US: New deal reporting system ‘burdensome’, ARB told

21 February 2014 18:25 Source:ICIS

Proposed rules for more detailed transaction reporting in the California cap-and-trade programme would be “burdensome”, participating companies argued, with some of them claiming the new system could reduce liquidity. But regulator Air Resources Board (ARB) said the change is necessary to ensure its “comprehensive oversight” of the programme.

As part of a package of potential amendments to the cap-and-trade regulation, the body in 2013 proposed to shift from the current system – where companies are required to report the price at which they buy and sell California carbon allowances (CCAs) and offsets – to a reporting system based on three different transaction types.

But in a second round of public consultation closed last week, several companies were critical of the new proposed reporting system, which would require participants to indicate if the deal was closed on exchange or over-the-counter and to provide details about the underlying agreement ( see separate factbox ).

Many of the deals are already subject to US Commodity Futures Trading Commission reporting requirements, said Sempra Generation in its submission last week.

Double reporting

The point was raised by the industry group the International Emissions Trading Association when the first draft was put out for consultation last year.

“Concern has been voiced amongst our membership that ARB may be wading into CFTC’s jurisdiction in requiring that entities report on futures trades – particularly those falling under the third category,” IETA said at the time. Since CFTC already regulates these types of transactions, it seems “overly burdensome” that entities be required to report these transactions to ARB too, the lobby added.

Companies would prefer the ARB to continue requesting information on an ad-hoc basis. The regulator already has the power to request the contract underpinning a deal. “It is more appropriate that ARB utilise its current right to request the underlying contracts for the transaction should additional market monitoring information be desired,” Sempra said, sharing energy company Chevron’s remarks last year that the ARB should take a “for cause” or “as needed” approach to the issue.

An ARB spokesman said this week that the proposed changes would fit its purpose to provide “meaningful data to market participants based on a full understanding of the types and prices of allowances and ensure we have information to support comprehensive oversight of the programme.”


On a stronger note, energy company Shell said that the ARB “does not regulate or limit the price that an entity may charge to sell, or pay to purchase compliance instruments in the secondary market”. The oil and gas giant argued that price disclosure for secondary-market transactions would reduce liquidity and create conditions that would make price manipulation “relatively more likely”.

The concern was shared by the Western Power Trading Forum last year. Fears that the ARB may claim the right “to opine on the appropriateness of transactions and the associated price” could drive many intermediaries out of the market and reduce liquidity, “if there is an indication that such prices could be subject to review and/or disallowance of some sort,“ it said.

The ARB spokesman said it has “no jurisdiction” to block any secondary-market transaction from obtained data. “There is only one floor price and it applies only to auctions”.

The amendments are expected to be voted on in May. An additional formal comment period will take place in March, the ARB spokesman said. Silvia Molteni

By Silvia Molteni