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2001 Acid Rain Allowance Auction
Remarks by Brian McLean
March 28, 2001
Today, we are announcing the results of our 9th annual auction of sulfur dioxide (SO2) allowances conducted for EPA by the Chicago Board of Trade (CBOT).
The year 2000 marked the beginning of the second phase of the Acid Rain Program created under the Clean Air Act Amendments of 1990. Last year the Acid Rain Program expanded from 400 fossil fuel-fired electric generating units in 25 states to over 2000 units in 48 states. All major power plants in the contiguous 48 states are now covered by this program.
Preliminary information indicates that SO2 emissions dropped last year by a million tons over the previous year as companies further reduced their emissions. National sulfur dioxide emissions are now 8 million tons lower than they were in 1980.
For the next few years, we expect SO2 emissions to remain relatively stable as companies use the allowances they saved during Phase I, and then we expect emissions to gradually decline by another 2 million tons to meet the full 10 million ton reduction mandated by the 1990 Clean Air Act.
For the last two years, EPA has also been operating a nitrogen oxide (NOx) emissions cap and trading program for 9 states in the northeastern U.S. in order to reduce summertime smog. Having successfully reduced NOx emissions by more than 50 percent in the Northeast, EPA offered to extend that trading system to states in the Midwest and Southeast. The expanded program should begin operating over the next two years as states and EPA complete rulemaking activities.
Through the active participation of industry and brokers and the 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. Our collective success has encouraged the application of this approach to other environmental problems both here and abroad. In fact, the report released on Monday by the Hubbard Brook Research Foundation confirmed the progress being made by this approach while establishing the need for further emissions reductions to address the acid rain problem, and the Administration and many in Congress support the use of this approach to further reduce SO2 and NOx emissions.
I am happy to be able to join the Board of Trade this morning to announce the results of the year 2001 auction, and I look forward to hearing the remarks of the others here today. Thank you.