Aviation EU ETS Verification A legal perspective

Transcription

1 Aviation EU ETS Verification A legal perspective Julien Dufour, Managing Director, VerifAvia SARL (France) & VerifAvia (UK) Ltd ATW Eco-Aviation Conference Hilton Capital, Washington D.C. 24 June 2010

2 Which airlines are affected by EU ETS? What is the timeline of Verification? How to prepare for verification? Who are verifiers? Who is VerifAvia? 2

3 Which airlines are affected by EU ETS? 13 airlines attending the Eco-Aviation Conference Eco Aviation Conference airlines by Competent Authority France UK Germany Spain Belgium Netherlands Latvia 3

4 Which airlines are affected by EU ETS? Most other transatlantic airlines Top North and Latin American airlines by Competent Authority Spain France UK Germany 4

5 Which airlines are affected by EU ETS? What is the timeline of Verification? How to prepare for verification? Who are verifiers? Who is VerifAvia? 5

6 A requirement of the EU ETS Directive and the MRG Article 15 of EU ETS Directive: Member States shall ensure that the reports submitted by operators and aircraft operators [ ] are verified. Member States shall ensure that an aircraft operator whose report has not been verified as satisfactory [ ] by 31 March each year for emissions during the preceding year cannot make further transfers of allowances until a report from that operator or aircraft operator has been verified as satisfactory. Annex V of EU ETS Directive Section 10.4 of Annex I of MRG 2007 Annex XIV, Section 9 & Annex XV, Section 8 of Aviation MRG 6

7 The third pillar of the MRV process Verification Monitoring Reporting 7

8 It is about verifying procedures The aim of the verification is to reach a verification opinion with reasonable assurance that: The existing procedures conform with the approved monitoring plans, the EU ETS regulation, and the national legislation of the administering Member State Reasonable assurance : Means a high but not absolute level of assurance whether the aircraft operator does not have material non-conformities. 8

9 and about verifying data The aim of the verification is to reach a verification opinion with reasonable assurance that: The data submitted in the annual emissions or tonne-kilometre reports are fairly stated, i.e. free from material misstatements Materiality level: It is the net calculated difference between reported and estimated aggregated data, not for individual data points Emissions > 500,000 tco2: 2% Emissions < 500,000 tco2: 5% Tonne-kilometer data: 5% 9

10 A mixture of financial and management systems auditing Verification is based on the approaches used for both financial and management systems auditing: Review of documents Observation of processes Observation of IT systems Audit trails Interviews Data analysis Data sampling Corroboration of information Data Procedures Software ORGANISATIONAL CONTEXT Data transformation process People Hardware Information ORGANISATIONAL CONTEXT 10

11 It is a 10-step process * Steps to be performed on-site if required 11

12 Which airlines are affected by EU ETS? What is the timeline of Verification? How to prepare for Verification? Who are the verifiers? Who is VerifAvia? 12

13 What is the timeline of Verification? Start verification as early as possible Verification can start as early as possible in 2010: To avoid pressure by conducting all the verification work at the last minute To allow time for corrective actions 13

14 What is the timeline of Verification? The process can be split in two stages 1. Stage 1 may be conducted in Q3 or Q4 of 2010: Analysis of the design and implementation of the operator's ETS management system (organization, procedures, IT) and control system Identification of any areas of risk that require special attention Assessment of whether the ETS system conforms with the monitoring plan and the ETS regulations Test of available ETS data until the audit day 2. Stage 2 may be conducted in Q1 of 2011: Detailed testing and analysis of remaining ETS data Independent technical review Materiality analysis and final verification opinion 14

15 What is the timeline of Verification? The first stage can start in Q3 or Q4 of * Steps to be performed on-site if required

16 Which airlines are affected by EU ETS? What is the timeline of Verification? How to prepare for verification? Who are verifiers? Who is VerifAvia? 16

17 How to prepare for Verification? PEOPLE Involve all stakeholders Mobilise all implied internal stakeholders for the audit Make sure all stakeholders are aware of their roles and responsibilities Update job descriptions and guidelines Coordinate with Human Resources 17

18 How to prepare for Verification? PROCESSES Implement all procedures Make sure all procedures are implemented as per monitoring plans Identify and document differences with monitoring plans Prepare / update EU ETS manual Inform Competent Authority of any major change in monitoring methodology 18

19 How to prepare for Verification? DATA Control the quality of data Perform and document control activities Set up audit trails Identify problems with the data: Data gaps Non plausible data Potentially erroneous data Make sure flight documentation is readily available for VerifAvia 19

20 How to prepare for Verification? Verification lasts between 6 and 9 man-days Time for verification depends on: Complexity of the operator s EU ETS management system Complexity of the IT systems architecture Complexity of the operations To be estimated carefully at the pre-contract stage Minimum between 6 and 9 man-days: ~ 1 man-day preparation ~ 2-3 man-days process analysis ~ 1-3 man-days data testing ~ 1 man-day reporting ~ 1 man-day technical review Complex operator s EU ETS management systems may require more time 20

