United States: CARB Releases Final Proposed Amendments To Cap-and-Trade Regulations; Formal Comment Period Commences

The California Air Resources Board's (CARB) timeline toward amending California's cap-and-trade regulations progressed with the release of its final proposed amendments and supporting documentation August 2, 2016. Formal comment period starts August 5, 2016. Comments may also be presented orally or in writing at a scheduled public hearing September 22, 2016. Written comments not submitted at the hearing must be received by CARB no later than 5 p.m. September 19, 2016.

Background On July 12, 2016, CARB deviated from the typical rulemaking process and released a preliminary draft of proposed amendments to the state's cap-and-trade regulations. Since then, CARB submitted a draft of its formal regulatory package to the Office of Administrative Law July 19, 2016. On August 2, 2016, CARB published its final proposed regulations and supporting documentation, including a full Initial Statement of Reasons (it previously published a portion of it July 12).

The proposed amendments first drew public attention for their assumed authority to extend the cap-and-trade program beyond 2020. CARB's proposed amendments would establish decreasing aggregate emissions caps for covered entities through 2031 – and discusses reaching 2050 targets to "signal the long-term trajectory of the Program to inform investment decisions."1

CARB has received public scrutiny on whether it indeed has such authority. In an April 19, 2016, opinion, the Legislative Counsel Bureau opined that neither CARB nor the governor has the authority, without legislative approval, to extend the provisions of Assembly Bill 32 (California's Global Warming Solutions Act of 2006) beyond 2020. A copy of the opinion can be found here. While there may be opposition to pushing beyond 2020, Gov. Brown remains firmly committed to cap-and-trade post 2020 and will cement this authority with either legislative approval or a ballot initiative in 2018 as indicated in a statement by his office on August 4, 2016.2

CARB also takes a strong but contested position as to the viability of California's cap-and-trade auctions of carbon allowances. This stance is at the heart of a pending court decision in the Court of Appeal of the State of California Third Appellate District. The consolidated cases of California Chamber of Commerce v. California Air Resources Board, and Morning Star Packing Co. v. California Air Resources Board, challenge the constitutionality of, and CARB's authority, to utilize cap-and-trade auctions on various legal grounds. For more information on these legal challenges, read our previous alert. Both cases are fully briefed and are awaiting oral argument. The court is expected to calendar oral argument by fall of this year.

Proposed Amendments to CARB's Cap-and-Trade Auction Provisions CARB's Notice of Public Hearing identifies five specific goals it aspires to achieve from its proposed amendments to the cap-and-trade regulations:

  • To continue the cap-and-trade program beyond 2020
  • To provide for California compliance with the federal Clean Power Plan
  • To link the program in Ontario, Canada, beginning January 1, 2018, and supplement the regulatory process for potential future linkages
  • To update the program with the latest information on leakage risks and other allocation factors
  • To streamline certain aspects of the program

Included in CARB's Initial Statement of Reasons released August 2 is a comprehensive summary of, and CARB's rationale for, each regulatory provision. This e-alert focuses on certain proposed amendments to the auction provisions – particularly to changes to the format or participation in cap-and-trade auctions.

A few key proposed changes to the auction provisions are:

  • Order of Fulfillment of Winning Bids from Consignment Sources: If the quantity of bids accepted by the Auction Administrator is fewer than the number of allowances offered for sale, then some allowances will remain unsold. CARB proposes to change the order that the Auction Administrator will fulfill winning bids with allowances from consignment sources. Allowances previously designated by CARB for auction that remain unsold from previous auctions would be last in line for fulfilling winning bids. But with the proposed changes, these unsold allowances are used to fulfill bids before consignments bids, thus ensuring the revenue for these sold allowances inure to California before private consignment sources.3
  • Transfer of Unsold Allowances to the Allowance Price Containment Reserve: A new proposed provision allows CARB to transfer unsold allowances from the Current Auction, if unsold for 24 months after their initial sale date, to be transferred to the Allowance Price Containment Reserve and made available through a Reserve Sale. This process would come into effect January 1, 2018.4

    According to CARB, this proposed provision is necessary to allow CARB to remove allowances that remain unsold after two years from immediate availability, and to supplement the Allowance Price Containment Reserve when the market is depressed for a lengthy period of time. This would restrict market access to these unsold allowances.
  • Technical Delays: CARB deletes language regarding the delay or pause of an auction bidding window because of technical systems failures. This language is proposed to be moved to a new section to expand CARB's authority to delay, reschedule, or cancel a scheduled auction bidding window because of a technical systems failure. CARB indicates that the conduct of auctions is dependent on fully functioning and secure online systems. Based on experience in the conduct of auctions to date, if technical issues develop, CARB states that jurisdictions require additional options to reschedule or cancel an auction. This change is made with a CARB eye toward linkage to more jurisdictions and technical issues that may develop not just in California auction platforms, but in others as well.5
  • Exchange Rate: The Auction Administrator would calculate the Auction Reserve Price by setting the exchange rate as the most recently available daily closing rate (previously the noon daily buying rate) for U.S. and Canadian dollars, as published by the Bank of Canada. The Bank of Canada announced that it will cease publication of the noon daily buying rate in early 2017, but will continue to publish the closing exchange rate. This proposed amendment would reflect that change.6
  • Clarity to Auction Purchase Limit Requirements: CARB provides improved clarity of the auction purchase limit requirements. It explains that certain purchase limits apply for the Current Action and for the Advance Auction, and that purchase limits in effect for Current and Advance Auctions since 2015 are retained in the proposed amended regulations.7
  • Attestation Requirement: CARB proposes to remove the attestation requirement as it would relate to indirect corporate associations and to only apply it to those entities with whom the applicant has a direct corporate association.8
  • Surety Bond Requirement: Auction participants must provide a bid guarantee to the financial services administrator at least 12 days prior to the auction. The regulations allow an auction participant to use one or a combination of listed bid guarantees. CARB proposes to remove surety bonds as a form of bid guarantee because they are not commonly available with an ability to meet the requirement to be payable within three business days of payment request.9

CARB's final proposed amendments to the cap-and-trade regulations can be found here.


  1. CARB Staff Report: Initial Statement of Reasons at 13 (August 2, 2016).
  2. http://www.latimes.com/politics/la-pol-sac-climate-change-plan-sacramento-fizzles-20160804-snap-story.html
  3. See 17 CCR § 95911(f)(1).
  4. See 17 CCR § 95911(g).
  5. See 17 CCR § 95911(h).
  6. See 17 CCR § 95911(c)(3)(C).
  7. See 17 CCR § 95911(d).
  8. See 17 CCR § 95912(d)(4)(E).
  9. See 17 CCR § 95912(j)(1).

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions