Presentation on theme: ". Melanie Eddis ERM Certification and Verification Services (ERM CVS) CDM Coordination Meeting UNFCCC, Bonn 24-25 March 2012 Materiality in the CDM Experiences."— Presentation transcript:
. Melanie Eddis ERM Certification and Verification Services (ERM CVS) CDM Coordination Meeting UNFCCC, Bonn March 2012 Materiality in the CDM Experiences from Other Schemes
. Objective To prompt discussion on how to apply materiality concept in CDM, based on experiences from similar schemes: – Joint Implementation – EU Emissions Trading Scheme
. Comparable Schemes applying the concept a)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
. Comparable Schemes b) 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.
. Comparable Schemes b) 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;
. 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
. 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)