Principles of Monitoring and Reporting by ETS2 Regulated Entities

(Extracted from EU Commission Guidance Document  “The Monitoring and Reporting Regulation – General guidance for ETS2 regulated entities” March 2024)

Articles 5 to 9 of the EU Monitoring and Reporting Regulation (MRR) outline the guiding principles which the regulated entities have to follow when fulfilling their obligations. These are:

1. Completeness (Article 5): The completeness of fuel streams is at the very core of the EU ETS monitoring principles. In order to ensure completeness of emissions monitored, the regulated entity should take into account the following considerations:
   • Article 5 of the MRR requires that all emissions associated with all fuel streams (See section 2 of the Guidance Document (GD)) are to be included, where these belong to combustion in sectors listed in Annex III of the EU ETS Directive, or which are included in the ETS2 by unilateral extension by a Member State, pursuant to Article 30j of the EU ETS Directive (henceforth referred to as "opt-in").
   • For completeness of system boundaries see ‘designating ETS2 regulated entities’ in section 8 of the GD and ‘types of fuels covered’ in section 2 of the GD.
2. Consistency and comparability (Article 6(1)): Time series of data need to be consistent across the years. Arbitrary changes of monitoring methodologies are prohibited. This is why the monitoring plan submitted by the RE has to be approved by the competent authority, for significant changes to the monitoring plan. Because the same monitoring approaches are defined for all regulated entities the data created is also comparable between regulated entities; although depending on their circumstances the regulated entities may be required to apply different methods according to the tier system (See section 2 of the GD).
3. Transparency (Article 6(2)): All data collection, compilation and calculation must be made in a transparent way. This means that the data itself, the methods for obtaining, processing and reporting them (in other words: the whole data flow) have to be documented transparently, and all relevant information has to be securely stored and retained allowing for sufficient access by authorised third In particular, the verifier and the competent authority must be allowed access to this information. It is worth mentioning that transparency is in the self-interest of the regulated entity: It facilitates transfer of responsibilities between existing and new staff and reduces the likelihood of errors and omissions. In turn this reduces the risk of over-surrendering, or under-surrendering allowances and penalties. Without transparency, verification activities are more onerous and time- consuming and hence costly to the regulated entity. Furthermore Article 67 of the MRR specifies that relevant data is to be stored for 10 years from submission of the verified report. The minimum data to be retained is listed in Annex IX of the MRR.
4. Accuracy (Article 7): Regulated entities have to take care that data is accurate, i.e. neither systematically nor knowingly inaccurate. Due diligence is required by regulated entities, striving for the highest achievable accuracy. As the next point shows, “highest achievable” may be read as where it is technically feasible and “without incurring unreasonable costs”. Any claim in regard to unreasonable costs must be backed up by evidence and the EU Commission have provided a tool to allow calculation of unreasonable costs.
5. Integrity of the methodology and of the emissions report (Article 8): This principle is at the very heart of any Monitoring Reporting and Verification system. The MRR mentions it explicitly and adds some elements that are needed for good monitoring:
   • The monitoring methodology and the data management must allow the verifier to achieve “reasonable assurance” on the emissions report, i.e. the monitoring must be able to endure a quite intensive test;
   • Data shall be free from material misstatements and avoid bias;
   • The data shall provide a credible and balanced account of a regulated entity’s emissions
   • When looking for greater accuracy, regulated entities may balance the benefit against additional costs. They shall aim for “highest achievable accuracy, unless this is technically not feasible or would lead to unreasonable costs” A claim in regard to unreasonable costs must be backed up by evidence and the EU Commission have provided a tool to allow calculation of unreasonable costs.
6. Continuous improvement (Article 9): In addition to the requirement of Article 75q, which requires the regulated entity to regularly submit reports on improvement possibilities, e.g. for reaching higher tiers, this principle also is the foundation for the regulated entity’s duty of responding to the verifier’s recommendations. 

For more details on any of the above please read the guidance document.