Post on 22-Mar-2018
ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Verification
November, 2009Toronto, ON
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Overview
Who is ICF? Regulatory Context The Terminology The Market – supply and demand The ICF Approach The Challenges
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
ICF History Founded in 1969 – Forty years of experience. Publicly traded ICFI: NASDAQ (IPO 2006) Global presence with over 30 offices
throughout the world. Working throughout the energy and
environment space:• Fuel and emission markets, environmental
assessment and compliance, policy analysis.• Air, water, waste.
More than 3,500 employees
Highlights of Climate Experience Over 230 professionals with climate-related
expertise Provided climate policy advice to > 60
governments Providing climate strategy advice to > 65
companies in the FT Global 500
Climate Service Offerings Carbon market pricing analysis Compliance analysis—how will
legislation/regulation affect a company’s operations/business
Energy efficiency—portfolio assessment Voluntary strategy support—companies not
likely to face compliance constraints Value-at-stake—how will various lines of
business be affected by action on climate? Financial industry—investment portfolios,
carbon offset businesses, etc. they are/have been developing
Carbon offset projects—project feasibility, project support (PDDs), due diligence, market analysis
Carbon footprinting—initial entrée leading to broader environmental/sustainability strategy
ICF History, Experience, and Climate Services
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Award-Winning Performance
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
ICF Assurance Services ICF’s audit work started in 1977 when we developed the first corporate EHS
audit program To date, we have conducted more than 5,000 audits in more than 30
countries and trained more than 6,000 EHS professionals in auditing skills and techniques
GHG Verification Carried out first global GHG emissions audit for bp – all operations/countries Audit/Technical Lead on annual audit of GHG emissions Petrobras Since 1999 ICF has verified DuPont’s emission reduction assertion
associated with high GWP (N2O and HFC23) abatement projects Verified Anadarko’s EOR emission reduction assertion associated with
projects in Wyoming Alberta SGER: Leading verifier of offsets and facility emissions Active in Voluntary and Pre-compliance assurance
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Overview
Who is ICF? Regulatory Context The Terminology The Market The ICF Approach The Challenges
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Compliance and The Market Based Mechanism
Cap and Trade is an “indulgence” provided by the regulator to minimize cost of conformance to emitters
• The regulator should also recognize cost savings vs. command and control
In return for the “indulgence” the emitter must provide evidence of conformance and provide the regulator with “a level of comfort” that:
• Reported emissions are calculated according to regulation, complete, and represent actual emissions
• Purchased offsets are in conformance with offset eligibility criteria and are calculated according to methodology
• Allowance is purchased for emissions not offset
To meet “level of comfort” on conformance the regulator must carry out due diligence OR third parties must provide via Verification(another “indulgence”) .
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Overview
Who is ICF? Regulatory Context The Terminology The Market The ICF Approach The Challenges
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Verification
external party evaluate a subject matter express a conclusion concerning the relevance and
reliability of the information provide user(s) of information with a high, but not
absolute, level of comfort
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Terminology – Project Cycle Validation
• Evaluation of project information (baseline, monitoring, quantification and verification plan) vs. relevant program criteria
• Ex-ante, typically pre project implementation Registration –
• Formal acceptance of the project/documentation as conformant • Typically provided by program authority
Verification• Ex-post evaluation of project information (GHG assertion, baseline,
monitoring, quantification) vs. relevant program criteria Certification/Registration –
• Formal declaration claiming emissions reductions have been achieved in conformance with criteria
• Typically provided by program authority Accreditation –
• credentials provided by authoritative body, indication of qualification• provided to verifiers (individuals and/or firms)
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
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Terminology – GHG Information
Relevance – refers to the appropriateness of the information being collected and reported Completeness – refers to the recording, disclosure, and
classification of all GHG sources in accordance with applicable reporting guidelines Consistency – refers to that quality of GHG information
that allows users to compare data year on year Transparency – refers to factual and coherent manner of
GHG information presented Accuracy – refers to the likely range of deviation of a
reported figure (precision needed for intended use)
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
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Terminology
Materiality: the extent to which GHG information may be omitted or misstated before it has the potential to change or influence the opinions or decisions made by the users of the verified information.
• Omissions or misstatement can result from either an error or inherent uncertainty.
• Users of GHG information can include management, shareholders, analysts, government, NGOs etc...
