Cap-and-Trade Regulation Instruct ional Guidance September 2012

California Air Resources Board 19 

### CHAPTER 2: IS MY COMPANY SU BJECT 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 Pr ogram if it is in a sector listed in

Table 2.1 and has covered emissions that m eet or exceed the applicability threshold in any data year from 2009 through 2012. If your fa cility 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 exce eds the applicability threshold for the first time in any year following 2014, your facilit y becomes a covered entity during that year.

Once a covered entity, your facility will cont inue 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, uni ts, and supply operations subject to reporting

. If your facility’s emissions have dropped below 25,000 metric tons CO 2 e for an entire compliance period, then y our facility is no longer a cove red entity, effective at the beginning of the next compliance period.

The entity with operational cont rol over the covered sources will be responsible for the compliance obligation surrender under the Cap-and-Trade Regulation.

Nothing in this document supplements the prov isions of the Cap-an d-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 ob ligation as specified in subarticle 7 of the Cap-and-Trade Regulatio n; and that has emitt ed, produced, imported, manufactured, or delivered in 2008 or any subsequent year more than the applicable threshold level specified in se ction 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 comp liance period only considers em issions from data years of

2013 and 2014.Cap-and-Trade Regulation Instructional Guidance September 201220Table 2.1 Covered EntitiesSectorEmission Source Applicability Threshold When CoveredCarbon Dioxide SuppliersSupplied CO2≥25,000 metric tons of CO2e January 1, 2013Cement ProductionStationary Combustion Emissions≥25,000 metric tons of CO2e January 1, 2013Process EmissionsCogenerationStationary Combustion Emissions≥25,000 metric tons of CO2e January 1, 2013Electricity- In-state GeneratorsStationary Combustion Emissions fromElectricity Generating Facilities locatedin California (note – in 2015 natural gascomes into the program and capturesplants emitting˂25,000 metric tonsCO2e)≥25,000 metric tons of CO2e January 1, 2013Electricity ImportersImports from Specified SourcesA. All emissions from importsgenerated by sources with≥25,000 metric tons of CO2eemissionsA. January 1,2013B. All emissions are covered.There is no threshold.B. January 1,2015Imports from Unspecified Sources All imports from unspecifiedsources are included; there is nothreshold.January 1, 2015Electricity- Self-GenerationStationary Combustion Emissions≥25,000 metric tons of CO2e January 1, 2013Cap-and-Trade Regulation Instructional Guidance September 201221SectorEmission SourceApplicability ThresholdWhen CoveredGlass ProductionProcess and Stationary Combustion Emissions≥25,000 metric tons ofCO2eJanuary 1, 2013Hydrogen ProductionStationary Combustion≥25,000 metric tons ofCO2eJanuary 1, 2013Hydrogen ProductionIron and SteelProductionProcess Emissions≥25,000 metric tons ofCO2e≥25,000 metric tons ofCO2eJanuary 1, 2013January 1, 2013Stationary Combustion EmissionsIron and SteelProductionLime ManufacturingProcess Emissions≥25,000 metric tons ofCO2e≥25,000 metric tons ofCO2eJanuary 1, 2013January 1, 2013Stationary Combustion EmissionsLime ManufacturingNitric Acid ProductionProcess Emissions≥25,000 metric tons ofCO2e≥25,000 metric tons ofCO2eJanuary 1, 2013January 1, 2013Stationary Combustion EmissionsNitric Acid ProductionPetroleum and NaturalGas SystemsProcess Emissions≥25,000 metric tons ofCO2e≥25,000 metric tons ofCO2eJanuary 1, 2013January 1, 2013Stationary CombustionPetroleum and NaturalGas SystemsProcess Vented Emissions≥25,000 metric tons ofCO2eJanuary 1, 2013Flares and Destruction DevicesCap-and-Trade Regulation Instructional Guidance September 201222SectorEmission SourceApplicability ThresholdWhen CoveredPetroleum RefiningStationary Combustion Emissions≥25,000 metric tons ofCO2eJanuary 1, 2013Process EmissionsCatalyst RegenerationFlares and Destruction DevicesPulp and PaperManufacturingStationary Combustion Emissions≥25,000 metric tons ofCO2eJanuary 1, 2013Process EmissionsStationary CombustionStationary Combustion Emissions≥25,000 metric tons ofCO2eJanuary 1, 2013Suppliers of LiquefiedPetroleum GasCombustion Emissions from Total Volume ofLiquefied Petroleum Gas Supplied≥25,000 metric tons ofCO2eJanuary 1, 2015Suppliers of Natural GasCombustion Emissions from the TotalVolume of Natural Gas Delivered to NonCovered Entities≥25,000 metric tons ofCO2eJanuary 1, 2015Suppliers of RBOB andDistillate Fuel OilCombustion Emissions from Total Volume ofRBOB and Distillate Fuel Oil Supplied≥25,000 metric tons ofCO2eJanuary 1, 2015Cap-and-Trade Regulation Instruct ional Guidance September 2012

