions installations) per reporting period.
☐ Very helpful ☐ Somewhat helpful ☐ Not very helpful ☐ I don’t know
Comment:
37. Do you have any other suggestions for possible improvements to the monitoring, reporting and verification requirements of the EU ETS?
Thank you for completing this survey.
May we contact you about your survey responses? If so, please provide your details below.
Name of installation: Contact person: Email:
Do you have any final comments you would like to add?
July 2016 Doc Ref. 37474 C1 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Appendix C Trade associations contacted for Phase 1 consultation
Name Abbreviation Contact person (if known) Email
Association of European Ferro-Alloy Producers Euro Alliages Iva Ganev ganev@euroalliages. be
Business Europe Business main@businesseurop Europe e.eu
Confederation of European Paper Industries CEPI Nicola Rega [email protected]
Confederation of European Waste-to-Energy CEWEP Ella Stengler ella.stengler@cewep. Plants eu
Eurelectric Anne-Marie Rego amrego@eurelectric. org
Euroheat & Power Eloi Piel [email protected]
European Aluminium Association AluEurope Máximo Miccinilli miccinilli@european- aluminium.eu
European Association for Promotion of COGEN Europe Alexandra Tudoroiu-Lakavičė [email protected] Cogeneration Europe u
European Association of Metals EUROMETAUX Jernej Vernik vernik@eurometaux. be
European Association of Mining Industries Euromines Mirona Coropciuc coropciuc@euromine s.be
European Association of Sugar Producers CEFS [email protected]
European Automobile Manufacturers ACEA Aldo Celasco [email protected]
European Ceramic Industry Association Cerame-Unie Magdalena Vallebona vallebona@cerameun ie.eu
European Chemical Industry Council CEFIC Valérie Rampi [email protected]
European Conference of Fuel Distributors ECFD Johan Mattart johan.mattart@brafco .be
European Copper Institute ECI Laia Perez Simbor laia.simbor@copperal liance.eu
European Domestic Glass EDG Falls under the umbrella of Glass Alliance Europe
European Engineering Industries Association OGRALIME Sigrid Linher secretariat@orgalime .org
European Envelope Manufacturers Association FEPE Lisa Kretschmann lisa.kretschmann@fe pe.org
European Expanded Clay Association EXCA [email protected]
European Federation of Local Public Energy CEDEC [email protected] Distribution
July 2016 Doc Ref. 37474 C2 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Name Abbreviation Contact person (if known) Email
European Glass Fibre Producers Association APFE info@glassfibreeurop (GlassFibreEuro e.eu pe)
European Industrial Gases Association EIGA Philip Brickell [email protected]
European Insulation Manufacturers Association EURIMA Jan te Bos [email protected] g
European Lime Association EULA Julien Coubronne [email protected] u
European Manufacturers of Gypsum Products EUROGYPSUM Christine Marlet [email protected] Manufacturers g
European Panel Federation Europanels [email protected]
European Passive Components Industry EPCIA secretariat@eusemic Association onductors.eu
European Petroleum Refiners Association Olivera Drazic [email protected] (Divisions Fuels Europe and Concawe)
European Tyre and Rubber Manufacturers ETRMA [email protected] Association
European Vegetable Oil and Proteinmeal Industry FEDIOL Coen Blomsa [email protected] in Europe.
