The Trading Price of SOx and NOx Emissions Has Fallen Dramatically . . .
Although few people realize it, the US already has a functioning cap-and-trade market with regard to the emissions of sulfur and nitrous oxides from power plants. The program was set up as a policy choice by the Environmental Protection Agency as part of the enforcement of the Clean Air Interstate Rule (CAIR). The NOx Budget Trading Program was put in place in 2003. It operates in 12 northeastern states and is in force from May 1 to September 30 each year. Its major purpose is to cut the formation of ozone formation and its transport across state lines. Fourteen other states also have NOx state implementation plans that have the option of participating in the trading program. Permits are exchanged on the Over-the-Counter (OTC) market.
The price of sulfur dioxide stood at a hefty $500 per short ton in 2007 and slipped to $300 per ton in 2008. Nitrous oxide prices were even higher, rising to $800 per ton in 2008. Then in July 2008 the District of Columbia Court of Appeals struck down CAIR on the basis of a suit brought by the State of North Carolina. The following December the court reinstated the program temporarily until the EPA could finalize a replacement plan, but certain restrictions were put on the implementation and the market has essentially collapsed. In 2011 it stood at $2.12 per ton for SOx and $15.89 for NOx. Nonetheless, both sulfur and nitrous oxide emissions have continued to decline, as indicated in the next graph.