23 

### 2.1 How Do I Know if My CO 2 

### e Emissions Exceed the Applicability

Threshold?

The inclusion threshold is based on the subs et of emissions reported and verified under the MRR that generate a comp liance obligation. See sect ion 95852 of the Cap-andTrade Regulation for more details on emi ssions categories used to calculate a compliance obligation. For most facilities, the total emissions for any year during the period 2008–2010 (excluding biomass CO 2 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 presenc e of excluded or newly included process, vented, or fugitive emissions (see the examples).

Additionally, biomass-derived fuels that were reported in 20 08–2010 have to meet stricter standards beginning 2011, and may count toward t he compliance obligation in

some situations.

Electricity importers that impor ted 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 betw een years 2008–2010 are covered entities if any of the source s emitted more than 25,000 MTCO 2 e. In almost all cases specified imports will be from lar ge generators that exceed 25,000 MTCO 2 e emissions. So a safe assumption would be that any ent ity with specified im ports will be a covered entity.

If your facility meets the applicability requi rements found in section 95101 of the MRR for both source category and emissions threshol d, 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 emissi ons data report for that year and for subsequent calendar years, except as provided in the report ce ssation 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 emissi ons under the 2008–2010 MRR, but these emissions do not apply toward the th reshold for compliance under the Capand-Trade Regulation and should be s ubtracted 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 Instruct ional Guidance September 2012

24 which calculation methods are provided or re ferenced 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/c apandtrade/covered_entities_list.pdf

.

This list includes covered entities with ce rtified 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 re view and verified emissions reports from

2010 and 2011. The list does not include entities covered starting in 2015, such as fuel suppliers. The preliminary lis t of covered entities was developed using current MRR data that were not collected explicit ly to support the Cap-and-Trade Program.
Amendments to the MRR, whic h are effective January 1, 2012, may modify the list of covered entities (because, for example, so me biomass and process emissions have an obligation under the Cap-and-Tr ade Regulation but were not previously required to be reported).

This list neither substitutes for nor supplem ents the provisions of the Cap-and-Trade Regulation and is intended to provide in formation 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-deriv ed fuel which meets the requirements of 95852.1.1 will not be subject to a complianc e obligation when reported as biomass CO 2 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 renegot iated 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 providesCap-and-Trade Regulation Instruct ional Guidance September 2012

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

California’s Renewables Portfolio Standard fo r the contracted biomass-derived fuel, or cannot be so certified, provided that the application for certif ication was submitted to the CEC before January 1, 2012.

The fuel being provided under a contract mu st meet the provisions listed in section 95852.1.1(2) through (4).

As part of a biomass-derived fuel’s eligibilit y to avoid a compliance obligation, no party may sell, trade, give away, claim, or other wise dispose of any of the carbon credits, carbon benefits, carbon emissi ons reductions, carbon offsets, or allowances, howsoever entitled, attributed to the fuel production t hat 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 bei ng exempt from a compliance obligation. However, to pr event double-counting of the environmental attributes of utilizing biom ass-derived fuel, the section prevents another source from claiming the benefits realized or using the benef its to fulfill a comp liance obligation, or for any other purposes.