Fertilisers Europe (previously European Fertiliser Christian Palliere christian@fertilizerse Manufacturers Association) urope.com
Food Drink Europe Patricia Lopez p.lopez@fooddrinkeu rope.eu
Glass Alliance Europe Véronique Favry info@glassallianceeu rope.eu
International Federation of Industrial Energy IFIEC Annette Loske [email protected] Consumers
Standing Committee of the European Glass CPIV [email protected] Industries
The European Cement Association CEMBUREAU Sven Rydahl energy@cembureau. eu
The European Container Glass Federation FEVE Fabrice Rivet [email protected]
The European Steel Association EUROFER Adolfo Aiello [email protected]
A number of country-level associations were also contacted in an effort to increase sample sizes for the cement industry in particular:
Agrupación de Fabricantes de Cemento de España
Associazione Italiana Tecnico Economica del Cemento Cementa AB (Sweden)
Croatia Cement
Eerste Nederlandse Cement Industry Hungarian Cement Concrete & Lime Association
July 2016 Doc Ref. 37474 C3 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Minerals Products Association – Cement (UK) Slovenian Cement Producers Association
Czech Cement Association
Syndicat Français de l’Industrie Cimentière
July 2016 Doc Ref. 37474 D1 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Appendix D Stakeholder consultation: Follow-up interviews
Appendix D sets out the interview protocols used for completed interviews as part of the targeted stakeholder engagement and is structured according to the stakeholders interviewed. Interviews were completed with the following stakeholders:
Environment Agency (Germany)
CEMBUREAU (cement)
CEPI (paper)
EUROFER (iron and steel)
European Association for Promotion of Cogeneration Europe
European Manufacturers of Gypsum Products Manufacturers European Cooperation for Accreditation
Environment Agency (Germany)
1. Approximately how many people are employed at UBA to implement MRV on a permanent basis? And do you employ additional people at times of peak workload?
2. Does UBA participate in any information exchange practices in relation to EU ETS MRV? How useful do you think these have been? For example, have they reduced your costs?
3. Do you consider there are any cost savings due to economies of scale affecting EU ETS implementation and enforcement due to the presence of a high number of installations in your country, compared to countries with a lower number of installations?
4. Given the division of competences established by German law in the context of EU ETS, do you believe that there are any additional costs or savings associated with there being multiple competent authorities in Germany? Or indeed, any additional costs or savings associated with geographical dispersal of competent authority resources?
5. Do you identify any specific sources of inefficiency generating higher costs or else do you identify any potential sources of improvement or streamlining to reduce costs in the EU ETS MRV system?
Cost verification We obtained information from 31 other competent authorities across 23 member states. They provided data in terms of time relating to particular tasks as well as any outsourced costs. We have used a relevant sub-set of that data to provide indicative ranges of total costs per element of MRV for UBA to reflect upon for the following set of questions. Please circle the value you consider may best reflect UBA’s costs. Importantly, we understand that these costs may only be considered as estimates.
6. The preliminary survey results indicated substantial cost differences between the 201344 and 201445 compliance cycles in terms of approving and issuing new monitoring plans, and approving significant modifications to monitoring plans. a) 2013: Approving and issuing new monitoring plans:
44 01 January 2013 to 30 June 2014. 45 01 January 2014 to 30 June 2015.
July 2016 Doc Ref. 37474 D2 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Less than €100,001 - €250,001 - €500,001 - More than €100,000 250,000 500,000 1,000,000 €1,000,000 b) 2013: Approving significant modifications to monitoring plans:
Less than €25,000 €25,001 - 100,000 €100,001 - 250,000 €250,001 - 500,000 More than €500,000 c) 2014: Approving and issuing new monitoring plans:
Less than €500 €501 - 5,000 €5,001 - 15,000 €15,001 - 25,000 More than €25,000 d) 2014: Approving significant modifications to monitoring plans:
Less than €25,000 €25,001 - 100,000 €100,001 - 300,000 €300,001 - 600,000 More than €600,000
Questions 7-10 relate to the 2014 compliance cycle. 7. What do you estimate the total costs to UBA of assessing operators’ claims about unreasonable costs incurred due to applying a specific monitoring methodology?
