Market Trading Forum: About

On September 25, 2000, the WRAP approved the SO2 milestones, and the details of the backstop "cap-and-trade" program. The WRAP recommendations were submitted to the U.S. Environmental Protection Agency ("EPA") as an Annex to the GCTVC recommendations. The recommendations were sent to EPA on October 2, 2000, for inclusion in an existing rule aimed at reducing regional haze and improving visibility in 16 national parks and wilderness areas on the Colorado Plateau. EPA has one year to incorporate the recommendations into the regional haze rule.

SO2 is an important contributor to haze in Western parks and wilderness areas, and under EPA's regional haze rule, nine Western states have the option of establishing milestones for voluntarily reducing SO2 emissions through the year 2018. These milestones must show greater progress toward reducing SO2 emissions than would be achieved by requiring older facilities to install what is known as Best Available Retrofit Technology through a command-and-control regulatory program.

The WRAP recommendations include agreements on how many tons of SO2 emissions should be cut by 2018, and for the interim years of 2003, 2008 and 2013. It has also designed a backstop cap-and-trade program that would go into effect if the voluntary emission reductions established by the milestones are not achieved. Under that backstop program, each source of emissions -- such as power plants and smelters -- would be given a certain number of "allowances" or amount of emissions that it could trade. A source that exceeded its allowance could, for example, purchase allowances from another source that is under its limit.

A preliminary analysis indicated that the cost of the WRAP's voluntary and market-based program to reduce emissions will be $50 - $100 million cheaper than the traditional command-and-control approach. Since the largest sources of these sulfur dioxide reductions are coal-fired electric power generating plants, a backstop trading program may reduce any increases in the cost of electricity for consumers.

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