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EPA ACID RAIN AUCTION SELLS 275,010 ALLOWANCES AND NETS $53 MILLION FOR UTILITIES

Release Date: 03/26/99
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FOR RELEASE: FRIDAY, MARCH 26, 1999
EPA ACID RAIN AUCTION SELLS 275,010 ALLOWANCES AND NETS
$53 MILLION FOR UTILITIES

EPA and the Chicago Board of Trade (CBOT) announced on March 24 that the seventh annual acid rain allowance auction held on March 22 resulted in proceeds totaling over $53.5 million. The auction is part of EPA’s program to significantly reduce acid rain by cutting utility sulfur dioxide (SO2) emissions in half nationwide. The auction gives power plants, brokers and private citizens the chance to buy and sell SO2 allowances, each of which gives a power plant the right to emit one ton of SO2 in a designated year or any year thereafter. The allowance auctions are part of what has become a large SO2 trading program, now in its fifth year of operation. Two electronic sealed bid auctions were held March 22 in Chicago: a "spot" auction that sold allowances first useable in 1999 and a "seven-year advance" auction that sold allowances first useable in 2006. A total of 152,510 allowances was offered for sale in the spot auction (150,000 offered by EPA and 2,510 offered by private parties), and 125,000 EPA allowances in the seven-year advance auction. CBOT received 77 bids for the spot auction, of which 27 were successful; 11 bidders submitted these 27 bids. The successful bid prices ranged from $200.55 to $230.00, the average price being $207.03. All 150,000 allowances available were sold. In addition, 10 allowances that were offered by a private party were sold at $200.55. CBOT received 32 bids for the 7-year advance auction, of which 21 were successful; 11 bidders submitted these 21 bids. The successful bid prices ranged from $167.55 to $220.51, the average price being $179.79. All 125,000 allowances available were sold. As required by Congress in the Clean Air Act, the proceeds from the auction must be returned to the utilities from which the allowances were drawn. The acid rain control program, authorized by the Clean Air Act Amendments of 1990, mandates an annual reduction of 10 million tons of SO2 emissions from 1980 levels by the year 2010. The reductions will be accomplished in two phases: Phase I affects about 180 plants, including the largest, highest-polluting plants in the United States; this Phase began in 1995. Phase II will affect about 700 additional plants beginning in the year 2000. EPA emphasizes that no matter how many allowances a utility purchases, it will not be allowed to emit levels of SO2 that would violate national or state atmospheric health protection standards for SO2. Detailed results of this year’s allowance auction can be found on the Acid Rain Program’s home page on the Internet at: https://www.epa.gov/acidrain. EPA is also helping launch other trading programs which feature a cap on emissions. For instance, EPA is operating emissions and allowance tracking systems for the Ozone Transport Commission’s nitrogen oxide (NOx) trading program for the 12 northeastern states, which begins this summer; the Agency is also working with states to develop rules for a NOx trading program, which would start in 2003, to reduce the cost of controlling the transport of smog-forming emissions across state lines throughout the eastern United States. For further technical information on the auction results, contact Kenon Smith of EPA’s Acid Rain Division at 202-564-9164 ([email protected]).

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