Cap-and-Trade Regulation Instructional Guidance September 2012 

California Air Resources Board 19 

CHAPTER 2: IS MY COMPANY SUBJECT TO THE CAP-AND-TRADE 

REGULATION? 

For sectors covered as of January 1, 2013, your facility is a covered entity and is 

required to participate in the Cap-and-Trade Program if it is in a sector listed in 

Table 2.1 and has covered emissions that meet or exceed the applicability threshold in 

any data year from 2009 through 2012. If your facility exceeds the applicability threshold 

for the first time in any year following 2012, your facility becomes a covered entity 

during that year. 

If your facility is in a sector covered as of January 1, 2015, and the covered emissions 

exceed the applicability threshold in any data year from 2011 through 2014, then your 

facility is a covered entity and required to participate in the Cap-and-Trade Program 

starting January 1, 2015. If your facility exceeds the applicability threshold for the first 

time in any year following 2014, your facility becomes a covered entity during that year. 

Once a covered entity, your facility will continue to be a covered entity for the entire 

compliance period, even if emissions drop below the threshold or your facility ceases 

reporting and shuts down all processes, units, and supply operations subject to 

reporting. If your facility’s emissions have dropped below 25,000 metric tons CO2e for an 

entire compliance period, then your facility is no longer a covered entity, effective at the 

beginning of the next compliance period. 

The entity with operational control over the covered sources will be responsible for the 

compliance obligation surrender under the Cap-and-Trade Regulation. 

Nothing in this document supplements the provisions of the Cap-and-Trade Regulation. 

Key Definitions 

“Covered Entity” means an entity within California that has one or more of the 

processes or operations and has a compliance obligation as specified in subarticle 7 of 

the Cap-and-Trade Regulation; and that has emitted, produced, imported, 

manufactured, or delivered in 2008 or any subsequent year more than the applicable 

threshold level specified in section 95812 (a) of the Regulation. 

“Compliance Period” means the three-year period for which the compliance obligation is 

calculated for covered entities, except for the first compliance period. The compliance 

obligation for the first compliance period only considers emissions from data years of 

2013 and 2014.
Cap-and-Trade Regulation Instructional Guidance September 2012 

Table 2.1 Covered Entities

Sector Emission Source Applicability Threshold Carbon Dioxide Suppliers Supplied CO2 ≥ 25,000 metric tons of CO2e Cement Production Stationary Combustion Emissions ≥ 25,000 metric tons of CO2e 

Process Emissions 

Cogeneration Stationary Combustion Emissions ≥ 25,000 metric tons of CO2e Electricity- In-state Generators Stationary Combustion Emissions from 

Electricity Generating Facilities located in California (note – in 2015 natural gas comes into the program and captures plants emitting ˂ 25,000 metric tons 

CO2e) 

≥ 25,000 metric tons of CO2e 

Electricity Importers Imports from Specified Sources A. All emissions from imports 

generated by sources with ≥ 25,000 metric tons of CO2e 

emissions 

B. All emissions are covered. There is no threshold. 

Imports from Unspecified Sources All imports from unspecified 

sources are included; there is threshold. 

Electricity- Self-Generation Stationary Combustion Emissions ≥ 25,000 metric tons of CO2e 
Cap-and-Trade Regulation Instructional Guidance September 2012 

Sector Emission Source Applicability Threshold WGlass Production Process and Stationary Combustion Emissions ≥ 25,000 metric tons of 

CO2e 

Hydrogen Production Stationary Combustion ≥ 25,000 metric tons of 

CO2e 

Hydrogen Production Iron and Steel Production 

Process Emissions ≥ 25,000 metric tons of 

CO2e 

≥ 25,000 metric tons of CO2e 

Stationary Combustion Emissions 

Iron and Steel Production Lime Manufacturing 

Process Emissions ≥ 25,000 metric tons of 

CO2e 

≥ 25,000 metric tons of CO2e 

Stationary Combustion Emissions 

Lime Manufacturing Nitric Acid Production 

Process Emissions ≥ 25,000 metric tons of 

CO2e 

≥ 25,000 metric tons of CO2e 

Stationary Combustion Emissions 

Nitric Acid Production Petroleum and Natural Gas Systems 

Process Emissions ≥ 25,000 metric tons of 

CO2e 

≥ 25,000 metric tons of CO2e 

Stationary Combustion 

Petroleum and Natural Gas Systems 

Process Vented Emissions ≥ 25,000 metric tons of 

CO2e 

Flares and Destruction Devices 
Cap-and-Trade Regulation Instructional Guidance September 2012 

Sector Emission Source Applicability Threshold WPetroleum Refining Stationary Combustion Emissions ≥ 25,000 metric tons of 

CO2e 

Process Emissions Catalyst Regeneration Flares and Destruction Devices 

Pulp and Paper Manufacturing 

Stationary Combustion Emissions ≥ 25,000 metric tons of 

CO2e 

Process Emissions 

Stationary Combustion Stationary Combustion Emissions ≥ 25,000 metric tons of 

CO2e 

Suppliers of Liquefied Petroleum Gas 

Combustion Emissions from Total Volume of Liquefied Petroleum Gas Supplied 

≥ 25,000 metric tons of CO2e 

Suppliers of Natural Gas Combustion Emissions from the Total 

Volume of Natural Gas Delivered to NonCovered Entities 

≥ 25,000 metric tons of CO2e 

Suppliers of RBOB and Distillate Fuel Oil 

Combustion Emissions from Total Volume of RBOB and Distillate Fuel Oil Supplied 

≥ 25,000 metric tons of CO2e 
Cap-and-Trade Regulation Instructional Guidance September 2012 

23 

2.1 How Do I Know if My CO2e Emissions Exceed the Applicability 

Threshold? 

