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Clean Air Markets

Progress Report

Market Activity

Market Activity Figures

Last updated: 05/2016

Related Figures

2013 Allowance Transfers under CAIR and ARP
Allowance Spot Price (Promtp Vintage), January – December 2013

Key Points

Transaction Types and Volumes

  • In 2014, the majority of ARP and CAIR sulfur dioxide (SO₂) program allowances were traded between related organizations. In contrast, about one-third of CAIR nitrogen oxides (NOₓ) ozone season and CAIR NOₓ annual program allowance transactions were between unrelated parties (distinct organizations), often with a broker facilitating the trade.

2014 Allowance Prices

  • ARP* SO₂ allowance prices averaged less than $1 per ton.
  • CAIR NOₓ annual program allowances averaged** $50 per ton.
  • CAIR NOₓ ozone season allowances averaged** $24 per ton.

* ARP allowances are used for CAIR compliance at a two-to-one ratio, with two ARP allowances available to cover 1 ton of emissions under CAIR.

** Average spot price was calculated between January and October. All CAIR NOₓ allowance prices dropped to $10 per ton after the October 2014 D.C. Circuit decision to lift the stay on the CSAPR.

Analysis and Background Information

Transaction Types and Volumes

Allowance transfer activity includes two types of transfers: EPA transfers to accounts and private transactions. EPA transfers to accounts include the initial allocation of allowances by states or EPA, as well as transfers into accounts related to set-asides. This category does not include transfers due to allowance retirements. Private transactions include all transfers initiated by authorized account representatives for any compliance or general account purposes.

To help better understand the trends in market performance and transfer history, EPA classifies private transfers of allowance transactions into two categories:

  • Transfers between separate and unrelated parties (distinct organizations), which may include companies with contractual relationships (such as power purchase agreements), but excludes parent-subsidiary types of relationships.
  • Transfers within a company or between related entities (e.g., holding company transfers between a facility compliance account and any account held by a company with an ownership interest in the facility).

Allowance Markets

The 2014 emissions were below emission budgets for the Acid Rain Program (ARP) and for all three Clean Air Interstate Rule (CAIR) programs. As a result, CAIR allowance prices were well below the marginal cost for reductions projected at the time of the final rule, and are subject, in part, to downward pressure from the available banks of allowances.

Overall, allowance prices in 2014 remained relatively stable until October 23, 2014 when the D.C. Circuit granted EPA’s motion to lift the stay on the Cross-State Air Pollution Rule (CSAPR) and allow it to replace CAIR starting in 2015. The increased certainty regarding CSAPR implementation and the resulting phase-out of CAIR, including the future use of CAIR allowances, significantly decreased the value of CAIR allowances.

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