Did you also panic before April Fool’s day 2006?

By Robert Dornau, SGS Société Générale de Surveillance SA

For anyone involved in the verification of greenhouse gas (GHG) emissions under the EU Emissions Trading Scheme (ETS), the 31^st March 2006 was a crucial date. It was the deadline for the completion of verifications and submission of verified emissions reports for the first reporting year of EU ETS. Now that the deadline has come and gone, what lessons are there to be learnt?

This article is from the SGS perspective as a company involved globally in the area of Climate Change, offering verification of GHG emissions and other related services in all relevant schemes. This article is a synopsis of some of the common issues that arose during this first year of reporting.

Harmonization across Europe?
The EU Guidance provided an excellent staring point, however as can be expected, the interpretation of the guidance varied across Europe from one Competent Authority to another, specifically in terms of measurement issues and indeed the actual verification process itself. This was problematic not only for operators who had sites across Europe, but also a challenge to verifiers who were working in those sites across Europe. Great care had to be taken to ensure that the local guidance was being followed.

In addition the whole area of accreditation of verifiers proved somewhat problematic. Whilst a number of member states finalised their accreditation requirements in the early part of 2005, for others, issues relating to accreditation of verifiers were only finalised in the first quarter of 2006.

From the outset it became clear that whilst most operators included in the EU ETS were aware that the scheme was in the pipeline, for some, a “burying head in sand” approach was adopted. As a result, 01st January 2005 (the date for monitoring for Year One of EU ETS to begin) came as a rather unpleasant surprise. It is fair to say that in many cases operators were not fully prepared for the requirements involved. This was further exacerbated in a number of cases, by delays in issuing of GHG permits, guidance documents, and paperwork from Competent Authorities. It should be noted that in some cases GHG permits and approved Monitoring & Reporting plans were only issued in first quarter 2006!

The Verification Process
The principle objectives of verification are verifying that the data in the installations’ emissions report are fairly stated and that the installation is in compliance with the GHG permit, the agreed monitoring and reporting methodology and any other relevant requirements. This is achieved through the process of strategic analysis, risk analysis and process analysis i.e. the verification loop.

As an internationally active company with significant experience in the Climate Change arena, SGS is well positioned to offer independent verification services in line with the requirements of EU ETS. In order to achieve this, SGS placed great emphasis on the selection of the most appropriate audit team for each site.

SGS promoted the split verification approach. Essentially this involved the commencement of verification in 2005 with the final verification to be completed in 2006. The advantages of this approach are obvious in that it provides an opportunity for verifiers to confirm the validity of the monitoring system providing confidence in internal numbers. It also allows the verifiers to ensure that all the relevant documentation is in place from the outset.

In reality, when it came to pre-verification, in many cases the installations had not yet finalised their own internal Quality Assurance and Quality Control (QA/QC) procedures with regards to EU ETS reporting. Whilst for most installations, information with regards to fuel consumption would have been previously recorded, it was often in the domain of finance departments. As a result for the majority, the requirements for recording, monitoring and reporting under EU ETS was an unprecedented development, and one which caused much anguish! Consequently, findings relating to the QA/QC procedures, the required evidence pack and supporting documents, missing documentation etc were the most common at pre-verification stage. Perhaps one of the most important lessons learnt from this first year of reporting is the need to have comprehensively documented QA/QC procedures incorporating all the requirements, and more importantly having a defined means of collecting and collating the relevant information and drawing it all into one user friendly arena.

Throughout 2005 and indeed right up until the 31^st March deadline, there was a flood of guidance and requirements from Competent Authorities. The result, was for both verifiers and installations alike, a constant challenge of meeting deadlines and verification commitments and stay abreast of current guidance. Complications arose when guidance was updated or clarified after the pre-verification, where details already agreed between the verifier and the operator had to be reviewed. It should also be noted that from a verifier perspective, some operators wanted to rely heavily on the verifier for advice and interpretation of the guidance and this resulted in the need to avoid conflict of interest situations since the independence of the verification process is one of its core values. It is essential that as part of the sites QA/QC procedures, responsibilities for interpreting guidance documents are defined.

Data measurement challenges
Measurement was one, if not the, most contentious issue during the first reporting year. The majority of operators did not have adequate (or in some cases, any) meter or guage calibration data and again comments with regards to this issue were commonplace in pre-verification reports. There are also significant lessons to be learnt with regards to the issue of uncertainty of meters. A full uncertainty analysis is a detailed procedure which is beyond the scope of the verification activity, and so some judgement is required to assess the uncertainties actually being achieved. Most operators do not have the expertise or experience to complete the uncertainty analysis or to apply a judgment to the assessment. The lesson here is to ensure that the appointed verification team, includes someone with the necessary background – something which SGS can ensure through its network of metering experts.

Lessons learnt
To conclude we need to reflect on some of the problematic areas referenced above whilst embarking on the second year of monitoring. As part of the verification process verifiers should identify performance improvements for the sites and subsequent verifications should involve a review of compliance with these improvements. In order for the verification process to improve going forward, it is important that there is a standardized approach to the process across Europe, e.g. with regards to accreditation, deadlines and the actual verification requirements. To end on a positive note, there is an air of optimism that the verification process should be somewhat less arduous for both operators and verifiers for succeeding reporting years since many of the major issues will have been identified during the Year One verification.

The SGS Group is the global leader and innovator in inspection, verification, testing and certification services. Founded in 1878, SGS is recognised as the global benchmark in quality and integrity. With more than 50’000 employees, SGS operates a network of over 1’000 offices and laboratories around the world.

This story was first published in www.wrenuk.co.uk.