California Code of Regulations
Title 17 - Public Health
Division 3 - Air Resources
Chapter 1 - Air Resources Board
Subchapter 10 - Climate Change
Article 5 - California Cap on Greenhouse Gas Emissions and Market-Based Compliance Mechanisms
Subarticle 10 - Auction and Sale of California Greenhouse Gas Allowances
Section 95911 - Format for Auction of California GHG Allowances

Universal Citation: 17 CA Code of Regs 95911

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) Auction Bidding Format.

(1) The auction will consist of a single round of bidding.

(2) Bids will be sealed.

(3) Bid quantities must be submitted as multiples of 1,000 California GHG allowances.

(4) Entities registered into the California Cap-and-Trade Program must submit bids in U.S. dollars and whole cents.

(5) The allowances for auction in section 95911(a)(3) will also include allowances from a jurisdiction operating an External GHG ETS system to which California has linked pursuant to subarticle 12.

(b) Auction Reserve Price Schedule.

(1) Each auction will be conducted with an auction reserve price.

(2) No allowances will be sold at bids lower than the auction reserve price.

(1) The Auction Reserve Price for vintage 2013 allowances auctioned in 2012 will be $10 per allowance. For Advance Auctions conducted in 2012, the Reserve Price shall be $10 per allowance for vintage 2015 allowances.

(2) The Auction Reserve Price will be announced on the first day in December that is a business day in California and in any jurisdiction operating an External GHG ETS to which California has linked pursuant to subarticle 12. The Auction Reserve Price shall be stated in U.S. dollars and in the currency (or currencies) used in any External GHG ETS to which California has linked pursuant to subarticle 12.

(3) The Auction Administrator will calculate the Auction Reserve Price using the following procedure:

(A) The Auction Reserve Price in U.S. dollars shall be the U.S. dollar Auction Reserve Price for the previous calendar year increased annually by 5 percent plus the rate of inflation as measured by the most recently available twelve months of the Consumer Price Index for All Urban Consumers.

(B) Prior to the opening of the auction window on the day of the auction, the Auction Administrator shall announce the Auction Reserve Price.

(C) The auction administrator shall set the exchange rate as the most recently available daily buying rate for U.S. and Canadian dollars as published by the Bank of Canada, and shall announce the exchange rate prior to the opening of the auction window.

(D) The Auction Reserve Price in Canadian dollars shall be the highest of the minimum prices set and published or posted in Canadian dollars in any jurisdiction operating an External GHG ETS to which California has linked pursuant to subarticle 12.

(E) The auction administrator will use the announced exchange rate to convert to a common currency the Auction Reserve Prices previously calculated separately in U.S. and Canadian dollars. The auction administrator will set the Auction Reserve Price equal to the higher of the two values.

(4) The Auction Reserve Price will be announced prior to the opening of the auction window at 10 a.m. Pacific Standard Time (or Pacific Daylight Time when in effect) on the day of the auction, and will be in effect until the window closes at 1 p.m. Pacific Standard Time (or Pacific Daylight Time when in effect).

(d) Auction Purchase Limit.

(1) The auction purchase limit is the maximum number of allowances offered at each Current and Advance Auction which can be purchased by any entity or group of entities with a direct corporate association.

(2) Purchase Limit Values.

(A) The purchase limit for covered entities, electrical distribution utilities, opt-in covered entities, or direct corporate associations containing any of these types of entities will be 25 percent of the allowances offered for auction at both the Current and Advance Auctions.

(B) The purchase limit for voluntarily associated entities or direct corporate associations comprised entirely of these entities is four percent of the allowances offered for auction at the Current and Advance Auctions.

(3) Auction Purchase Limits for Members of a Direct Corporate Association.

(A) Entities that are part of a direct corporate association must allocate a specified percentage share of the association's purchase limit to each member of the direct corporate association. The sum of the percentage shares allocated among the entities must equal one hundred percent. The purchase limit for each associated entity is its allocated percentage share multiplied by the auction purchase limit assigned to the association.

