The process of recording and verifying emissions of carbon dioxide in the European trading scheme is heavily reliant on the manual recording of data to a spreadsheet and a complex system of verification. For examples, see the returns that the UK's Environment Agency require organisations to complete and the verification protocol that IETA has prepared for the EU ETS. The manual logging of values may be satisfactory for integrated pollution control, but should now be replaced so that emissions can be recorded / computed in real time and to a fiscal standard. This will become increasingly important as the volume and value of traded carbon rises.
NB: The collection of readings over 12 months, followed by a verification process lasting 3 months was responsible for a collapse in the traded price of carbon dioxide in April 2006. Once figures were released, the market realised that member nations of the EU had been granted an excess of permits. Such an overhang would have been corrected if results had been produced in real time.
It would seem that fiscal metering of fuel consumed may be a better way to go. Such an approach would eliminate a great deal of bureaucracy and support the real time reporting of data – something that both traders and the taxman should welcome!
