Allowances available for the spot auction--first usable in 2001--included 125,000 by the EPA, and 2,788 privately offered, for a total of 127,788. Allowances in the 7-year advance auction--first usable in 2008--were 125,000 by the EPA and 2,388 privately offered, for a total of 127,388.
Spot auction results showed the highest bid price at $225.00, lowest at $105.00, clearing at $173.57, with the weighted average of winning bids at $174.97. In the spot auction there were bids for 480,995 allowances, with 127,788 sold. The number of bids included 14 successful and 71 unsuccessful, for a total of 85. The number of bidders were 12 successful and 15 unsuccessful, for a total of 27.
In the 7-year auction results showed the highest bid price at $115.07, lowest at $30.00, clearing at $105.72, with the weighted average of winning bids at $110.75. In the 7-year advance auction there were bids for 355,500 allowances with 127,388 sold. The number of bids included 6 successful and 14 unsuccessful, for a total of 20. The number of bidders were 1 successful and 4 unsuccessful, for a total of 5.
Participating in the announcement of the auction results were CBOT®® member and developer of the CBOT®’s SO2 program Richard L. Sandor, Chairman/CEO of Environmental Financial Products; Brian McLean Director of the EPA’s Clean Air Markets Division; and (by phone) Gary Hart, President of The Emission Marketing Association, and Manager of Emissions Trading, Southern Companies, Birmingham, Alabama.
The briefing took take place in the CBOT®® Board Room, and members and others were able to participate through a teleconference link, or listen to the briefing via the CBOT®®’s Internet web site at CBOT®®.com Webcasts
The audience for the auction is nationwide and worldwide, with interest in the results expressed by some 1,500 publication and other media in the U.S. and Europe.
The auction is part of the EPA’s program to significantly reduce acid rain by cutting utility SO2 emissions in half, nationwide. The auction gives power plants, brokers, and private citizens anywhere in the world the chance to buy and sell SO2 allowances. An allowance is an authorization, established by the 1990 Clean Air Act Amendments, giving affected sources (mainly existing electric power plants) the right to emit one ton of SO2 in a designated year or any year thereafter. Plants which cut emissions at lowest cost may make extra emission cuts and sell their freed-up allowances in the auction to other plants which face higher costs in cutting emissions.
McLean said, "Through the active participation of industry and brokers, and the Chicago Board of Trade’s sponsorship of this auction, we have created a viable market and demonstrated that an emissions cap and trade approach can improve the environment at a lower cost than traditional control approaches."
Sandor said, "As part of a larger scope of environmental challenges linked to market-based solutions, the CBOT® reaffirms its commitment as the environmental exchange of the 21st century. This year’s results continue to demonstrate that auctions provide efficient and transparent markets."
For additional information about the results of the SO2 auction call Kenon Smith in the EPA’s Clean Air Division at 202-564-9164. The complete results will be posted on the EPA’s website at www.epa.gov/airmarkets, or visit the CBOT®’s website at www.cbot.com/acidrain.
