Agency Posts Acid Rain Auction Results Online

The U.S. Environmental Protection Agency has posted the results of its annual acid rain auction, held on March 24. The auction gives power plants, brokers, and private citizens the opportunity to buy and sell sulfur dioxide (SO2) allowances as part of EPA's cap-and-trade program to reduce emissions contributing to acid rain.

The spot auction bidders spending the most money included Ohio Valley Electric Corp., EMMT, Macquarie Cook Power Inc., and Denver City Energy Associates. Those bidders in the seven-year advance auction receiving the greatest number of allowances were JP Morgan Ventures Energy Corp., and Green Country Energy LLC. The auction offered 125,000 allowances in each of the auctions and all of these were sold. Bidders paid out a total of about $9.5 million

The 1990 Clean Air Act (CAA) amendments established this program to cap national SO2 emissions at 50 percent of 1980 levels. Each year, EPA issues allowances to existing sources within that cap. In addition, the CAA mandates that a limited number of those allowances are withheld and auctioned. The auctions help ensure that new electric generating plants have a source of allowances beyond those allocated initially to existing units. Proceeds from the auctions are returned to sources in proportion to the allowances withheld. In addition to allowances offered by EPA, private parties may offer allowances for sale in the auction.

The auction includes two "vintages" of allowances. Vintage describes the earliest year an allowance may be applied against SO2 emissions. In addition to year 2009 allowances, the Clean Air Act mandated that EPA auction additional allowances seven years in advance to help provide stability in planning for capital investment. These advance allowances will be usable first in 2016. No offers from private parties to sell their allowances were received.

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