# COMAR Title 26 — Department of the Environment ## Subtitle 09 — Maryland Co2 Budget Trading Program ### Chapter 04 — Auctions **Authority:** Environment Article, §§1-101, 1-404, 2-103, and 2-1002(g), Annotated Code of Maryland **Administrative History:** Effective date: **Administrative History:** Regulations .01—.13 adopted as an emergency provision effective April 4, 2008 (35:9 Md. R. 895); adopted permanently effective August 25, 2008 (35:17 Md. R. 1490) **Administrative History:** Regulation .02C amended effective August 6, 2012 (39:15 Md. R. 964) **Administrative History:** Regulation .03B amended as an emergency provision effective December 28, 2009 (37:4 Md. R. 336); amended permanently effective May 3, 2010 (37:9 Md. R. 674) **Administrative History:** Regulation .03B amended effective August 6, 2012 (39:15 Md. R. 964) **Administrative History:** Regulation .05F amended effective August 6, 2012 (39:15 Md. R. 964) **Administrative History:** Regulation .08B amended as an emergency provision effective December 28, 2009 (37:4 Md. R. 336); amended permanently effective May 3, 2010 (37:9 Md. R. 674) **Administrative History:** Regulation .09A amended as an emergency provision effective December 28, 2009 (37:4 Md. R. 336); amended permanently effective May 3, 2010 (37:9 Md. R. 674) **Administrative History:** Chapter revised effective January 6, 2013 (40:26 Md. R. 2165) **Administrative History:** Regulation .03B amended effective March 30, 2026 (53:6 Md. R. 292) **Administrative History:** Regulation .06B amended effective December 31, 2018 (45:26 Md. R. 1249); March 30, 2026 (53:6 Md. R. 292) #### Regulation .01 Purpose. *COMAR 26.09.04.01* The purpose of this chapter is to provide for the administration and implementation of CO2 allowance auctions under the Maryland CO2 Budget Trading Program. #### Regulation .02 Multistate Auctions. *COMAR 26.09.04.02* A. The Department, in consultation with the Auction Advisory Committee (Committee), shall determine whether to participate in multistate regional CO2 allowance auctions in coordination with other participating states or to conduct Maryland-only auctions. B. In making its determination, the Department and the Committee shall consider whether: (1) A multistate regional auction process, which includes the Department and other participating states, has been jointly established and is operationally in place; (2) A multistate regional auction process will result in fair market prices for allowances at reasonable transaction costs; and (3) A multistate regional auction process is consistent with the auction processes described in this chapter. C. The Department shall convene the Committee at least quarterly to review the status of the Consumer Energy Efficiency Account, the CO2 Allowance Contingency Account, the CO2 Allowance Retirement Account, and the Set-aside accounts. #### Regulation .03 Consumer Energy Efficiency Account. *COMAR 26.09.04.03* A. The Department shall establish the Consumer Energy Efficiency Account, referred to in this subtitle as the Account, as described in COMAR 26.09.02. Each allowance to be auctioned shall be identified by its serial number as described in COMAR 26.09.02. B. The Department shall administer the Account in such a manner that allowances allocated to the Account or transferred to it from the Long Term Contract Set-aside Account, the Voluntary Renewable Set-aside Account, the Clean Generation Set-aside Account, or the CO2 Allowance Contingency Account may be offered for sale in CO2 allowance auctions as described in COMAR 26.09.02. C. The proceeds of the auction shall be placed into the Fund. D. The Department shall use the proceeds it receives from the Fund for climate change programs. #### Regulation .04 Implementation of CO *COMAR 26.09.04.04* A. The Department shall design, implement, and administer CO2 allowance auctions in accordance with the objectives of this subtitle. B. Implementation and administrative support functions for any auction conducted may be performed by an agent of the Department, if the agent performs all functions under the direction and oversight of the Department. #### Regulation .05 Commencement, Frequency, and Quantity of CO *COMAR 26.09.04.05* A. The Department shall allocate allowances to the Account for auction as described in COMAR 26.09.02. B. The initial auction shall be conducted at a time and in a manner determined by the Department in consultation with the Committee. C. Frequency. Auctions shall be held at least annually and may be held as often as necessary to meet the objectives of this subtitle, at the Department's discretion and in consultation with the Committee. D. Participation. The Department shall determine whether an auction will be an open auction or a closed auction. E. Reserve Price. Before any auction, the Department may set a binding reserve price to be accepted for CO2 allowances in the auction, which may or may not be disclosed to the public or to prospective bidders. F. CO2 allowances left unsold in any auction shall be transferred, in quantities and in a manner determined by the Department in