PART 2 : MRV in Carbon Pricing Instruments : Options for policymakers
Building a robust monitoring reporting and verification (MRV) system to support emissions quantification is essential for a CPI. This can be achieved by developing an appropriate and robust legal and institutional framework to underpin it.
A key element of such a framework is that the applicable legislation is legally binding on stakeholders and of sufficiently high status to ensure that MRV requirements can be enforced. Equally important is that the roles and responsibilities of different stakeholders are clearly defined: including the nature and role of entities responsible for monitoring and reporting, verifiers, regulators, institutions accrediting and supervising verifiers; and any technical experts formally involved.
When designing their MRV framework policymakers can make different choices. Which options to choose depend on different factors such as available resources in a country; the country’s level of ambition for its climate policy, environmental targets and future plans; and the specific type of CPI selected. For example, a carbon tax system that has simple monitoring rules based on fiscal systems may not require independent verification.
Selecting a particular option may impact policymaker’s decisions in other areas. If they decide to include certain industrial sectors or gases within the scope of a CPI, this may have an effect on the quantification or monitoring methodologies that would apply. For example, a direct measurement methodology using continuous emissions measurement instruments might be more appropriate for monitoring N2O or NOx emissions.
There are considerations that policymakers can take into account to help in making choices and mitigating the transaction costs involved with setting up an MRV system, such as:
- using existing frameworks and institutions may be more cost effective;
- using international standards can help structure MRV processes, improve robustness; and facilitate consistency for linking etc. in the future.
SQ experts have developed guidance for the World Bank PMR on designing verification and accreditation systems for CPIs. They are currently drafting guidance on designing quantification protocols for CPIs. Both guidance documents are aimed at policymakers and practitioners that are setting up MRV systems for CPIs. They outline which factors and options play a role when designing MRV systems and what to consider when making choices. The link to the accreditation and verification guidance can be found here:
Designing accreditation and verification systems: a guide to ensuring credibility for carbon pricing instruments:
Machteld Oudenes and Lucy Candlin