Bank of America Merrill Lynch has joined forces with U.S.-based carbon portfolio manager TerraPass Inc in a bid to enter the nascent Californian emissions market, the bank said on Tuesday.

Under the deal, Bank of America Merrill Lynch Global Commodities Group has the option to purchase and bring to market several million California carbon offsets from TerraPass through 2020, which will be compliant with the California Air Resources Board's standards.

The value of the deal was not disclosed.

The offsets will be generated from agricultural methane projects located throughout the United States, the bank said.

In the absence of federal U.S. climate legislation, California's fledgling emissions market could grow to one of the largest in the world.

California is expected to approve the final design of its cap-and-trade rules this month, which should boost liquidity.

By acting as a first mover in California, we are positioning ourselves as the offset provider of choice for companies that will need to become compliant under these new regulations, said Abyd Karmali, global head of carbon markets at the bank's global commodities group.