consultation with the Committee, to: (1) The CO2 Allowance Contingency Account for future distribution to other accounts by the Department in consultation with the Committee; (2) The Consumer Energy Efficiency Account for sale in subsequent auctions; or (3) The CO2 Allowance Retirement Account for permanent retirement. #### Regulation .06 Auction of CO *COMAR 26.09.04.06* A. The following rules shall apply to each allowance auction. The Department may specify additional information in the auction notice for each auction. Such additional information may include the time and location of the auction, auction rules, registration deadlines, and any additional information deemed necessary or useful. B. General Requirements. (1) The Department shall include the following information in the auction notice for each auction: (a) The number of CO2 allowances offered for sale at the auction, not including any CO2 CCR tier 1 or CO2 CCR tier 2 allowances; (b) The number of CO 2 CCR tier 1 allowances that will be offered for sale at the auction if the condition of §B(2)(a) of this regulation is met; (c) The number of CO 2 CCR tier 2 allowances that will be offered for sale at the auction if the condition of §B(2)(c) of this regulation is met; (d) The minimum reserve price for the auction; (e) The CCR tier 1 trigger price for the auction; and (f) The CCR tier 2 trigger price for the auction. (2) The Department or its agent shall follow these rules for the sale of CO2 CCR allowances: (a) CO2 CCR tier 1 allowances shall only be sold at an auction in which total demand for allowances, above the CCR tier 1 trigger price, exceeds the number of CO2 allowances available for purchase at the auction, not including any CO2 CCR tier 1 or tier 2 allowances; (b) If the condition of §B(2)(a) of this regulation is met at an auction, then the number of CO2 CCR tier 1 allowances offered for sale by the Department at the auction shall be equal to the number of CO2 CCR tier 1 allowances in the Consumer Energy Efficiency Account at the time of the auction; (c) CO2 CCR tier 2 allowances shall only be sold at an auction in which total demand for allowances, above the CCR tier 2 trigger price, exceeds the number of CO2 allowances available for purchase at the auction, not including any CO2 CCR tier 2 allowances; (d) If the condition of §B(2)(c) of this regulation is met at an auction, then the number of CO 2 CCR tier 2 allowances offered for sale by the Department at the auction shall be equal to the number of CO 2 CCR tier 2 allowances in the Consumer Energy Efficiency Account at the time of the auction; (e) After all of the CO2 CCR tier 1 allowances in the Consumer Energy Efficiency Account have been sold in a given calendar year, no additional CO2 CCR tier 1 allowances will be offered for sale at any auction for the remainder of that calendar year, even if the condition of §B(2)(a) of this regulation is met at an auction; (f) After all of the CO2 CCR tier 2 allowances in the Consumer Energy Efficiency Account have been sold in a given calendar year, no addition CO2 CCR allowances will be offered for sale at any auction for the remainder of that calendar year, even if the condition of §B(2)(c) of this regulation is met at an auction; (g) At an auction in which CO2 CCR tier 1 allowances are sold, but no CO2 CCR tier 2 allowances are sold, the reserve price for the auction shall be the CCR tier 1 trigger price; (h) At an auction in which CO 2 CCR tier 2 allowances are sold, the reserve price for the auction shall be the CCR tier 2 trigger price; (i) If the condition of §B(2)(a) of this regulation is not satisfied, no CO2 CCR tier 1 or CO2 CCR tier 2 allowances shall be offered for sale at the auction, and the reserve price for the auction shall be equal to the minimum reserve prices; and (j) If the condition of §B(2)(c) of this regulation is not satisfied, no CO 2 CCR tier 2 allowances shall be offered for sale at the auction, and the reserve price for the auction shall be determined as follows: (i) If the condition of §B(2)(a) of this regulation is met, the reserve price shall be equal to the CCR tier 1 trigger price; and (ii) If the condition of §B(2)(a) of this regulation is not met, the reserve price shall be equal to the minimum reserve price. (3) The Department shall implement the reserve price in the following manner: (a) No allowances shall be sold at any auction for a price below the reserve price for that auction; and (b) If the total demand for allowances at an auction is less than or equal to the total number of allowances made available for sale in that auction, then the auction clearing price for the auction shall be the reserve price. #### Regulation .07 Auction Formats. *COMAR 26.09.04.07* A. In conducting auctions, the Department may employ any of the following auction formats, or an auction format consisting of any or all of the components in §§B—E of this regulation. B. Sealed Bid, Discriminatory Price. In this format: (1) There is a single or multiple round sealed-bid auction in which the bidders may submit multiple bids at different prices; and (2) Allowances