(B) For voluntarily associated entities that are part of a corporate association containing covered entities, opt-in covered entities, or electrical distribution utilities, the total purchase limit assigned to voluntarily associated entities within the corporate association must be less than or equal to four percent of the allowances to be auctioned at Current and Advance Auctions.

(e) Determination of Winning Bidders and Settlement Price. The following process shall be used to determine winning bidders, amounts won, and a single auction settlement price:

(1) Each bid will consist of a price and the quantity of allowances, in multiples of 1,000 CA GHG Allowances, desired at that price.

(2) Each bidder may submit multiple bids.

(3) Beginning with the highest bid price, bids from each bidder will be considered in declining order by price, and the auction operator shall reject a bid for a bundle of 1,000 allowances:

(A) If acceptance of the bid would result in violation of the purchase limit pursuant to sections 95911(d) and 95914;

(B) If acceptance of the bid would result in violation of the holding limit pursuant to sections 95914 and 95920(b); or

(C) If acceptance of the bid would result in a total value of accepted bids for an auction participant greater than the value of the bid guarantee submitted by the auction participant pursuant to section 95912(h).

(4) Bids from all bidders will be ranked from highest to lowest by price. Beginning with the highest bid and proceeding to successively lower bids, entities submitting bids at each price will be sold allowances until:

(A) The next lower bid price is less than the auction reserve price, in which case the current price becomes the auction settlement price; or

(B) The total quantity of allowances contained in the bids at the next lower bid price is greater than or equal to the number of allowances yet to be sold, in which instance, the next lower bid price becomes the auction settlement price and the procedure for resolution of tie bids in section 95911(e)(5) shall apply.

(5) Resolution of tie bids. If the quantity of allowances contained in the bids placed at the auction settlement price is greater than the quantity of allowances available to be sold at that price, then:

(A) The auction administrator will calculate the share of the remaining allowances to be distributed to each entity bidding at the auction settlement price by dividing the quantity bid by that entity and accepted by the auction administrator by the total quantity of bids at the settlement price which were accepted by the auction administrator;

(B) The auction administrator will calculate the number of allowances distributed to each bidding entity by multiplying the bidding entity's share calculated in section 95911(e)(5)(A) by the number of allowances remaining, rounding the number down to the nearest whole number; and

(C) To distribute any remaining allowances, the auction administrator will assign a random number to each entity bidding at the auction settlement price. Beginning with the lowest random number, the auction administrator will assign one allowance to the last bundle purchased by each entity until the remaining allowances have been assigned.

(f) If the quantity of bids accepted by the Auction Administrator is less than the number of allowances offered for sale then some allowances will remain unsold.

(1) If allowances remain unsold at auction, the auction administrator will fulfill winning bids with allowances from consignment and other sources in the following order:

(A) Allowances consigned to auction pursuant to section 95910(d)(2);

(B) Allowances consigned from limited use holding accounts pursuant to section 95910(d)(1);

(D) Allowances redesignated to the auction pursuant to section 95911(f)(3); and

(E) Allowances designated by ARB for auction pursuant to sections 95910(c)(1)(B), (c)(2)(B), and (c)(2)(C).

(2) When there are insufficient winning bids to exhaust the allowances from a consignment source in section 95911(f)(1), the auction administrator will sell an equal proportion of allowances from each consigning entity in that source as follows:

(A) The auction administrator will calculate the number of allowances sold on behalf of each consigning entity by multiplying the consigning entity's share of the total consigned allowances by the number of consigned allowances sold, rounding the number down to the nearest whole number; and

(B) To distribute any remaining allowances, the auction administrator will assign a random number to each entity consigning allowances. Beginning with the lowest random number, the auction administrator will assign one allowance to each entity until the remaining allowances have been assigned.

(3) Disposition of Allowances Designated by ARB for Auction Which Remain Unsold.

(A) Allowances designated by ARB pursuant to section 95910(c)(1)(B), (c)(2)(B), and (c)(2)(C) for an auction which remain unsold shall be kept in the Auction Holding Account for later auction.

