Further developments as regards carbon markets position limits
- Category: Emissions trading
Another important change that is proposed by the Draft Amendments is the differentiation in computation of position limits. “Annual Allowance Budget” (being the number of allowances issued for the current budget year) according to the proposal will be calculated as the sum of not only the compliance budgets of California but also all external GHG ETS to which California has linked. This change appears rather straight consequence of the general decision for the linkage admissibility.
For future vintages position limits will be calculated separately from the current one, and - if the proposed amendments enter into force - separately for each future vintage. In my opinion, if the position limits should be applied at all, they really ought to be counted for each vintage separately. This seems to be more clear and transparent formula than other.
As regards the allocation of shares of the holding limit among entities that are part of a direct corporate association the rule is sustained that the accounts administrator must be informed of the way for the allocation when the entity is registering.
The legislators decided, however, to delete the provision:
‘If entities with a direct or indirect corporate association do not allocate shares of the holding limit among themselves, the accounts administrator will not record any transfer request which would result in the entities with a direct or indirect corporate association exceeding the holding limit.’
It seems that it was considered that the basic rule requiring the indication of the allocation of the position limit while registering is sufficient (the failure to do comply with this requirement should effect in incomplete registration process and per se the lack of the eligibility to trade in California emission allowances). If the above reasoning is true, the rule that is proposed to be deleted really is superfluous.
The provision stating that the application of the holding limit will treat beneficial holding by an agent as part of the holding of the principal was also deleted (the consequence of the general abandonment of the concept for beneficial holdings – see: Beneficial holdings disclosure requirements for emissions agents under the California cap-and-trade and Major overhaul of the California cap-and-trade - linkage with the Quebec scheme and the KYC-checks substitution for the beneficial holding disclosure provisions).