Carbon Trading to Protect the Environment

Acid Rain Program (SO2)

Market Overview

In 2000, the EPA began Phase II of the sulfur dioxide (SO2) program.  Under Title IV of the 1990 Clean Air Act Amendments, SO2 emissions must be reduced by 10 million tons from 1980 levels. The program is a national program that currently affects all existing utility generators with an output capacity of greater than 25 megawatts and all new utilities.  Phase II sets a permanent SO2 cap of 8.95 million tons (allowances) for the affected utilities.  Recent CAIR rules enacted, on March 10, 2005, will initiate further cuts in SO2 emissions.  In 2010, SO2 emissions will be reduced by a further 4.3 million tons.  Participants will be required to turn in two allowances for every ton of pollution.  Deeper cuts will be achieved (5.4 million tons) in 2015 when 2.87 allowances will be required per ton of SO2.

Allowance trading is the centerpiece of the EPA's Acid Rain Program, and allowances are the currency with which compliance with the SO2 emissions requirements is achieved. Through the market-based allowance trading system, utilities regulated under the program, rather than a governing agency, decide the most cost-effective way to use available resources to comply with the acid rain requirements of the Clean Air Act.  Title IV of the Clean Air Act Amendments established a national cap on SO2 emissions that allocated a limited number of allowances to sources.  The allowances can be traded, but sources must hold and surrender enough allowances to cover their annual emissions at the end of each year.

The SO2 market is a liquid market with active spot, forward and options markets. Market participants range from small coops to multi-regional utilities to hedge funds to multinational banks.  Market factors include weather, economic growth, fuel prices, and legislative rulings and uncertainty.

CantorCO2e is a leading Brokerage in the SO2 program.  Our SO2 brokers are knowledgeable, experienced and professional.  We provide unmatched market access, and vital market information to our clients, through voice contact, real time market updates on our website and daily bulletin emails.