Duringthe first quarter of the year, more than 366 million allowances and offsetswere held in compliance accounts of covered entities in California and Quebec,according to quarterly data posted April 5 by the California Air ResourcesBoard. This compares to about 300 million allowances and offsets held in suchaccounts during the fourth quarter of 2015.
Atthe end of the first quarter of 2016, a total of more than 254.3 millionvintage 2015 allowances and more than 1.7 million vintage 2017 allowances hadbeen retired. During the final quarter of 2015, a total of about 220.0 millionvintage 2015 allowances and more than 1.7 million vintage 2017 allowances hadbeen retired.
TheCalifornia cap-and-trade system covers emissions from utility and industrialfacilities, which emit more than 25,000 tonnes of carbon each year, as well asentities that opted into the program. Those facilities must purchase eitherstate carbon allowances or carbon offsets to account for their annual emissionsunder the annual emissions cap. The cap is reduced annually until the 2020target is reached.
TheCalifornia cap-and-trade program has three compliance periods. The firstcompliance phase went into effect Jan. 1, 2013, and ran through Dec. 31, 2014.The first phase of the program included all major industrial sources, alongwith electric utilities. Jan. 1, 2015, marked the start of the second phase ofthe cap-and trade program, and brought in distributors of transportation fuelsand natural gas under the caps. The second compliance period ends Dec. 31, 2017.
Upto 8% of an entity's emissions can be covered using offset credits fromcertified projects. Carbon offset credits can be purchased in the secondarymarket. On an annual basis, California requires emitters to surrender 30% ofthe prior year's emissions. Entities must make up the difference at the end ofthe compliance period.