are awarded to the highest bidders at their own bid price. C. Sealed Bid, Uniform Price. In this format: (1) There is a single or multiple round sealed-bid auction in which bidders may submit multiple bids at different prices; and (2) The price paid by all awarded bidders shall be uniform. D. Ascending Price, Multiple Round. In this format: (1) There is a multiple round auction starting with an opening price with increases for each round by predetermined increments; (2) In each round, bidders offer the quantity they are willing to purchase at the posted price; (3) Rounds continue until demand exceeds the quantity offered for sale; and (4) At the completion of the final round, the Department shall award allowances as follows: (a) Bidders who bid above the final price shall receive full allocations; (b) Bidders who bid at the final price shall receive full allocations in time-stamp order until the quantity of allowances offered for sale is exhausted; (c) Bidders who bid at the final price but late in the auction may receive prorated allocations or no allocations at all; and (d) The Department may incorporate alternate award scenarios consistent with those established by other participating states. E. Descending Price, Multiple Round. In this format: (1) There is a multiround auction starting with a high provisional price, which falls in each round by predetermined increments; (2) In each round, the bidder may lock in some purchases at the current provisional price or the bidder may wait for the price to fall; and (3) The auction rounds cease when the number of allowances locked in is greater than or equal to the quantity of allowances being offered. F. The Department may establish a limit on the number of allowances that can be purchased by any one bidder at an auction. This limit shall be consistent with limits established in other participating states. #### Regulation .08 Participant Eligibility. *COMAR 26.09.04.08* A. The Department, in consultation with the Committee, shall determine which categories of eligible bidders will be authorized to submit bids in each auction. Notification of the categories shall be included in each notice of CO2 allowance auction. B. Eligible categories of bidders for an auction may include: (1) Owners of CO2 budget units located in Maryland; (2) Owners of CO2 budget units located outside of Maryland but in a participating state with final CO2 budget trading rules in place at the time of the auction; and (3) Other market participants, including but not limited to, brokers, environmental groups, financial and investment institutions, and owners of generation units, located in or outside of the participating states with final CO2 budget trading rules in place at the time of the auction. C. In order to participate in auctions, eligible bidders shall provide financial security in the form of a bond, cash, certified funds, or an irrevocable standby letter of credit, in a form acceptable to the Department. D. A bidder's eligibility to bid in any auction may be limited to the level of financial security provided. E. A bidder's financial security may be forfeited and retained by the Department in the event the bidder's offer is accepted in an auction and the bidder fails to tender payment of the full amount when due. F. Return of Financial Security. (1) A bidder may request return of its financial security at any time before or following any auction. (2) The Department shall return the financial security upon the Department's determination that the bidder has complied with these regulations and paid the full amount of its accepted bid. #### Regulation .09 Notice of Auctions. *COMAR 26.09.04.09* A. Notice of CO2 Allowance Auction. (1) A notice of CO2 allowance auction shall be published on the CO2 allowance auction website and in any other publication the Department considers appropriate not later than 45 days before the date upon which the auction may be conducted. (2) Failure to publish the notice at least 45 days prior to the auction does not prohibit the Department from conducting an auction, if reasonable notice of the auction is provided. (3) Notices may be transmitted electronically to parties requesting notification if they have submitted an electronic mail address to the Department. B. Each notice shall provide a specific description of the auction format and include, but not be limited to, the following: (1) All auction participant requirements; (2) Date, time, and location of the auction; (3) Categories of bidders who will be eligible to bid; (4) Number of CO2 allowances to be auctioned; (5) Required bid format; (6) Instructions as to the qualification application; (7) Other pertinent rules of the auction; (8) Identification of a contact person at the Department for further information; and (9) Any other information the Department may consider necessary. #### Regulation .10 Participation Requirements. *COMAR 26.09.04.10* A. Qualification. (1) Any party wishing to participate in an auction shall open and maintain a compliance or general account as described in COMAR 26.09.01. (2) Any party wishing to participate