The issue of reporting corporate associations with entities not going to participate in the California cap-and-trade program


To consolidate accounts in the California carbon market in the form of CEA the effective disclosure by the firms of corporate associations is needed.  When multiple entities in the program have a financial interest in each other, the relevant disclosures are required by Section 95833 of the California Cap-and-Trade Regulation.


The question may however appear whether an entity need to report every entity with which it has a corporate association even if the other entity is not going to participate in the California cap-and-trade program.


The document published by the California Air Resources Board ‘Guidance for Compliance Instrument Tracking System Service (CITSS) Account Application Corporate Associations and Structure Form’ makes this issue clear by giving the following example: covered entities A and C may be 100% owned by an entity B that is not required to register. Entities A and C must report the corporate association information for B and all of the subsidiaries of B.


The conclusion is that the California Cap-and-Trade Regulation requires identification of associated entities which are not required to register when a corporate association exists through a chain of control or ownership between entities that are registered and that are not registered.


As accounts may be consolidated prior to all entities subject to the Regulation applying for accounts in the CITSS, all entities subject to the Regulation must be reported regardless of whether they apply for an account in the CITSS. The above-mentioned document has also given a practical clue that if an entity is reported that does not apply for an account in the CITSS, then the CITSS Entity ID column can be left blank.



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