This page last reviewed December 2, 2013

Allowance Allocation 

Allocation refers to how ARB distributes the allowances it issues.  

ARB allocates allowances in three primary methods:

  1. Direct distribution to covered entities for industrial assistance
  2. Direct distribution to electrical distribution utilities on behalf of ratepayers
  3. Selling allowances through quarterly State run auctions

In addition, a small percentage of allowances have been set-aside for the allowance price containment reserve (see Cap-and-Trade Regulation 95870(a) and Staff Report Appendix G) and the Voluntary Renewable Electricity Program (see 95870(c)).

This webpage only details the direct distribution to industrial entities and electrical distribution utilities. For more information on distribution of allowances through the auction, please visit the auction information website:

Allowances Allocation for Industrial Assistance

Sections 95870(e), 95890, and 95891 describe allowance allocation for industrial assistance.

ARB allocates to industrial facilities for leakage prevention and transition assistance. For more information on leakage prevention, please review Staff Report: Initial Statement of Reasons Section II-H and Appendix K.

To receive allocation, an industrial facility must have an activity and North American Industrial Classification System (NAICS) code in Table 8-1 of the Cap-and-Trade Program Regulation. This table identifies the leakage risk and assistance factor of each of the activities.

The summary of 2014 vintage allowances allocated for industrial assistance are available here. The allowance allocation is aggregated by NAICS code(s) so as to not reveal any confidential business information.

The distribution of industrial assistance allocations is determined using a combination of product-based and energy-based methodologies.

Product-Based Allocation Methodology

A facility will receive allowance allocations using the product-based allocation methodology if it is both eligible for allocation from Table 8-1 and has an activity and product in Table 9-1. Product-based allocation uses the equations detailed in Section 95891(b). To see information regarding the development of product benchmarks, please review Appendix B: Development of Product Benchmarks for Allowance Allocation.

For the petroleum refining sector, please visit the refinery allowance allocation web page.

Energy-Based Allocation Methodology

A facility will receive allowances under the energy-based allocation methodology if it is eligible for allocation from Table 8-1 but does not have an activity and product in Table 9-1. Energy-based allocation is described in Section 95891 (c).

For new facilities eligible for allowance allocation under the energy-based allocation methodology, additional data on steam and fuel consumption needs to be collected. For more information and forms, please visit the energy-based allocation web page

Allowance Allocation to Electrical Distribution Utilities on Behalf of Ratepayers

The relevant regulation sections describing allowance allocation to electrical distribution utilities are Sections 95870(d), 95890, and 95892.

To ensure that electricity ratepayers do not experience sudden increases in their electricity bills associated with the Cap-and-Trade Regulation, ARB allocates allowances for free to electrical distribution utilities on behalf of ratepayers.  The regulation stipulates that electrical distribution utilities must use the value associated with these allowances for the benefit of retail ratepayers of each electrical distribution utility, consistent with the goals of AB 32.  They may not be used for the benefit of entities or persons other than their ratepayers.

To see information regarding the development of the allocation to the electrical distribution utilities, please review Appendix 1: Staff Proposal for 15-day Changes to Address Electricity Sector Allowance Allocation and Appendix A:  Staff Proposal for Allocating Allowances to Electricity Distribution Utilities.

As stated in Section 95892, investor owned utilities must consign allowances into their limited use holding account whereby those allowances are consigned to the auction. Publically owned utilities, however, can determine how to distribute their allowances between their holding account or limited use holding account. Prior to receiving a direct allocation of allowances, publicly owned electric utilities or electrical cooperatives shall inform the Executive Officer of the share of their allowances to be placed in each of the accounts. For more information, please review the information and forms listed on the POU allowance distribution web page.

For questions or comments, please contact David Allgood at (916) 445-8238