Under the European Union Emissions Trading Scheme (EU ETS), and, specifically, the Monitoring and Reporting Regulation (MRR) so-called 'tiers' are defined as data quality levels addressing each parameter needed for the determination of emissions.
In the MRR the system of required tiers has been significantly changed in comparison to MRG 2007.
This is to make efforts or uncertainty level requirements proportionate to the size of the installation. The MRR requires all operators to meet certain minimum tiers, larger emission sources must meet higher tiers (i.e. involving more reliable data quality), less strict requirements apply for smaller sources (i.e. for minor and de-minimis source streams and for smaller installations).
In this way the tier system defines a hierarchy of different ambition levels for activity data, emission factors and oxidation or conversion factors.
The higher the number of the tier chosen, the higher the level of accuracy and the more site-specific the monitoring system becomes.
In general it can be said that tiers with lower numbers represent methods with lower requirements and being less accurate than higher tiers.
Tiers of the same number (e.g. tier 2a and 2b) are considered equivalent.
Higher tiers are considered, in general, more difficult and costly to meet than lower ones (e.g. due to more expensive measurements applied).
Guidance document No. 1 on M&R Regulation emphasises that the overarching rule is that the operator should apply the highest tier defined for each parameter.
Report on the functioning of the European carbon market, accompanying the document Report from the Commission to the European Parliament and to the Council, Climate action progress report, including the report on the functioning of the European carbon market and the report on the review of Directive 2009/31/EC on the geological storage of carbon dioxide of 18 November 2015 (COM(2015) 576 final), p. 26, indicates, in the EU ETS day-to-day operation the minimum tier requirements are usually met by installations.
Only 118 category C installations (14% of total) were reported to deviate for at least one parameter from the requirement to apply the highest tiers for the major source streams (for 2013, there were 137 installations, 16% of total).
However, the real number may be higher, as not all Member States reported details in this regard.
These deviations are only allowed where the operator demonstrates that the highest tier is technically not feasible or incurs unreasonable costs. If those conditions are found not to apply anymore, operators have to improve their monitoring systems.
In a similar way, Member States have had to report the number of category B installations which do not meet the highest tier requirements for major source streams or emission sources.
Only 22 Member States reported on this issue, showing that on average 28% of category B installations deviate from the requirements in some respect (for 2013, 24 Member States reported indicating an average of 28% of category B installations affected).
According to the Report of 23 November 2017 from the Commission to the European Parliament and to the Council, Report on the functioning of the European carbon market (COM(2017) 693 final) the minimum tier defaults of the MRR were met by the vast majority of installations.
Only 105 category C installations were reported to deviate for at least one parameter from the requirement to apply the highest tiers for the major source streams (these deviations are only allowed where the operator demonstrates that the highest tier is technically not feasible or incurs unreasonable costs),
Once these conditions no longer apply, the operator has to improve their monitoring system accordingly.
In the 2013 reporting period, 137 category C installations (16% of the total) were reported as not meeting highest tiers in one way or another.
Therefore, a steady improvement in category C installation highest tier compliance can be seen in each year of Phase 3 of the EU ETS.
In a similar way, reports from 22 participating countries (the same as in the previous two years) indicate that overall 22% of category B installations are permitted with some form of deviation from the MRR default requirements, compared to 26% in the previous year and 28% in the year before that, again demonstrating a steady improvement in highest tier compliance.
For calculation-based methodology the applicable tiers are laid down in Article 26 of the MRR, which reads:
1. When defining the relevant tiers in accordance with Article 21(1), to determine the activity data and each calculation factor, each operator shall apply the following:
(a) at least the tiers listed in Annex V, in the case of an installation that is a category A installation, or where a calculation factor is required for a source stream that is a commercial standard fuel;
(b) in other cases than those referred to in point (a), the highest tier as defined in Annex II.
However, the operator may apply a tier one level lower than required in accordance with the first subparagraph for category C installations and up to two levels lower for category A and B installations, with a minimum of tier 1, where it shows to the satisfaction of the competent authority that the tier required in accordance with the first subparagraph is technically not feasible or incurs unreasonable costs.
The competent authority may, for a transitional period of up to three years, allow an operator to apply lower tiers than those referred to in the second subparagraph, with a minimum of tier 1, provided that both of the following conditions are met:
(a) the operator shows to the satisfaction of the competent authority that the tier required pursuant to the second subparagraph is technically not feasible or incurs unreasonable costs;
(b) the operator provides an improvement plan indicating how and by when at least the tier required pursuant to the second subparagraph will be reached.
2. For activity data and each calculation factor for minor source streams, the operator shall apply the highest tier which is technically feasible and does not incur unreasonable costs, with a minimum of tier 1.
3. For activity data and each calculation factor for de-minimis source streams, the operator may determine activity data and each calculation factor by using conservative estimations instead of using tiers, unless a defined tier is achievable without additional effort.
4. For the oxidation factor and conversion factor, the operator shall, as a minimum, apply the lowest tiers listed in Annex II.
5. Where the competent authority has allowed the use of emission factors expressed as t CO 2 /t or t CO 2 /Nm 3 for fuels, and for fuels used as process input or in mass balances in accordance with Article 25, the net calorific value may be monitored using lower tiers than the highest tier as defined in Annex II.
For measurement-based methodology the applicable tiers are laid down in Article 41 of the MRR, which reads:
1. For each emission source which emits more than 5 000 tonnes of CO 2(e) per year, or which contributes more than 10 % of the total annual emissions of the installation, whichever is higher in terms of absolute emissions, the operator shall apply the highest tier listed in section 1 of Annex VIII. For all other emission sources, the operator shall apply at least one tier lower than the highest tier.
2. Only where the operator can demonstrate to the satisfaction of the competent authority that application of the tier required under paragraph 1 is technically not feasible or incurs unreasonable costs and application of a calculation methodology using the tier levels required by Article 26 is technically not feasible or incurs unreasonable costs, may a next lower tier be used for the relevant emission source, with a minimum of tier 1.