(B) Allowances used to fulfill an untimely surrender obligation transferred by the Executive Officer pursuant to section 95857(d) for an auction which remain unsold shall be kept in the Auction Holding Account for later auction.

(C) Allowances designated by ARB for auction which remain unsold will be re-designated for auction after two consecutive auctions have resulted in an auction settlement price above the Auction Reserve Price. If future vintage allowances remain unsold at the end of the calendar year for which they were designated for sale at Advance Auction, they will remain in the Auction Holding Account until their vintage year. They will then be designated for the Current Auction pursuant to section 95910(c)(1)(B).

(D) The number of allowances re-designated to a subsequent Current or Advance Auction will not exceed 25 percent of allowances already designated by ARB for that auction. Allowances which remain unsold above that level will be held in the Auction Account for later auction.

(4) Disposition of Consigned Allowances Remaining Unsold at Auction.

(A) Allowances consigned to auction from limited use holding accounts that remain unsold at auction will be held in the Auction Holding Account and offered for sale at each auction until sold.

(B) Allowances consigned to auction pursuant to section 95910(d)(2) that remain unsold at auction will be held in the Auction Holding Account and offered for sale at each auction until sold.

(g) Disposition of Allowances Remaining Unsold at Auction for More than Twenty-Four Months. ARB will transfer current vintage allowances that remain unsold in the Auction Holding Account for more than 24 months to the Reserve. ARB will transfer these allowances no later than the surrender deadlines specified in sections 95856(d) and (f). Current vintage allowances designated by ARB pursuant to this section do not include allowances consigned to auction pursuant to section 95910(d).

(h) Retirement of Future Vintage Allowances to Cover Unresolved Emissions Obligations Resulting from Covered Entity Bankruptcy.

(1) Starting in 2019, ARB will retire future vintage allowances equivalent to the unsurrendered compliance obligation of any bankrupt entity, where such compliance obligation is not otherwise accounted for by section 95835(b). For the avoidance of doubt, the unsurrendered compliance obligation of the bankrupt entity consists of the quantity of verified reported emissions, assigned emissions, and emissions that have been released from the subject facility but not reported yet for which the covered entity would be required to submit compliance instruments to CARB absent the bankruptcy, but that the covered entity has not surrendered to CARB at the time of completion of the bankruptcy proceeding. ARB will retire allowances from the allowance budget two years after the current allowance budget year that is not already allocated to entities pursuant to sections 95870(a) and 95871(a).

1. New section filed 12-13-2011; operative 1-1-2012 pursuant to Government Code section 11343.4 (Register 2011, No. 50).
2. Amendment filed 8-29-2012; operative 9-1-2012 pursuant to Government Code section 11343.4 (Register 2012, No. 35).
3. New subsections (a)(5), (c)(3)(C)-(E) and (c)(5) filed 6-24-2013; operative 10-1-2013 (Register 2013, No. 26).
4. Amendment of subsections (c)(3), (c)(4), (d)(2) and (d)(4)(A), new subsections (d)(5)-(6) and amendment of subsections (e)(3)(B)-(C) filed 6-26-2014; operative 7-1-2014 pursuant to Government Code section 11343.4(b)(3) (Register 2014, No. 26).
5. Amendment filed 9-18-2017; operative 10-1-2017 pursuant to Government Code section 11343.4(b)(3) (Register 2017, No. 38).
6. Amendment of subsection (c)(3)(D) filed 5-30-2018; operative 7-1-2018 (Register 2018, No. 22).
7. Amendment filed 3-29-2019; operative 3-29-2019 pursuant to Government Code section 11343.4(b)(3) (Register 2019, No. 13).

Note: Authority cited: Sections 38510, 38560, 38562, 38570, 38571, 38580, 39600 and 39601, Health and Safety Code. Reference: Sections 38530, 38560.5, 38564, 38565, 38570 and 39600, Health and Safety Code.

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