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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.
Phase I of the EPA's SO2 allowance program began in 1995 with the EPA allocating emissions allowances to the 110 largest SO2 emitting electricity plants affecting 263 generating units. In Phase II of the program, which began January 1, 2000, emissions limits are extended to include an additional 2,000 utility units, while the national cap for annual SO2 emissions is set at 8.95 million tons, half what the utility industry emitted in 1980.
Brian McLean, Director of EPA's Clean Air Markets Division, said "The SO2 trading program is clearly a success and has moved from a public policy experiment to a 'tried and true' tool for protecting the environment. It has reduced emissions by millions of tons and acid rain and fine particle pollution by up to 25 percent, and industry has achieved compliance at costs now expected to be 75 percent lower than originally predicted."
Richard L. Sandor, CBOT Member and developer of the CBOT's SO2 program said, "Now that we, along with the EPA, have entered Phase II of the emissions allowance program, the CBOT's role in the program has increased. Uncertainty has developed over Phase II allowance demand and volatility has increased significantly.
"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."
For information about the results of the SO2 auction, or the CBOT's other environmental initiatives, call Laura LaBarbera in the CBOT Communications Department at 312-435-3649 or Kenon Smith in the EPA's Clean Air Division at 202-564-9164.
