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 9 - Direct Allocations of California GHG Allowances
Section 95891 - Allocation for Transition Assistance and Leakage Minimization

(a) The Executive Officer shall determine the amount of allowances directly allocated to each eligible covered entity or opt-in covered entity using the product output-based allocation calculation methodology specified in section 95891(b) if the entity conducts an activity listed in both Table 8-1 and Table 9-1. The Executive Officer shall determine the amount of allowances directly allocated to each eligible covered entity or opt-in covered entity using the energy-based allocation calculation methodology specified in section 95891(c) if the entity conducts an activity listed in Table 8-1 but not listed in Table 9-1.

(b) Product Output-Based Allocation Calculation Methodology. The Executive Officer shall calculate the amount of California GHG Allowances directly allocated under a product output-based methodology annually using the following formula:

At = InitialAllocationt + TrueUpt

Where:

"At" is the amount of California GHG allowances directly allocated to the operator of an industrial facility for all activities with a product output-based allocation from budget year "t";

"InitialAllocationt" is the amount of allowances allocated to an entity in advance of budget year "t" for budget year "t" industry assistance. This amount is calculated using previously reported production at the facility from year "t-2," which is an estimate of year "t" production. If the entity will not be performing activity "a" listed in Table 8-1 in year "t", then the entity is not eligible for InitialAllocationt; and

"t" is the budget year from which the direct allocation occurs.

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Where:

"t-2" is the year two years prior to year "t";

"a" is each eligible activity as defined in Table 9-1;

"n" is the number of eligible activities at a facility;

"Oa, t-2" will be calculated by the Executive Officer as the output for activity "a" in year "t-2" as reported to ARB;

"Ba" is the emissions efficiency benchmark per unit of output for activity "a" defined in Table 9-1;

"AFa,t" is the assistance factor for budget year "t" assigned to each activity "a" as specified in Table 8-1;

"ca,t" is the adjustment factor for budget year "t" assigned to each activity "a" to account for cap decline as specified in Table 9-2; and

"TrueUpt" is the amount of true-up allowances allocated to account for changes in production or allocation not properly accounted for in prior allocations. This value shall only be calculated if the entity was covered under the Cap-and-Trade Program in year "t-2" or if the entity received an initial allocation of vintage t-2 allowances but was not a covered entity in year "t-2." In the latter case, a negative true-up will be calculated. These true-up allowances from budget year "t" may be used for compliance for budget year "t-2" or subsequent budget years pursuant to sections 95856(h)(1)(D) and (h)(2)(D). This value is calculated using the following formula:

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Where:

"Oa,t-2" will be calculated by the Executive Officer as the output for activity "a" in year "t-2" as reported to ARB;

"AFa,t-2" is the assistance factor for budget year "t-2" assigned to each activity "a" as specified in Table 8-1; and

"ca,t-2" is the adjustment factor for budget year "t-2" assigned to each activity "a" to account for cap decline as specified in Table 9-2.

Table 9-1: Product-Based Emissions Efficiency Benchmarks

(c) Energy-Based Allocation Calculation Methodology. The Executive Officer shall calculate the amount of California GHG Allowances directly allocated under the energy-based methodology annually using the following formula:

At= (SConsumed * BSteam + FConsumed * BFuel - eSold * BElectricity + ProcessEmissions) * AFa,t * ca,t + TrueUpt,CP3

Where:

"At" is the amount of California GHG allowances directly allocated to the operator of an industrial facility with an energy-based allocation from budget year "t";

"t" is the budget year from which the direct allocation occurs;

"SConsumed" is the historical baseline annual arithmetic mean amount of steam consumed, measured in MMBtu, at the industrial facility for any industrial process, including heating or cooling applications. This value shall exclude any steam used to produce electricity. This value shall exclude steam produced from an onsite cogeneration unit;

"BSteam" is the emissions efficiency benchmark per unit of steam, 0.06244 California GHG Allowances/MMBtu Steam;

"FConsumed" is the historical baseline annual arithmetic mean amount of energy produced due to fuel combustion at the facility, measured in MMBtu. The Executive Officer shall calculate this value based on measured higher heating values or the default higher heating value of the applicable fuel in Table C-1 of subpart C, title 40, Code of Federal Regulations, Part 98 (October 20, 2009). This value shall include any energy from fuel combusted in an onsite electricity generation or cogeneration unit. This value shall exclude energy to generate the steam accounted for in the "SConsumed" term;

"BFuel" is the emissions efficiency benchmark per unit of energy from fuel combustion, 0.05307 California GHG Allowances/MMBtu;

"eSold" is the historical baseline annual arithmetic mean amount of electricity sold or provided for off-site use, measured in MWh;

"BElectricity" is the emissions efficiency benchmark per unit of electricity sold or provided to off-site end users, 0.431 California GHG Allowances/MWh;

"ProcessEmissions" is the historical baseline annual arithmetic mean process emissions, as defined in section 95802(a), for the industrial facility, measured in metric tons of CO2 equivalent;

"AFa,t" is the assistance factor for budget year "t" assigned to the facility for activity "a" as specified in Table 8-1;

"ca,t" is the cap adjustment factor for budget year "t" assigned to the facility for activity "a" to account for cap decline as specified in Table 9-2; and

"TrueUpt,CP3" is the amount of true-up allowances allocated from budget years 2020 and 2021. This value shall only be calculated if the entity has received an initial allowance allocation from budget year t-2. These true-up allowances from budget year "t" may be used for compliance for budget year "t-2" or subsequent budget years pursuant to sections 95856(h)(1)(D) and 95856(h)(2)(D). This value shall be zero for all budget years except 2020 and 2021. For budget years 2020 and 2021, this value is calculated using the following formula:

TrueUpt,CP3 = (SConsumed * BSteam + FConsumed * BFuel - eSold * BElectricity + ProcessEmissions) * AFa,t-2 * ca,t-2 - At-2

Where:

"AFa,t-2" is the assistance factor for budget year "t-2" assigned to each activity "a" as specified in Table 8-1;

"ca,t-2" is the cap adjustment factor for budget year "t-2" assigned to each activity "a" to account for cap decline as specified in Table 9-2; and

"At-2" is the amount of California GHG allowances directly allocated to the operator of the industrial facility with an energy-based allocation from budget year "t-2".

(d) Allocation to University Covered Entities and Public Service Facilities. The Executive Officer shall calculate the amount of allowances directly allocated to a university covered entity or a public service facility using the following methods.

(e) Adjustment of Allowance Allocation to a Legacy Contract Counterparty. Industrial entities that receive an allowance allocation pursuant to section 95891 and are designated as a legacy contract counterparty shall have an adjustment to their allowance allocation. The Executive Officer shall subtract the allowances from the number of California GHG Allowances directly allocated to the legacy contract counterparty pursuant to 95891(b) or (c). If the legacy contract counterparty was not eligible for allocation pursuant to sections 95891(b) or (c) and the legacy contract counterparty has a direct corporate association pursuant to section 95833 with any other covered or opt-in covered entity that was eligible for allocation pursuant to sections 95891(b) or (c) then the entity with a direct corporate association who received industrial allocation pursuant to sections 95891(b) or (c) shall have its allowance allocation adjusted by the equations in this section.

(f) Allocation to Waste-to-Energy Facilities. The Executive Officer shall calculate the amount of allowances directly allocated to waste-to-energy facilities using the following methods.