California carbon market regulators warned on Monday of a potential scam where companies are being offered the opportunity to sell their CER or VER credits in the state’s reserve auctions for a fee.

“Please be aware that ARB does not sell these types of credits at its Reserve Sale,” the ARB said in a market alert on its website, adding that it had not seen any market impact by the scam to date.

“Only ARB allowances from the Allowance Price Containment Reserve may be sold at a Reserve Sale. Further, as set forth in Section 95910 of the Regulation, only allowances issued by ARB or a linked jurisdiction may be sold at ARB’s Joint Greenhouse Gas Allowance Auctions (Auction).”

Canada’s Québec province is currently the only such linked jurisdiction to date, although neighbouring Ontario is working to create and link a cap-and-trade system to the WCI-operated market.

California has so far issued just shy of 20 million offsets for use in the market, which must be from projects hosted in the US. Quebec is yet to issue any offsets.

California’s offset issuance includes over 10 million converted VER units under the state’s ‘early action’ provision, whereby credits previously issued under voluntary programmes run by the Climate Action Reserve, the American Carbon Registry (ACR) and the Verified Carbon Standard (VCS) can be transferred if the project type had been approved by the regulator.

The WCI market does not allow CER offsets from the UN’s CDM, which generates carbon credits from projects located in the developing world that can be used by richer states to meet targets under the Kyoto Protocol, a treaty which both the US and Canada are not currently parties to.

“ARB has been and will continue to coordinate with law enforcement authorities and other market regulatorsto address any potential fraudulent activity,” the ARB added.

“At this time, ARB has not observed any impact on the California-Québec Linked Cap-and-Trade Program,” it said.

By Ben Garside –  ben@carbon-pulse.com