in an auction shall be qualified by the Department. (3) Only those bidders found qualified through the qualification application process will be permitted to submit a bid or bids or otherwise participate in bidding in any auction. (4) As part of the qualification application, bidders shall be required to provide information and documentation relating to the bidder's ability and authority to execute bids and honor contractual obligations, which includes, but is not limited to, the following: (a) Information and documentation regarding the corporate identity, ownership, and capital structure of the bidder; (b) Audited annual reports and credit reports; (c) Identification of any indictment or felony conviction of the bidder, or of any member, director, principal, partner, or officer of the bidder or any affiliate or related entity; and (d) A statement by the bidder identifying prior findings of nonresponsibility with regard to any Maryland procurement. (5) Any party wishing to participate in an auction shall submit a qualification application to the Department on or before the qualification application deadline date specified in the notice, that is not sooner than 15 days following the date of publication of the notice. (6) Qualification application information and forms shall be made available electronically on the CO2 allowance auction website. (7) The Department shall review each qualification application and make a determination as to the qualifications of each applicant to submit bids in the auction. The following shall apply: (a) Failure to provide any information required by the notice or this chapter may result in the qualification application being declared incomplete or otherwise deficient; (b) All prospective bidders shall be notified in writing of the Department's determination not later than 15 days before the date upon which the auction may be conducted; (c) If a qualification application is determined to be incomplete or otherwise deficient, the Department shall notify the prospective bidder and state the reason; and (d) Prospective bidders whose qualification applications have been determined to be incomplete or deficient shall be given not less than 10 business days to provide additional information and address the deficiencies. (8) Bidders found qualified for participation shall be qualified for all subsequent auctions and shall be eligible to bid in the auctions if: (a) The bidders maintain compliance with the financial security requirements; (b) There is no material change to the information provided in the qualification step; and (c) The applicant remains within one of the categories of eligible bidders described in the notice for the auction. (9) The bidder shall notify the Department of any change in the information provided in the qualification application not later than 5 days following the end of the month during which the change occurred. The notification shall include the date the change occurred and a description of the change with sufficient detail to enable the Department to determine whether the change is material. B. Bid Submittal Instructions. (1) All bids shall be in a form prescribed by the Department and made available electronically on the CO2 allowance auction website, as appropriate. (2) All bids submitted shall be considered binding offers for the purchase of allowances under the rules of the auction. C. If the Department determines that a bidder has provided false or misleading information, has withheld pertinent information in its qualification application, or has otherwise failed to comply with any material provision of this chapter, the Department may prohibit the bidder from participating in any future CO2 allowance auction. #### Regulation .11 Audit and Certification. *COMAR 26.09.04.11* The Department shall assign a designee to observe the conduct and outcome of each auction and to issue a report to the Committee. #### Regulation .12 Antideceptive Practices. *COMAR 26.09.04.12* It is unlawful for a bidder to use or employ any manipulative, misleading, or deceptive practice in connection with its qualification application or purchase of allowances from the Department, including but not limited to any practice that is in contravention of any applicable federal or state law or regulation, this subtitle, and rules and regulations the Maryland Public Service Commission may prescribe as necessary or appropriate in the public interest or for the protection of electric rate payers. #### Regulation .13 Transfer of CO *COMAR 26.09.04.13* Upon receipt and approval by the Committee of the report provided under Regulation .10 of this chapter and upon payment in full of purchased allowances by the successful bidder, the Department shall transfer or have transferred the corresponding CO2 allowances from the Account to the successful bidder's compliance or general account. #### Regulation .14 Publication of Results. *COMAR 26.09.04.14* The Department shall publish on the CO2 allowance auction website the auction clearing price and the number of allowances purchased by a successful bidder through the auction.