November 10, 2014 by Rahul Rana
CaliforniaCarbon.info, November 9, 2014: The California cap-and-trade program witnessed 100% compliance from entities with obligations for the 2013 compliance year, Dave Clegern, spokesman for the state regulatory body the Air Resources Board (ARB) has confirmed. ARB will also release a detailed report in the coming weeks.
In order to comply with the program, each compliance entity has to surrender one California carbon allowance (CCA) for each metric ton of CO2e (MMtCO2e) they emit. The first annual surrender deadline fell on November 3, 2014, and over 360 entities have surrendered the required 30% of their obligations for 2013. Only V2013 CCAs as well as ARB offset credits (up to 8% of the annual obligation) can be used to meet compliance in the first year. The remaining 70% will be surrendered at the triennial deadline in November 2015, along with 100% of the obligations for 2014. The number of ARBOCs surrendered this year will be a point of interest when ARB releases its detailed report.
Earlier this week, ARB also released data on 2013 emissions reported by California entities. This data puts the level of covered emissions for 2013 at nearly 145 MMtCO2e. With over 160 million V2013s (one percent of the annual cap of 162.8 million is held back in the price containment reserve, while a further 814,000 is kept in the voluntary renewable electricity account) released to the market through allocations and auctions, plus any offsets which have been or are scheduled to be used for 2013 obligations, there will be a significant surplus to carry forward. The secondary market has yet to react to the results, which were in line with most expectations.
The experience of successfully negotiating the first compliance round will be reassuring to market participants. In contrast, the pilot ETS’ in China had a much rougher tide with their first compliance hurdles earlier this year (imposed by five of the seven programs). Of the five, only Shanghai reported 100% compliance, with the others having to extend deadlines, hold compensatory last-minute auctions, or suffer eleventh-hour price surges, none of which guaranteed 100% compliance. In comparison, California’s program has had a much smoother run, with the gentle rise in prices also attributable to the price floor increment for next year. Generous free allocations to industry, and ARB’s frequent workshops and webinars on compliance procedures, seem to have done the trick.