Less than €500 €501-1,000 €1,001 -1,500 €1,501 - 2,000 More than €2,000
8. What do you estimate the total costs to UBA of receiving and reviewing annual emissions reports? Less than €10,000 €10,001 - 50,000 €50,001 - 150,000 €150,001 - 250,000 More than €250,000
9. What do you estimate the total costs to UBA of receiving and reviewing operator improvement reports?
Less than €5,000 €5,001 - 10,000 €10,001 - 25,000 €25,001 - 50,000 More than €50,000
10. What do you estimate the total costs to UBA of carrying out regular inspections of EU ETS installation sites?46
Less than €10,000 €10,001 - 50,000 €50,001 - 100,000 €100,001 - 150,000 More than €150,000
11. What do you estimate the total one-off costs to UBA of purchasing capital equipment in relation to EU ETS MRV?
Less than €100,001 - €150,001 - €250,001 - More than €100,000 150,000 250,000 450,000 €450,000
12. What do you estimate the total annual costs to UBA of operating capital equipment in relation to EU ETS MRV?
Less than €5,000 €5,001 - 10,000 €10,001 - 25,000 €25,001 - 50,000 More than €50,000
CEMBUREAU (cement)
1. Can you tell us what your members tell you about their costs associated with monitoring, reporting and verification (MRV) under the EU ETS?
2. The survey data we received indicated that, in general, MRV costs reported by operators in the cement sector fall within the average costs data across other activity types in the EU ETS. While the sample received was small (22 cement operators), why do you think the costs reported by cement producers might reflect costs more generally across other activity types?
46 Note we understand that Germany carries out joint inspections with federal emission authorities. Please think about the costs incurred solely by UBA.
July 2016 Doc Ref. 37474 D3 © Amec Foster Wheeler Environment & Infrastructure UK Limited
3. In the survey results we received, we noted that one operator in Ireland reported very high costs. Are you aware of any reason as to why costs might be higher for cement producers operating in Ireland?
4. What are the important aspects of MRV that should definitely be retained, and what are some things that may need improving from the point of view of the cement sector?
5. In the survey results, verification was frequently mentioned by installations in many different sectors as the least beneficial aspect of MRV in terms of a cost to benefit ratio. Why do you think that this may be?
6. Do you have observations about how the costs related to MRV may vary among your members? For example, do your members in particular countries experience higher costs than others, or do you think other factors such as operator experience with the EU ETS are more important?
7. Do you think there are economies of scale for MRV costs for cement producers under the EU ETS? I.e. do larger operators have lower costs comparative to smaller operators, per tonne of greenhouse gas emitted?
8. Finally, do you have any other recommendations for how to reduce the costs of MRV compliance for cement producers?
CEPI (paper)
1. Can you tell us what your members think about their costs associated with monitoring, reporting and verification (MRV) under the EU ETS?
2. The survey data we received indicate that, in general, paper producers indicated lower MRV costs as compared to other activity types in the EU ETS. Why do you think paper producers might report lower costs?
3. The survey results also indicated that in general across both low emissions and other, larger, installations, operators in Germany, Finland and Sweden reported relatively higher costs. These costs may relate to greater stringency or expectations in those countries related to the quality of monitoring and verification. However, several installations in France declared very low costs of monitoring and verification. Are you aware of any possible explanation for such a result?
4. What aspects of MRV should definitely be retained, and what are some things that may need improving from the point of view of the paper sector?
5. In the survey, verification was frequently mentioned by installations in many different sectors as the least beneficial aspect of MRV in terms of the cost to benefit ratio. Why do you think that verification may be seen in this way?
6. Do you have observations about how the costs related to MRV may vary among your members? For example, do members in particular countries experience higher costs than others (which may, for instance, be related to different salary rates), or do you think other factors such as operator experience with the EU ETS are generally more important?
7. Do you think there are economies of scale for MRV costs for paper producers under the EU ETS? For example, do larger operators have lower costs compared to smaller operators, per tonne of greenhouse gas emitted?
8. Do MRV requirements influence companies’ competitiveness (within Europe and outside)? E.g. On one hand, there might be a negative effect due to the increased costs to operators related to MRV activities. On the other hand, however, there might also be a positive effect due to increased efficiency of installations resulting from closer monitoring.
