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$20 BILLION EMISSION TRADING MARKET GOES ONLINE

Release Date: 12/03/2001
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Note to Correspondents
FOR RELEASE: MONDAY, DECEMBER 3, 2001

$20 BILLION EMISSION TRADING MARKET GOES ONLINE

Dave Ryan 202-564-7827 / ryan.dave@epa.gov

    EPA today announced the latest innovation in air emissions trading, the Online Allowance Transfer System (OATS). This time saving, online system will enable participants in the sulfur dioxide (SO2) and nitrogen oxide (NOx) markets to record trades directly on the Internet instead of submitting paper forms to EPA for processing.
    A trading unit is called an allowance and is equivalent to one ton of air emissions. EPA’s tracking systems, which currently hold allowances with a combined current value over $20 billion, record official SO2 and NOx allowance transfers under existing emission cap and trade programs. Anyone anywhere in the world can participate in the market, and hundreds of companies, brokers and individuals are already engaged in trading.

    “ EPA expects this online system will streamline and accelerate emission trading, saving industry and government time and money,” said EPA Administrator Christie Whitman. “The cap and trade approach has already proven to be extremely successful in air pollution control, and today’s online breakthrough will make it even better.”

    Emissions cap and trade programs ensure that environmental goals are met, while providing companies an alternative to the installation of costly pollution control technologies in complying with the law. It was first used nationally by EPA in its acid rain program to reduce SO2 and then utilized by the Northeastern states to reduce NOx, Southern California to reduce SO2 and NOx , and Chicago to reduce volatile organic compounds, the prime ingredient in the formation of ground-level ozone (smog). These cap and trade programs effectively reduce air pollution by setting a permanent cap on emissions, then allowing trading within that cap. As a prerequisite to trading, however, EPA requires rigorous monitoring and reporting standards, and mandates that companies pay automatic fees to the government for any emissions above the legal limit. Rigorous monitoring is essential to ensuring certainty and consistency in the program, making sure that each allowance traded represents one ton of emissions, regardless of where it is generated. It is this certainty and consistency that enables creation of a robust market for allowances, free from the need for government review and approval of transactions. EPA emphasizes, however, that no matter how many allowances a utility holds, it will not be allowed to emit emission levels that would violate the national or state atmospheric (ambient) health-protection standards.

    Both EPA’s acid rrain program and the Northeastern NOx Budget Program have reduced emissions faster than would have occurred with more conventional approaches. The acid rain program has reduced SO2 emissions by six million tons per year from 1980 levels, and the cost has been 75 percent below original projections by industry. EPA expects that by the program’s full implementation date of 2010, emissions from power plants will be half of their 1980 levels, improving lakes and streams damaged by acid rain and delivering more than $50 billion per year in health benefits to Americans. The Northeastern Program has reduced NOx emissions by more than 50 percent from 1990 levels. Under an EPA rule, this type of NOx control program may expand to as many as 19 states in 2004.

    Additional cap and trade programs have been proposed by Congress to reduce electricity industry emissions in the United States, and dozens of countries around the world are considering implementing such programs.

    For information on registering for access to online trading, visit:
    http://www.epa.gov/airmarkets/transfer/index.html

    For further technical information on online trading, contact: Janice Wagner of EPA’s Clean Air Markets Division at 202-564-9118 (wagner.janice@epa.gov), or visit the Clean Air Markets web site at:
    http://www.epa.gov/airmarkets


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