US: Half of compliance entities with CITSS account took part in auction

02 July 2014 23:03 Source:ICIS

Around half of the compliance entities with an account in the California’s cap-and-trade registry have never participated in any of the auctions held by the Air Resources Board (ARB), according to an analysis by ICIS.

The ARB, the carbon market regulator, requires companies to have a compliance instrument tracking service system (CITSS) account to hold, sell or buy carbon allowances or offsets. A CITSS account is also required to take part in the quarterly auctions or receive free allocation.

Companies can get allowances for compliance in multiple ways outside of the ARB auctions, including on the secondary market or through free allocation.

Of the 287 compliance entities with a CITSS account, 141 have never taken part in an auction, according to data from the ARB. Another 11 companies have not taken part in any of the ARB sales, but they have ties to companies who have participated. The remaining 135 compliance companies with a CITSS account have taken part in at least one auction, records show.

According to ARB data, 76 of the 141 companies who have not participated at auction received allowances for free because of their inclusion in the electricity or industrial sector. Therefore, they could be in line to comply for the November partial compliance deadline without having to buy allowances in an ARB auction.

The remaining 65 companies do not appear to have received free allowances from the ARB or taken part in an auction.

Traders said some of those entities may have fallen below the threshold to take part in the cap-and-trade programme or dramatically scaled back their operations in the market as a result of the carbon programme. They could also have opted to buy allowances on the secondary market to avoid tying up capital for allowances not immediately needed.

Companies with an account could also have an obligation only from the second compliance period, a trader from an electric company noted. Dan X. McGraw

By Dan X. McGraw