9. Finally, do you have any other recommendations for how to reduce paper producers’ costs of MRV compliance in general?
July 2016 Doc Ref. 37474 D4 © Amec Foster Wheeler Environment & Infrastructure UK Limited
EUROFER (iron and steel)
1. Can you tell us what your members think about their costs associated with monitoring, reporting and verification (MRV) under the EU ETS?
2. The survey data we received indicated that iron and steel producers indicated higher MRV costs as compared to other activity types. While the sample was quite small (17 operators), why do you think iron and steel producers might report higher costs? Are your members are aware of this trend? Do you have any recommendations how the costs could be reduced?
3. The survey results also indicate that four out of five operators in Sweden responding to the survey declared much higher than average (across the EU) costs related to monitoring plan development. Are you aware of any reasons why these costs might be higher in Sweden?
4. What aspects of MRV should definitely be retained, and what are some things that may need improving from the point of view of the iron and steel sector?
5. In the survey results, verification was frequently mentioned by installations in many different sectors as the least beneficial aspect of MRV in terms of the cost to benefit ratio. Why do you think that verification may be seen in this way?
6. Do you have observations about how the costs related to MRV may vary among your members? For example, do your members in particular countries experience higher costs than others (which may, for instance, be related to different salary rates related to verification activities or similar),, or do you think other factors such as operator experience with the EU ETS are generally more important?
7. Do MRV requirements influence companies’ competitiveness (within Europe and outside)? E.g. On one hand, there might be a negative effect due to the increased costs to operators related to MRV activities. On the other hand, however, there might also be a positive effect due to increased efficiency of installations resulting from closer monitoring of the activity.
8. Finally, do you have any other recommendations for how to reduce iron and steel producers’ costs of MRV compliance in general?
European Association for Promotion of Cogeneration Europe
1. Are there many low emissions installations in your sector?
2. What are your member’s views on the costs for activities associated with compliance of MRV requirements?
3. Are there any specific challenges you have identified related to MRV obligations? 4. Which aspects could represent the most significant costs in the cogeneration sector and why?
5. Which aspects of MRV should definitely be retained, and what are some things that may need improving from the point of view of the cogeneration sector?
6. In the survey results, verification was frequently mentioned by installations in many different sectors as the least beneficial aspect of MRV in terms of the cost to benefit ratio. Why do you think that verification may be seen in this way? 7. Do you have observations about how the costs related to MRV may vary among your members?
8. Do MRV requirements influence companies’ competitiveness (within Europe and outside)?
European Manufacturers of Gypsum Products Manufacturers
1. Are there many low emissions installations in your sector? 2. Are there any specific challenges you have identified related to MRV obligations?
July 2016 Doc Ref. 37474 D5 © Amec Foster Wheeler Environment & Infrastructure UK Limited
3. What are your member’s views on the costs for activities associated with compliance of MRV requirements?
4. Which aspects could represent the most significant costs to the gypsum products manufacturers sector and why?
5. What aspects of MRV should definitely be retained, and what are some things that may need improving from the point of view of the gypsum products manufacturers sector?
6. In the survey results, verification was frequently mentioned by installations in many different sectors as the least beneficial aspect of MRV in terms of the cost to benefit ratio. Why do you think that verification may be seen in this way? 7. Do you have observations about how the costs related to MRV may vary among your members?
8. Do MRV requirements influence companies’ competitiveness (within Europe and outside)?
European Cooperation for Accreditation
1. Costs for activities associated with different obligations (planning and preparation of the assessment of verifiers, verifiers’ assessment activities, accreditation activities etc.) and which aspects represent the most significant costs?
