Staff Proposes Industry Assistance Changes at Cap-and-Trade Workshop

The California Air Resources Board (CARB) held a workshop on May 1, 2013 to address potential adjustments related to universities, Combined Heat and Power ‘‘But For’’ facilities, and holders of legacy contracts within the cap-and-trade Regulation in response to CARB Resolution 12-33.  The potential regulatory changes discussed in the workshop will be brought to CARB for approval in the fall of 2013.  

Specifically, the workshop considered a proposed methodology to allocate allowances to California universities that recognizes early action to reduce GHG emissions through energy efficiency and Combined Heat and Power (CHP).  There are approximately 11 campuses being considered for the free allocations.  CARB proposed using a "grandfathering" approach as employed in the energy-based benchmark for determining the allocations.  The allocation would decline in proportion to the cap.  The first allocations would be 2015 vintage.

CARB refused to answer CLFP questions regarding whether expansion of campus’ facilities would result in additional allowances for growth under the energy-based methodology saying only that such was being considered. Staff also didn’t indicate whether the 10 percent "haircut" would apply to campus allocations.  Neither did staff indicate the manner in which such allowances would be distributed, i.e. whether they would all be taken from a single auction or if they would be spread across multiple auctions.

CARB staff indicated that the number of allowances totaled approximately 800,000.

Staff also presented a proposal to exempt emissions from steam and waste heat generated by facilities that would not have been covered entities (exceeded the 25,000mmtco2e threshold) ‘but for’ the choice to improve efficiency by installing CHP.  The staff attached two qualifying criteria:

1. Steam emissions alone do not exceed the 25,000 mmtco2e threshold, and;
2. Electricity emissions alone do not exceed the 25,000 mmtco2e threshold.

The ‘but for’ exemption would cover only the first compliance period.  There is no time limit on the exemption and would apply to any type of facility that invested in CHP before and during the first compliance period.

 

CARB also discussed a proposed methodology to provide transition assistance to covered entities that have a compliance obligation cost that cannot be reasonably recovered due to a legacy contract.  These contracts in question are generally power purchase agreements (PPAs) that don’t provide for the pass-through of costs.  The contracts had to be in effect before AB 32 was passed.  Any PPAs with utilities will be referred to the CA Public Utilities Commission for resolution.