Evidence• Sufficient and appropriate – quantity/quality• Reliability - source and nature
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Overview
Who is ICF? Regulatory Context The Terminology The Market The ICF Approach The Challenges
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Canadian Reporting Facilities
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose15
US Facility Level Reporting
Source: EPA
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Waxman/Markey Cap and Offsets
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose17
Supply CDM : EU audit firms Large accountancies Engineering firms Advisors
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Overview
Who is ICF? Regulatory Context The Terminology The Market The ICF Approach The Challenges
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose19
Our Principles Efficient and Effective
• prepared• process oriented
Add Value• contribute to Continual Improvement
Technically Proficient / Not cocky• we don’t expect client to hold our hand• we don’t understand we ask
Staffing Audit Teams• worldwide network of auditing professionals with technical expertise • extensive field auditing experience, formal training in audit skills and techniques • familiarity with a broad range of industries
Providing Audit Team Leaders• audit team leaders who set the tone, make key decisions about staffing and roles • confirm the appropriateness, rigor, and accuracy of the teams’ work
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
ICF Approach
ICF proprietary approach / evolving philosophy based on audit history and GHG precedent and learnings
EMS: 14000 and Responsible Care
ISO 14064-3 and 14065
CDM: Procedural guidelines for accrediting operational entities by the executive board of the clean development mechanism (CDM)
Compliance requirements
International Standards on Assurance Engagements (ISAE) 3000 –Assurance Engagements Other Than Audits or Reviews of Historical Financial Information
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
ICF Approach - OffsetsPlanning Execution Completion
1. Agree on level of assurance, objectives, criteria, scope and materiality
2. Conduct preliminary review of Project Report
3. Conduct preliminary review of the Supporting Data
4. Conduct preliminary review of the Information System Controls
5. Develop audit strategy 6. Develop preliminary
audit task/sampling plan
7. Review Offset Project Plan
8. Review Offset Assertion 9. Conduct Site Visit
(when applicable) 10. Finalize audit
task/sampling plan 11. Collect further evidence 12. Assess internal controls 13. Conduct substantive
testing
14. Develop Audit File 15. Confirm work done 16. Prepare Verification
Report 17. Prepare Risk
Assessment Report 18. Close engagement
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
ICF Approach – Facility Emissions Planning Execution Completion
1. Agree on level of assurance, objectives, criteria, scope and materiality
2. Conduct preliminary review of Baseline/Compliance Applications
3. Conduct preliminary review of the Supporting Data
4. Conduct preliminary review of the Information System Controls
5. Develop audit strategy 6. Develop preliminary
audit task/sampling plan
7. Review Baseline/Compliance Application
8. Independently develop emissions intensity from ground up
9. Compare BEI approach to similar reported facilities
10. Conduct Site Visit 11. Finalize audit
task/sampling plan 12. Collect further evidence 13. Assess internal controls 14. Conduct substantive
testing
15. Develop Audit File 16. Confirm work done 17. Prepare Verification
Report 18. Prepare Risk
Assessment Report 19. Close engagement
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
DocumentationProcess • Evidence of the planning process, including details of the anticipated
and actual objectives, scope, criteria and activities to be undertaken within the validation or verification programme;
Sampling • Details of the GHG information sampling plan, including explanations and justifications for the approach taken during the validation or verification and the methodologies used;
Information • Details of the reported GHG information that was validated, including any relevant supporting information that may be required to verify consistency in future validations or verifications;
Team • Records relating to validation or verification team personnel, including validator/verifier competence and performance evaluation, team selection and improvement of competence;
Risk • Results of the risk assessment and materiality analysis including evidence of inherent and control risk assessments;
Activities • A record of the nature, timing and extent of activities performed and the results of such activities, including the analytical testing undertaken and significant validation;
Judgement • Verifier’s reasoning and rationale on all significant matters that require the exercise of professional judgement;
Changes • Any changes made to the validation or verification plan and associated activities and analytical testing as a result of evidence obtained;
Results • The results and findings of the validation or verification; Conclusions • Conclusions reached by the verifiers concerning significant aspects of
the verification, including how exceptions and unusual matters, if any, were resolved or treated.
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Keys to success
Technically competent Prepared Process oriented Trained Fresh eyes vs. fresh approach Credibility/Brand Service Size Cost
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Overview
Who is ICF? Regulatory Context The Terminology The Market The ICF Approach The Challenges
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Issues/Challenges Immature space
• Confused terminology/expectations• Confused regulator, clients and verifiers
Limited “GHG” precedent • CDM• EU• AB• Voluntary
Existing standards and guidelines slow to evolve• ISO/UNFCCC/ISAE docs are not revised frequently
No “Precise” Accreditation• Define requirements for assurance providers
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Issues/Challenges Early market mayhem
• No price disclosure -> lowest common denominator (commoditization) -> flight to quality
Cap and Trade and Compliance Risk• Buyers / sellers determining how to price risk (allowance – risk = offset). Risk
quantification difficult without precedent.
Liability• What does the regulator wear? Facility wear? Verifier wear? Offset-er wear?
• What CAN they wear?
Work Load• RAMP UP TIME – massive volume of work looming, looming, looming…
• Cyclical / 11th hour nature of work
• Market is NOT owned by CAs or PEngs or Advisors
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Issues/Challenges Regulators: understand issues – define
• Understand risk and third parties and verification as a tool to mitigate risk• Clearly define regulation, requirements, criteria, guidance for reporting and
verification• Allow early policy transparency• Start with good – move toward perfect• “Reasonable” definition of “Reasonable”• Hard-cap vs. Intensity-based (numerator/denominator)
Level of assurance may change with more stringent targets;• Targets: FUN/INTERESTING -> INTERESTING/CHALLENGING ->
CHALLENGING/LIFE CHANGING
• U.S. no third party verification: regulator will wear burden
We – at ICF – are here to help
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ICF Proprietary and Confidential – Do Not Copy, Distribute, or Disclose
Duncan RotherhamVP and Managing Director - CanadaTel : 416.341.0389 Mobile : 416.460.1903drotherham@icfi.com
ICF INTERNATIONAL277 Wellington St. West, Suite 808Toronto ON Canada, M5V 3E4www.icfi.com