2. Were the costs higher than expected and if yes, why? Are the costs changing over time?
3. Do you think it is possible to limit the costs and what mechanisms could allow save time or reduce costs?
July 2016 Doc Ref. 37474 E1 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Appendix E Literature review sources
Title Author(s) Year Type
Trendsetter for companies and industrial sites: The Jacquier, G. and Bellassen, V. 2015 Scientific EU Emissions Trading Scheme papers
Accounting for carbon: Monitoring, reporting and Bellassen, V. and Stephan, N. (eds) 2015 Scientific verifying emissions in the climate economy papers
Exploring the EU ETS beyond 2020: A first COPEC 2015 Published assessment of the EU Commision's proposal for literature (e.g. Phase IV of the EU ETS (2021-2030) policy reports)
Economic impacts of MRV of fuel and emissions in Nelissen, D. and Faber, J. 2015 Published maritime transport literature (e.g. policy reports)
MRV requirements in emission trading systems Jacquier, G. - CITEPA – (research center) 2015 Other worldwide
EU ETS installation charges Environment Agency (UK) 2015 Published literature (e.g. policy reports)
Current approaches to MRV in South Africa: a Anya Boyda, Britta Rennkampa, Anthony 2015 Scientific scoping study James Danea & Harald Winklera papers
Climate report : more than 800 agricultural and agri- Claudine Foucherot and Valentin Bellassen 2015 Published food sites affected by the EU ETS for CDC Climat research (private sector) literature (e.g. policy reports)
The global climate change mitigation strategy REDD: Plugge, D., Baldauf, T. & Köhl, M. 2014 Scientific monitoring costs and uncertainties jeopardize papers economic benefits
KfW/ZEW CO2 Barometer 2011: Hoher Löschel, A., Brockmann, K. L., Heindl, P., 2014 Scientific Anpassungsbedarf im EU-Emissionshandel ab 2013 – Lutz, B., & Schumacher, J. papers deutliche Defizite bei der Vorbereitung in den Unternehmen.
Transaction Costs and Tradable Permits: Empirical Peter Heindl – Center for European 2014 Published Evidence from the EU Emissions Trading Scheme Economic Research literature (e.g. policy reports)
An international comparison of energy and climate ICF International 2013 Published change policies impacting energy intensive literature (e.g. industries in selected countries policy reports)
Firm trading behaviour and transaction costs in the Jūrate Jaraitė and Andrius Kažukauskas 2013 Published European Union's Emission Trading System: An literature (e.g. empirical assessment policy reports)
A literature-based multi-criteria evaluation of the EU Frank Venmans 2013 Scientific ETS papers
Government consultation on measuring and IEMA 2013 Other reporting of greenhouse gas emissions by UK companies: Response by the Institute of Environmental Management Assessment (IEMA)
July 2016 Doc Ref. 37474 E2 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Title Author(s) Year Type
Carbon Pricing: Transaction Costs of Emissions Coria, J. and Jaraitė, J. 2012 Published Trading vs. Carbon Taxes literature (e.g. policy reports)
Assessing the cost to UK operators of compliance Aether 2012 Published with the EU Emissions Trading System literature (e.g. policy reports)
Transaction costs for firms in the EU ETS: Lessons Jaraite, J., Convery, F.J. and Di Maria, C. 2012 Scientific from Ireland papers
Review of the Contribution of Reporting to GHG Price Waterhouse Coopers & Carbon 2012 Published Emissions Reductions and Associated Costs and Disclosure Project for UK Department for literature (e.g. Benefits Environment, Food and Rural Affairs policy reports)
The contribution that reporting of greenhouse gas Defra 2012 Published emissions makes to the UK meeting its climate literature (e.g. change objectives. A review of current evidence policy reports)
An overview of current research on EU ETS: Yue-Jun Zhang, Yi-Ming Wei 2011 Scientific Evidence from its operating mechanism and papers economic effect
KfW/ZEW CO2 Barometer 2010: Effizienzpotenziale Löschel, A., Kiehl, K., Heindl, P., Lo, V., 2011 Scientific des Emissionshandels noch nicht ausgeschöpft – Koschel, H., & Koesler, S. papers Strategien und management deutscher Unternehmen.
