[4] A 2021 study found that the "Acid Rain Program caused lasting improvements in ambient air quality," reducing mortality risk by 5% over 10 years.
[5] Title IV of the Clean Air Act Amendments of 1990 established the allowance market system known today as the Acid Rain Program.
To achieve these reductions by 2000, when a nationwide sulfur dioxide emissions cap of 8.95 million tons per year began, the law required a two phase tightening of operating restrictions placed on fossil fuel fired (e.g., coal, oil, natural gas) power plants.
[10] Installation of low-NOx burner retrofits are the most common means of compliance, generally reducing emissions from uncontrolled levels by up to 50%.
Low-NOx burner technology was readily available, and considerably less expensive than installation of scrubbers,[12] so control of NOx was considered less demanding by most electric utilities.
Every Acid Rain Program operating permit outlines specific requirements and compliance options chosen by each source.
Affected utilities also were required to install systems that continuously monitor emissions of SO2, NOx, and other related pollutants in order to track progress, ensure compliance, and provide credibility to the trading component of the program.
Strategies for compliance with air quality controls have been major components of electric utility planning and operations since the mid-1970s, affecting choice of fuels, technologies and locations for construction of new generating capacity.
Delays in allocating "early scrub" bonus credits and scheduling of the first auction of emissions allowances in March 1993[16] effectively removed these incentives from actual compliance decision making of most electric utilities.
States having the greatest number of generating units affected by the Phase I requirements were: Ohio (40), Indiana (37), Pennsylvania (21), Georgia (19), Tennessee (19), Kentucky (17), Illinois (17), Missouri (16) and West Virginia (14).
Justifying large additional capital investments in plants which may have a remaining useful life of 10 years or less, absent reconstruction of boilers, is often difficult.
In this context, utility executives were required to make investment decisions committing millions of dollars over extended periods.
[25] In February 1993, AEP was still unsure whether it would be allowed by the Ohio Public Utilities Commission to transfer emissions credits from the Gavin scrub to Phase I units in other states.
[26] Thus, substantial financial commitments had to be made on the basis of best judgments by utility planners and construction begun in the absence of definitive information or final regulatory approvals.
In a buyer's market, utilities renegotiated old contracts and signed new ones with a variety of provisions designed to manage risks and increase flexibility for future decisions.
[28] AMAX Energy purchased an undisclosed number of emissions allowances from Long Island Lighting Company, which it said it would offer in packages with its coal and natural gas contracts.
[29] Thus, coal suppliers began participating along with electric utilities as buyers and sellers of marketable sulfur dioxide emissions allowances.
The U.S. Department of Energy in 1991 estimated the installed retrofit cost per ton of SO2 pollution control equipment (scrubbers) on existing units would be in the $665– $736/ton range.
Citizens and groups can purchase sulfur dioxide emissions allowances alongside electric utilities and other producers of air pollution in annual auctions conducted by the U.S. Environmental Protection Agency (EPA) and on the Chicago Board of Trade.
[32] Each year the U.S. EPA auctions off to the highest bidder about 250,000 pollution allowances that enable their owners to emit one ton of sulfur dioxide.
[35] Since many purchases were made in earlier years, and unused allowances have accumulated, these groups own the right to emit 23,012 tons of sulfur dioxide in 2013.
[36] The EPA has used what is called the Integrated Planning Model (IPM) to estimate the effect of the Acid Rain Program (ARP).
[39] Therefore, the effectiveness of the emissions trading element as a mechanism has been criticised, since the EPA also used regulations to achieve the reductions, as all areas of the country "had to meet national, health-based, air quality standards that are separate from the Acid Rain Program’s requirements".
Pursuant to the Clean Air Act of 1990,[45] each year in March the U.S. Environmental Protection Agency auctions off to the highest bidder about 250,000 pollution allowances that enable companies to emit one ton of sulfur dioxide.
Sulfur dioxide is the principal contributor to acid rain, causing respiratory disorders, impairing visibility, harming the health of fish and wildlife, and degrading lakes and ponds.
[47][48][49][50] Research has shown lakes and streams in New England have been slow to recover from the effect of acid rain, compared to some in Wisconsin, New York and Pennsylvania.
[54] Harvard University economist Robert Stavins estimates about $1 billion per year has been saved in the United States by cleaning up since the Acid Rain Program went into effect.
Presentations are made in school classrooms about the causes and effects of acid rain, and students are encouraged to design their own fundraising efforts.
[34] According to A.R.R.F., EPA auction results 1993-2013 indicate groups or individuals who purchased emissions allowances for purposes other than releasing air pollution own the right to emit 3,188 tons per year of sulfur dioxide.
[57] Since many purchases were made in earlier years, and unused allowances have accumulated, these groups now own the right to emit 23,012 tons of sulfur dioxide in 2013.