melanie eddis erm certification and verification services (erm cvs) cdm coordination meeting unfccc,...
TRANSCRIPT
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Melanie Eddis
ERM Certification and Verification Services (ERM CVS)
CDM Coordination MeetingUNFCCC, Bonn
24-25 March 2012
Materiality in the CDMExperiences from Other Schemes
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Objective
• To prompt discussion on how to apply materiality concept in CDM, based
on experiences from similar schemes:
– Joint Implementation
– EU Emissions Trading Scheme
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Comparable Schemes applying the concepta)Joint Implementation
•Materiality Standard
– In verification only
– 5 % for emission reductions less then 100,000 tCO2e
– 2 % for emission reductions more then 100,000 tCO2e
– Statement required that …reductions …are accurate and free of material errors, omissions, or misstatements
– Reference to a reasonable level of assurance
•Determination and Verification Manual (DVM)
– Not yet included in the text
•Procedures which enable the AIE to accept deviations form the monitoring plan which could be considered as an implication of this concept
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Comparable Schemesb) EU Emissions Trading Scheme
• Monitoring and Reporting Guideline (Regulation from 2013 onwards)
• Definitions
– ‘materiality level’ means the quantitative threshold or cut-off point to be used
to determine the appropriate verification opinion on the emission data reported
in the annual emissions report
– Defined levels are:
• 5 % for installations up to annual emissions of 500,000 t CO2e
• 2 % for installations with annual emissions of more 500,000 t CO2e
• To be applied in the planning of the verification (strategic analysis)
• Operator to correct any identified misstatement
– “An annual emissions report is verified as satisfactory if the total emissions are
not materially misstated, and if, in the opinion of the verifier, there are no
material non-conformities.”
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Comparable Schemesb) EU Emissions Trading Scheme (cont.)
• Level of assurance
– the concept is embodied in the EU ETS definition of ‘level of assurance:
• ‘level of assurance’ means the degree to which the verifier is confident in
the verification conclusions that it has been proved whether or not the
information reported in the annual emission report for an installation or
aircraft operator is free from material misstatement;
• ‘material misstatement’ means a misstatement (omissions,
misrepresentations and errors, not considering the permissible uncertainty)
in the annual emissions report that, to the professional judgment of the
verifier, could affect the treatment of the annual emissions report by the
competent authority, e.g. when the misstatement exceeds the materiality
level;
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Main Experiences (both schemes)
• The concept:
– Materiality is understood as an auditing principle (and not a reporting principle)
– It is applicable in audit planning and audit conclusion
– The understanding of the concept is an issue of accreditation not of individual verification reports
• Thresholds applied
– Materiality sets cut-off points for the level of scrutiny (lowest detectable misstatement) in order to define the scope of verification activities
– Similar thresholds for implicit application by the authority (e.g. accepting estimations for de-minimis sources) or when dealing with deviations
• The outcome:
– Verification statements confirm that there is no material misstatement, with all identified misstatements corrected
• No discrepancies between authorities and verifiers due to differences in understanding or application are known to have been reported
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Recommendations
• Include materiality as an auditing principle in the VSS (draft text is
available from DOEs)
• Require confirmation within verification reports that a reasonable level of
assurance has been applied and that the number of emissions reductions
certified is free from material misstatement
not more, not less
• Offer an implicit application of materiality by using the thresholds
recommended by CMP during UNFCCC review processes – ie treatment
of de minimis sources, estimations, data/reporting gaps etc (instead of
requesting revision/deviation for minor issues)