Text: EPA Launches Online System to Reduce Air Pollution

The Environmental Protection Agency (EPA) has begun an online system for faster and more efficient trading in allowances for emissions of two major air pollutants, sulfur dioxide and nitrogen oxide.

The concept of using market forces to allow trading in air emissions under an overall ceiling has already proven highly successful in reducing air pollution and improving air quality in the United States.

Under the new system, called the Online Allowance Transfer System (OATS), industrial participants can record trades to EPA through the Internet instead of submitting time-consuming paper forms.

These so-called "emissions cap-and-trade programs," which permit companies to trade allowances of sulfur dioxide and nitrogen oxide, ensure that environmental goals are met while providing companies with an alternative to the installation of costly pollution control devices to comply with the law. (A trading unit is called an allowance and is equivalent to one ton of air emissions.)

"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."

A number of countries are considering implementing similar cap-and-trade programs to improve air quality.

Note: one billion equals one thousand million.

Following is the text of the EPA press release:

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Press Release

Environmental Protection Agency

$20 BILLION EMISSION TRADING MARKET GOES ONLINE

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, by Southern California to reduce SO2 and NOx, and by Chicago, Illinois, 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-rain 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

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