9 April 2024

An introduction to MRV in carbon markets

The push to develop robust and high quality MRV is growing. As the carbon markets expand and diversify, the need for accurate, transparent, and reliable verification of carbon emissions, reductions, and removals becomes more critical than ever.
Brandon Vlaar

MRV - or measurement, reporting, and verification - has catapulted to the forefront of conversations in the carbon markets for it's role as an essential enabler for markets to scale in a transparent, trustworthy, and credible way. 

The term MRV continues to be used in ways that have begun to introduce ambiguity and confusion around what MRV is, what it’s designed to do, and how companies develop and use it. This post aims to cut through some of the confusion, demystifying MRV and exploring its pivotal role in carbon markets.

What is MRV

MRV stands for measurement, reporting, and verification. It’s sometimes referred to as MMRV which adds monitoring, which is an integral part of making credible and auditable claims. For all intents and purposes, when you see MRV, think MMRV.

MRV in the context of climate change mitigation can be traced back to the Bali Action Plan in 2007 - a plan that laid the groundwork for the Paris Agreement a number of years later. The plan called for “measurable, reportable, and verifiable mitigation commitments or actions”. Shortly thereafter the term was adopted around the world with its inclusion in the EPA’s Greenhouse Gas Reporting Program in 2010, as well as the Low Carbon Fuel Standard (LCFS) enacted by the California Air Resources Board (CARB) when it took effect in 2011.

As adopted, the definitions vary somewhat from program to program, but the ultimate purpose - to ensure accuracy, transparency, and accountability for climate-related initiatives - remains the same.

Frontier Climate, an advance market commitment group that’s committed to purchasing over $1 billion of permanent carbon removal over the next decade, has provided a clear and succinct definition for MRV. They define MRV as “a many-part process of producing trustworthy quantitative estimates for key carbon removal outcomes”. Those many parts include:

• Defining the protocol (carbon accounting, process, and data required) for net carbon removal quantification and revising this methodology based on best available science.
• Using measurements and modeling to quantify net carbon removal outcomes and durability according to the protocol, inclusive of lifecycle impacts and discounting for uncertainties. 
• Verifying carbon removal delivery against the specific criteria for that protocol through an independent assessment of reported data and a rigorous verification in the field.
• Reporting deliveries and the methodology upon which they rest in a consistent, transparent manner, and listing verified removals as credits on public registries.

The role of MRV in the carbon markets

MRV plays a critical role in both voluntary and compliance markets. 

It helps ensure integrity in the markets by providing a standardized approach to tracking emissions and reductions. It is crucial for maintaining trust among market participants, ensuring that carbon removals represent actual carbon removals. 

MRV also plays a key role in determining the quality of carbon credits, influencing market value and investor confidence. It facilitates transparency, allowing buyers to verify the impact of their carbon credit purchases. Buyers of carbon removal often require detailed MRV - which may be further assessed by their own in-house teams - as a gate to purchase. In the voluntary market, MRV is a multi-part process that spans the project developer, their hardware and software systems, their registry, verifier (VVB) and buyer.

In compliance markets, MRV is often a regulatory requirement. For example, in the case of Class VI wells, which are used for CO2 sequestration projects, MRV is crucial. MRV outlines a project’s plans for how it will monitor and report the amount of CO2 captured and stored to verify compliance with environmental standards and safety regulations. This ensures that carbon sequestration is carried out effectively and aligns with laws and regulations.

Under the 45Q tax credit of the Inflation Reduction Act (IRA), MRV is essential for capturing and sequestering CO2 in carbon capture and storage (CCS) projects. This credit incentivizes companies to reduce CO2 emissions by offering a tax credit for each metric ton of CO2 captured and stored. MRV in this context ensures that the amount of CO2 captured and sequestered is accurately monitored, reported, and verified, thus affirming compliance with the requirements for receiving the 45Q tax credit. This rigorous process works to guarantee the integrity and environmental efficacy of CCS projects under the 45Q framework.

Cutting through the confusion

Robust MRV is essential for carbon markets to scale with trust and integrity. 

No one, singular entity, can claim to be ‘MRV’, and that’s by design. MRV requires independent parties for the definition of MRV to be satisfied. Using Frontier’s definition of MRV above - that specifically calls out the ‘many-parts’ of MRV - the same party that is defining the protocol and measuring and modeling the outcomes against that protocol cannot also verify the carbon removal delivery. It’s an inherent conflict, and goes against the purpose of MRV. There’s further thought on whether the same entity should - in the interest of developing efficient markets - be defining the protocol for which they are also performing the reporting of deliveries. Groups like Cascade Climate, for instance, are advancing the thought of standards being independent from registries so as to promote suppliers’ clear access to the best available science. 

MRV is not a one-size-fits-all solution or a title to be claimed by a single entity. It’s a collaborative, multi-faceted process that demands participation from various independent parties, each playing their distinct role to enable a transparent and trustworthy market.

What's next for MRV

The push to develop robust and high quality MRV is growing. As the carbon markets expand and diversify, the need for accurate, transparent, and reliable verification of carbon emissions, reductions, and removals becomes more critical than ever. This heightened need for robust MRV is a response to the growing demand from stakeholders, including buyers, investors, regulators, and the public, for greater accountability and transparency in the carbon markets.

There is no standard or universal definition for all of what MRV entails. It will continue to evolve, as it should, to encompass what is required for the market to operate with the highest level of transparency and trust. And in the spirit of this evolution, we believe it is our collective responsibility to create as much clarity as possible when it comes to the carbon market’s essential building blocks - like MRV - to help limit confusion, and promote ease of access for current and emerging carbon project developers.

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