21 Which airlines are affected by EU ETS? What is the timeline of Verification? How to prepare for verification? Who are verifiers? Who is VerifAvia? 21

22 Who are verifiers? Must be accredited according to ISO Verification bodies of GHG emissions under the EU ETS Directive: Must be accredited according to ISO standard and European guidance EA-6/03 Must develop and implement an EU ETS Assurance Management System About the accreditation: Granted by EU national accreditation bodies (e.g. UKAS) of the home country Granted only by the home accreditation body Accreditation process includes witness verification audits Accreditation is sector specific (non-aviation accredited verifiers must also be accredited for aviation) 22

23 Who are verifiers? Must be approved by the Competent Authority Most Competent Authorities accept verifiers accredited in other EU Member State: Provided that the accreditation is done according to Reg (EC) 768/2008 and EA-6/03 France / UK: verifiers from other EU Member State should demonstrate knowledge of national legislation + witness audit Germany: verifiers from other EU Member State should go through application process and demonstrate ability to communicate in German Spain: has yet to establish the accreditation rule but for other sectors under the EU ETS, accepts verifiers from other EU countries Belgium: the regulator is the only verifier (until 2013) Netherlands: open to foreign verifiers Latvia: open to foreign verifiers 23

24 Which airlines are affected by EU ETS? What is the timeline of Verification? How to prepare for verification? Who are verifiers? Who is VerifAvia? 24

25 Who is VerifAvia? A verification body of GHG emissions A verification body of GHG emissions dedicated to the aviation sector under the EU ETS Directive. In process of accreditation by UKAS (UK) and COFRAC (France) according to ISO standard and EA-6/03 guidance Main office in Paris, subsidiary in London Presence in Berlin and Vancouver Ability to work in English, French, German and Spanish languages 25

26 Who is VerifAvia? dedicated to the aviation sector Provides smart, efficient and cost-effective verification services: Smart: we use an electronic EU ETS data analysis system (SkyBreathe) to ensure a quicker and more accurate verification process Efficient: our auditors are aviation experts with strong EU ETS experience so we can focus on the key areas and not waste clients' time and resources Cost-effective: we don t have the high overhead costs of a large company so we can offer lower rates 26

27 Who is VerifAvia? Offers pre-verification and verification audits Pre-verification audit: A "readiness for legal verification" gap analysis which aims to highlight any weakness in the aircraft operator's EU ETS management and control systems, and to identify any areas where there is non-compliance with the rules and requirements. Legal verification audit: the formal legal process required under the EU ETS regulations. 27

28 Who is VerifAvia? Auditors with extensive aviation EU ETS experience throughout the world 24/06/

29 Who is VerifAvia? and extensive international aviation consulting and auditing experience 24/06/

30 Merci! Please contact: Julien Dufour, Managing Director, VerifAvia (Paris) Gary Cleven, EU ETS Lead Auditor (Vancouver) 30

31 Description of each of the ten steps * Steps to be performed on-site if required 31

32 A ten-step process: Preparation Step 1. Pre-contract Stage Ensure that the scope and extent of verification activities and time quoted are sufficient to meet the requirements for «Reasonable Assurance». Step 2. Strategic Analysis Understand the operator s organisation and the design and implementation of its EU ETS management and control systems. Step 3. Risk Analysis Identify where there are risks of system failure/breakdown that might result in a material misstatement in the EU ETS data so that the team can focus on the higher risk areas. Step 4. Verification Plan Prepare a verification plan which includes a detailed verification programme, a data analysis plan and the details of a site visit, if required. 32

33 A ten-step process: Execution Step 5. Business Process Analysis Implement the verification plan in order to assess whether the EU ETS management system conforms with the approved monitoring plans, the MRG and the national legislation of the administering Member State. Step 6. Data Analysis Test data using EU ETS data analysis system SkyBreathe which automatically performs plausibility checks on the entire data set. Perform data sampling and other key cross-checks. Step 7. Reporting Maintain and share with the operator an Issues Log that lists issues arising so that they can be closed out before completion of the audit. 33

34 A ten-step process: Completion Step 8. Technical Review Review the verification pack and draft verification opinion by an independent technical reviewer who did not take part in the verification process itself. Step 9. Final Verification Report Submit the final verification opinion to the operator who will forward it to the Competent Authority. Step 10. Approval of data in the EU ETS registry Approve the relevant entries into the EU ETS registry of the operator. 34

35 Step 1 Pre-contract stage The aim is to ensure that the scope and extent of verification activities and time quoted are sufficient to meet the requirements for "Reasonable Assurance". In this step, VerifAvia will: Analyse the information provided by the operator Evaluate the scope and complexity of the verification activities Select the verification team and allocate time to verification activities Prepare a draft contract, including quotation and contract conditions 35