Transaction costs of firms in the EU ETS J. Jaraite, F. Convery, C.,Di Maria C. 2010 Published literature (e.g. policy reports)
Administrative Cost of the Emissions Trading Emissions Trading Group 2010 Published Scheme to Participants literature (e.g. policy reports)
Impact Assessment of accompanying document to EC 2010 Commission the Proposal for a Directive of the European Study Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the EU greenhouse gas emission allowance trading system
Assessing transaction costs of project based Camille Antinori & Jayant Sathaye 2010 Scientific greenhouse gas emissions trading papers
Actal V: Actualiseren ACTAL-rapportage SIRA consulting 2010 Published emissiehandel literature (e.g. policy reports)
European Union Emissions Trading Scheme, A NAO 2009 Published Review by the National Audit Office literature (e.g. policy reports)
ECCP Meeting "Robust Compliance and Price Waterhouse Coopers 2009 Other Enforcement" - Status of Verification and Policy Options
Costs of Compliance with the EU Emissions Trading UK Environment Agency 2009 Published Scheme (UK Environment Agency) literature (e.g. policy reports)
July 2016 Doc Ref. 37474 E3 © Amec Foster Wheeler Environment & Infrastructure UK Limited
Title Author(s) Year Type
Costs of Compliance with the EU Emissions Trading AEA 2008 Published Scheme (Summary) literature (e.g. policy reports)
Transaction costs of unilateral CDM projects in India: Krey, M. 2008 Scientific Results from an empirical survey papers
Study on the impacts on low carbon actions and ZEW, SQ Consult, CE Delft, ICF 2007 Published investments of the installations falling under the EU International literature (e.g. Emissions Trading System (EU ETS) policy reports)
Evaluation of the EU ETS Directive Environment Agency Austria (Hubert 2007 Published Fallmann, Christian Heller, Katrin Seuss, literature (e.g. Monique Voogt, Dian Phylipsen, Sjors van policy reports) Iersel, Machtelt Oudenes, Elizabeth Zelljadt, Jenny Tröltzsch, Matthias Duwe, Arne Riedel)
EU Emissions Trading and Transaction Costs for Schleich, J. and Betz, R. 2007 Scientific Small and Medium Sized Companies papers
The integrity and implementation of the EU ETS European Court of Auditors 2007 Published literature (e.g. policy reports)
Fourth ETS MRAV Compliance Review Ecofys and Ricardo AEA for the European 2006 Commission Commission study
Impact Assessment accompanying the MRR and AVR European Commission 2005 Commission study
Application of the EU Emissions Trading Directive European Environment Agency 2004 Published literature (e.g. policy reports)
ECCP Meeting “Robust Compliance & Enforcement” - Price Waterhouse Coopers 2003 Other Policy Options on Enforcement
July 2016 Doc Ref. 37474 4 © AMEC Environment & Infrastructure UK Limited
July 2016 Doc Ref. 37474
HOW TO OBTAIN EU PUBLICATIONS
Free publications:
• one copy: via EU Bookshop (http://bookshop.europa.eu);
• more than one copy or posters/maps: from the European Union’s representations (http://ec.europa.eu/represent_en.htm); from the delegations in non-EU countries (http://eeas.europa.eu/delegations/index_en.htm); by contacting the Europe Direct service (http://europa.eu/europedirect/index_en.htm) or calling 00 800 6 7 8 9 10 11 (freephone number from anywhere in the EU) (*).
(*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you).
Priced publications:
• via EU Bookshop (http://bookshop.europa.eu).
Priced subscriptions:
• via one of the sales agents of the Publications Office of the European Union (http://publications.europa.eu/others/agents/index_en.htm).
ML
-
06
[Catalogue number [Catalogue
-
16
-
348
-
EN
-
N
]
doi:10.2834/640029