California Links to Québec's Cap and Trade System

On April 19, 2013, the California Air Resources Board (CARB) voted to link the California cap and trade program to Québec’s cap and trade system. CARB approved changes to the California cap and trade regulation on Friday to allow for the linkage, which is effective January 1, 2014. In practical terms, the linkage opens a new market for greenhouse gas allowances and offsets for California’s regulated entities and offset generators. As Québec’s cap and trade participants enter the California market, regulated entities in California could face tighter competition in bidding for allowances at CARB’s quarterly auctions. 

CARB is also planning for additional amendments to the California cap and trade regulation this year. Many of the potential changes were teed up for consideration in CARB Resolutions 12-33, 12-51, and 11-32. Topics up for potential amendment include:

  • Refining the definition of resource shuffling and clarifying how CARB will deal with the problem. CARB will base proposed amendments to resource shuffling provisions on the recommended actions presented by staff in October 2012. 
  • Providing transition assistance to electrical generating facilities with legacy power purchase agreements that do not provide for recovery of the cost of compliance with the cap and trade program. 
  • Exemption for steam and waste heat emissions from combined heat and power. 
  • Exemption for emissions from waste-to-energy facilities during the first compliance period (2013-2014).
  • Evaluate trade exposure categorizations and modify leakage risk determinations for rare earth mineral extraction activities, acid battery recycling activities, and liquid hydrogen production.
  • Product benchmarks for rare earth mineral extraction, acid battery recycling, dry gas extraction, food processing, foundries, metal casting, metal forging, and ethanol production. Staff may also propose benchmark modifications for thermal and non-thermal oil extraction, natural gas extraction, petroleum refining, hydrogen production, coke calcining, flat glass and container glass manufacturing, recycled boxboard manufacturing, and tissue product manufacturing.
  • The allowance allocation approach for the petroleum refining sector for the second (2015-2017) and third (2018-2020) compliance periods.
  • Allowance allocation to California universities that took early actions to reduce greenhouse gas emissions and invest in energy efficiency and combined heat and power.
  • Issues surrounding the implementation of the offset program.
  • New offset protocols for coal mine methane capture and rice cultivation practices.
  • Ensuring allowances prices do not exceed the highest tier price of the Allowance Price Containment Reserve.
  • Requirements for the retirement of renewable energy credits from electrical generating facilities to prevent double-counting.
  • Changes to implementation of the Auction Platform and Compliance Information Tracking Services System (CITSS) and modification of the current schedule for auctions and reserve sales.
  • Modification of information disclosure requirements for the CITSS.
  • Modification of current auction purchase limits.

CARB currently plans to release the language of draft proposed amendments in June 2013 and will consider adopting them in October 2013.

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