36 Step 2 & 3 Strategic & Risk analysis The strategic analysis aims to understand the operator s organisation and obtain an overview of the design and implementation of its EU ETS management and control systems, so that an appropriate verification plan can be established. The aim of the risk analysis is to identify where there are risks of system failure/breakdown that might result in a material misstatement or material non-conformity in the annual emissions or tonne-kilometre reports; it is on the higher risk areas that the verification team will focus its efforts. 36

37 Step 2 & 3 Strategic & Risk analysis (con t) VerifAvia will consider the following inputs: The approved monitoring plans and any changes to-date and how the operator has communicated this to the Competent Authority The nature, scale and complexity of the operator's operations and the associated EU ETS processes The complexity of IT systems used to handle EU ETS data Whether all the required control elements (MRG2:2007 Section 10.3) have been accounted for The existence of an environmental or a quality management system, for example ISO9000, ISO14001, EMAS or equivalent The existence of quality control and assurance processes that specifically focus on EU ETS data and systems The organizational structure of EU ETS management and how it is integrated with the overall business organisation The availability of information and data in terms of ease of access, completeness and accuracy 37

38 Step 4 Verification plan Based on the strategic and risks analysis, VerifAvia will prepare a verification plan which will include: A verification program that includes the nature, scope, personnel resources and timeframe of the verification activities A data analysis plan which sets out the data to be sampled and tested, the nature of the tests and how to respond where tests have failed The details of any site visit(s), if required 38

39 Step 5 Business process analysis VerifAvia will implement the verification plan and assess whether the EU ETS management system conforms with the approved monitoring plans, the MRG and the national legislation of the administering Member State. The process analysis is based on site visit(s) (if required), interviews, document review, observation and corroboration of information. The process includes: Interview of EU ETS manager, Flight Operations, Quality, Maintenance, IT, Ground Handling, Cargo and other departments if required Observation of IT systems or spreadsheets used to process EU ETS data (both simple and complex) Review of documents including Quality Manual, EU ETS Manual, calibration certificates and documented quality and maintenance activities Review of flight documentation including technical logs, journey logs, load sheets, fuel delivery notes, fuel invoices 39

40 Step 6 Data analysis VerifAvia will conduct a thorough analysis of EU ETS data utilizing the data query and validation capabilities of emission and in some cases by uploading flight, payload and fuel data into the EU ETS data analysis system SkyBreathe. The objective is to automatically identify data gaps, highlights flights with fuel consumption outside of the typical range and perform plausibility checks on fuel and payload data. The data analysis will allow the identification of problems with the data so that the operator can undertake corrective actions if necessary. This process will also allow the auditor to gain confidence in the reported EU ETS data which will facilitate the verification process. SkyBreathe is an electronic EU ETS data analysis system developed by OpenAirlines. 40

41 Step 6 Data analysis (con t) During Step 6, VerifAvia will also: Cross-check flight data with the air traffic data collected by EUROCONTROL and accessible through the ETS Support Facility Perform consistency checks between aggregated fuel consumption data and total fuel purchased (only when all flights are included into the EU ETS) Conduct data sampling of payload and fuel data on flights selected randomly 41

42 Step 7 Reporting Throughout all the steps identified above, the verification team maintains an Issues Log that lists issues arising, as well as outstanding questions and documents that have been requested. VerifAvia will share this Issues Log with the Operator so there is a common list of issues to be closed out before completion of the audit. The Operator is required to undertake corrective actions and provide evidence to the verification team. Where issues cannot be closed out, their impact will be taken into account when preparing the opinion statement. It is not necessary that all issues identified be implemented immediately to ensure a positive verification opinion. For example, some issues that are less critical can be viewed as 'improvement opportunities' and carried forward for future implementation. 42

43 Step 7 Reporting (con t) At the end of the whole verification, the verification team evaluates all its findings and conducts a materiality analysis on any errors and non-conformities remaining, in order that it can draft its opinion statement. It then compiles all its work papers and collected evidence into an internal verification pack for internal review. 43

44 Step 8 Technical review Before a decision can be made to issue the final verification opinion, the verification pack and associated draft verification opinion must be independently reviewed by a competent person (a technical reviewer) who did not participate in the verification process itself. The objective of the independent review is to ensure that the verification process was conducted in accordance with VerifAvia s documented procedures, that due professional care and judgment has been used, and that any verification risks have been minimised. Lastly, the evidence and work papers are reviewed to ensure that they support the stated opinion. 44

45 Step 9 Verification report VerifAvia will submit a final verification opinion to the Operator. It is the Operator's responsibility to submit this to the Competent Authority together with a copy of the verified emissions and tonne-kilometre reports. 45

46 Step 10 Approval of entry in ETS registry VerifAvia will then approve the relevant entries into the various EU ETS registries of the client. 46