AB 32 Updates and Information

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More allowances to prevent leakage?
On Monday July 30, California Air Resources Board (CARB) held a technical workshop where staff revealed that it was considering a proposal to increase "assistance factors" percentages generated from "leakage risk" (the risk of a facility shutting down in California and moving to another state or country). However, there was a catch as the CARB proposal includes the need for additional studies and significant data requests from California businesses and industry.

Any potential changes to assistance factors will require regulatory amendments. If adopted, the CARB proposal would change allowance allocations only for the second and third compliance periods (2015 to 2021) allowing for, as yet, undetermined increases in allowances. However, in the workshop CARB staff indicated any future percentage increases would not be large.

For food processors, currently considered at medium risk of leakage, it is unclear whether additional allowances will mitigate the cost increases anticipated in 2015. Right now, food processors will see their allowances cut by 25 percent in the second compliance period (2015-2017) followed by a 50 percent cut in 2018.

The data collection described by CARB staff proposes to collect facility-level economic data from covered industrial facilities to support monitoring of leakage and test theories in an effort to better assess the risk of business and industry departure from the state under AB 32’s cap-and-trade program.

Two New CARB Studies
At the workshop, CARB staff also announced it is also planning to launch a research effort toward establishing baselines in order to measure leakage. The first was a study that will examine how changes in energy prices have historically impacted plant output, emissions, and employment. A second study will examine recent trends in trade flows among emissions-intensive, trade-exposed industries.

AB 32 Compliance Instrument Tracking System Service (CITSS) Registration
August 1 marked CARB’s target deadline for facilities to register for the AB 32 Compliance Instrument Tracking System Service (CITSS). CARB has said this is not a firm deadline, but a "target deadline."

CITSS is the compliance tracking account for each facility subject to AB 32’s cap and trade program. It is how CARB will track the allowance issuances, trades, and surrender of allocations of carbon allowances by the state. Allowances and offsets, generally referred to as "compliance instruments," will be subject to CITSS tracking. This includes the "free" allowances that will be distributed to facilities on November 1, as well as any transfers and/or holding of AB 32 allowances and CARB approved offsets, and the surrender of compliance instruments to comply with the annual and periodic compliance deadlines under AB 32.

There has be a strong reaction to CARB’s requirement that corporate representatives register by providing such personal information such as their home address and personal financial data as "proof of identity." You should note that CARB also holds itself harmless for any inappropriate release of this personal data. At present, CARB staff is working on providing new guidance on registering facilities given the negative reactions over the last two weeks. The new guidance is expected in the next week or two according to the lead CARB staff for CITSS. CARB staff said the regulations required personal information in order to verify the identity and location of the facility. They did not expect the reaction they received.

Some temporary registration options may be available to facilities until CARB can issue new registration guidelines. CLFP is seeking confirmation as to these options from CARB.

If your facility has not yet registered with CITSS, CLFP recommends that you complete your registration by or before September 1 in order to be fully registered in the system to receive allowance allocations. CARB's target date for complete registration is mid-September.

Allowance Allocation Decisions Expected by Mid-August
CARB staff indicate they plan to make initial allowance allocation decisions by mid-August. Allowance allocations will be based upon the data packets recently issued by CARB. CLFP is available if you have questions concerning your facility response or if you have received an additional data request from CARB.

CARB Practice Auction Set for August 30
Covered facilities which were registered with CARB as of January 1, 2012, should expect to receive invitations in the next two weeks to CARB’s invite-only Practice Auction scheduled for August 30. The auction will not include real bidding on allowances but instead will be "mock" auction so potential auction participants can understand the process of the auction. The first real auction of allowances will occur on November 14, 2012.

Below is a basic schedule of CARB AB 32 Activities for the balance of 2012 and the next several years.
(Reprinted with permission from URS Corporation)

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