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California's ARB set to amend rules on emissions resource shuffling

20 Dec 2013 16:09:05 | edcm

Californian emissions market participants said the price of carbon could be weighed down if companies are allowed to substitute imports from a carbon-intensive generation to a cleaner version.

Resource shuffling, or artificially reducing emissions by importing cleaner power, is not currently allowed by Air Resources Board (ARB) regulations, but a proposed amendment would allow companies to swap imports if they meet specific guidelines, known as safe harbors.

But a climate policy researcher said those safe harbors are so broadly written that companies would easily be able to reduce emissions from imports by switching to a cleaner source of power.

Any reduction would perpetuate the oversupply in the California carbon allowance (CCA) market. “If they can get rid of it, this is the cheapest way for them to comply,” the researcher said.

A carbon market analyst said it is extremely difficult to deal with the resource shuffling issues, and the issue would likely linger in 2014.

“There is no good solution other than making sure other states join the programme,” the analyst said.

Imported power

About 60 companies imported more than 41m metric tonnes of CO2e into California according to ARB data, or 12% of the 354m covered emissions in 2012. Those emissions could rise when the programme expands to cover more imports in 2015.

Los Angeles Department of Water and Power (LADWP), Southern California Edison and Powerex imported roughly half of that power into the state in 2012.

Traders said the specific impact may be a mystery until companies are required to report emissions from those sources, but any reduction of emissions from imports could further hinder the market.

“If it is occurring, it could have an impact,” one trader said. Dan X. McGraw

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