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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.
Highlights of auction results were: In the spot auction for allowances usable for compliance purposes in 2005, the EPA sold 125,000 total allowances, with bids for 493,987 allowances. Bids ranged from a low of $300.00 to a high of $750.00, with the weighted average of winning bids at $702.51. The clearing price, the lowest at which a successful bid was made, was $690.00. There were 115 total bids, which included 25 successful and 90 unsuccessful. Bidders totaled 31, with 17 successful and 14 unsuccessful.
The seven-year advance auction, which offered allowances first usable in 2012 but can be traded earlier, resulted in 125,000 allowances sold, with bids for 327,324 allowances. Bids ranged from $130.00 to $350.00, with the clearing price at $260.00 and the weighted average of winning bids at $297.49. Bids totaled 35, including 21 successful and 14 unsuccessful, and there were 11 bidders, with six successful and five unsuccessful. Additional information about the results of the SO2 auction is available on the EPA’s Website at www.epa.gov/airmarkets/auctions/index.html.
The EPA has been working with the Chicago Board of Trade, as well as the power industry and brokers and traders, since the program's inception. The result is a viable SO2 market and a demonstration that a mandatory emissions cap and trade approach can improve the environment with more certainty and at a lower cost than traditional control approaches.