The inclusion threshold is based on the subset of emissions reported and verified under 

the MRR that generate a compliance obligation. See section 95852 of the Cap-andTrade Regulation for more details on emissions categories used to calculate a 

compliance obligation. For most facilities, the total emissions for any year during the 

period 2008–2010 (excluding biomass CO2 emissions) will give a rough estimate for 

comparison with the threshold. 

There may be situations in which a facility’s emissions for comparison with the threshold 

will be slightly different due to the presence of excluded or newly included process, 

vented, or fugitive emissions (see the examples). 

Additionally, biomass-derived fuels that were reported in 2008–2010 have to meet 

stricter standards beginning 2011, and may count toward the compliance obligation in 

some situations. 

Electricity importers that imported any amount of electricity from an unspecified source 

between years 2008–2010 are automatically a covered entity. Electricity importers that 

imported electricity from specified sources between years 2008–2010 are covered 

entities if any of the sources emitted more than 25,000 MTCO2e. In almost all cases 

specified imports will be from large generators that exceed 25,000 MTCO2e emissions. 

So a safe assumption would be that any entity with specified imports will be a covered 

entity. 

If your facility meets the applicability requirements found in section 95101 of the MRR 

for both source category and emissions threshold, then it must report. Any facility that 

fits into one or more of the categories in subsection 95101 for calendar year 2011 or 

later must submit an emissions data report for that year and for subsequent calendar 

years, except as provided in the report cessation provisions of subsection 95101(h) in 

the MRR. The emissions data report must cover all source categories and GHGs for 

Example 2.1.1 

Refineries reported fugitive emissions under the 2008–2010 MRR, but these 

emissions do not apply toward the threshold for compliance under the Capand-Trade Regulation and should be subtracted when comparing 2008–2010 

emissions with the threshold. 

Example 2.1.2 

Glass Manufacturers would have only reported combustion emissions from 

2008-2010, and I will now need to include their process emissions using the 

methods in the revised MRR for comparison to the threshold. 
Cap-and-Trade Regulation Instructional Guidance September 2012 

24 

which calculation methods are provided or referenced in the MRR for the facility type. 

More information about the MRR can be found at 

http://www.arb.ca.gov/cc/reporting/ghg-rep/ghg-rep.htm or by contacting sector-specific 

staff listed at http://www.arb.ca.gov/cc/reporting/ghg-rep/ghg-contacts.htm.

Key Definition 

“Emissions Data Report” means the report that provides the information required by the 

MRR, prepared by an operator or supplier each year and submitted by electronic means 

to ARB. 

2.2 Preliminary Draft List of Covered Entities 

A preliminary list of entities determined to be covered by the Cap-and-Trade Regulation 

is listed at http://www.arb.ca.gov/cc/capandtrade/covered_entities_list.pdf. 

This list includes covered entities with certified non-biomass emissions from 2008 and 

2010 and verified emissions from 2009 that meet or exceed the specified thresholds, 

and is subject to change based on further review and verified emissions reports from 

2010 and 2011. The list does not include entities covered starting in 2015, such as fuel 

suppliers. The preliminary list of covered entities was developed using current MRR 

data that were not collected explicitly to support the Cap-and-Trade Program. 

Amendments to the MRR, which are effective January 1, 2012, may modify the list of 

covered entities (because, for example, some biomass and process emissions have an 

obligation under the Cap-and-Trade Regulation but were not previously required to be 

reported). 

This list neither substitutes for nor supplements the provisions of the Cap-and-Trade 

Regulation and is intended to provide information about program coverage based on the 

best available information as of the creation date indicated in the header of the file. An 

entity not listed here should not assume that it is not covered by the Cap-and-Trade 

Regulation. 

2.3 Other Requirements Affecting Applicability 

2.3.1. Eligibility Requirements for Biomass-Derived Fuels 

Emissions from combustion of biomass-derived fuel which meets the requirements of 

95852.1.1 will not be subject to a compliance obligation when reported as biomass CO2

in an emissions data report that has received a positive or qualified positive emissions 

data verification statement and determined as exempt pursuant to section 95852.2 of 

the Regulation and 95103(g) of the MRR. 

Contracts for purchasing any biomass-derived fuel must be executed prior to January 1, 

2012, and remain in effect or have been renegotiated with the same California operator 

within one year of contract expiration. The delivery of the fuel under the contract must 

commence by 90 days after the execution date of the signed contract, by January 1, 

2012, or 10 days after the date on which the California Energy Commission provides 
Cap-and-Trade Regulation Instructional Guidance September 2012 

25 

notice that the operator’s electricity generating facility is certified as eligible for 

California’s Renewables Portfolio Standard for the contracted biomass-derived fuel, or 

cannot be so certified, provided that the application for certification was submitted to the 

CEC before January 1, 2012. 

The fuel being provided under a contract must meet the provisions listed in section 

95852.1.1(2) through (4). 

As part of a biomass-derived fuel’s eligibility to avoid a compliance obligation, no party 

may sell, trade, give away, claim, or otherwise dispose of any of the carbon credits, 

carbon benefits, carbon emissions reductions, carbon offsets, or allowances, howsoever 

entitled, attributed to the fuel production that would prevent the resulting combustion 

from not having a compliance obligation. This section was necessary to specify that 

Generation of Renewable Energy Credits is allowable and will not prevent a biomassderived fuel that meets this section’s requirements from being exempt from a 

compliance obligation. However, to prevent double-counting of the environmental 

attributes of utilizing biomass-derived fuel, the section prevents another source from 

claiming the benefits realized or using the benefits to fulfill a compliance obligation, or 

for any other purposes.