In the Acid Rain Program Allowances were allocated for each year beginning in 1995. Phase I included certain electricity generating units. EPA allocated allowances at an emission rate of 2.5 pounds of SO2/mmBtu (million British thermal units) of heat input, multiplied by the unit's baseline mmBtu (the average fossil fuel consumed from 1985 through 1987). In Phase II, which began in the year 2000, EPA expanded the group of affected sources to include virtually all units over 25 MW in generating capacity. EPA allocated allowances to each unit at an emission rate of 1.2 pounds of SO2/mmBtu of heat input, multiplied by the unit's baseline. Beginning in 2010, the Act places a cap at 8.95 million on the number of allowances issued to units each year. This effectively caps emissions at 8.95 million tons annually and ensures that the mandated emissions reductions are maintained over time. (EPA)
To supply the auctions with allowances, EPA set aside an Auction Allowance Reserve of approximately 2.8 percent of the total annual allowances allocated to all units. During Phase I, when the allocated allowances totaled 5.7 million allowances annually, 150,000 allowances were withheld every year for auctions. During Phase II, when allowance allocations total 8.95 million allowances annually, 250,000 allowances were withheld annually for auctions.
For the first 13 years, the auctions were conducted for EPA by the Chicago Board of Trade (CBOT). CBOT was not compensated by EPA for its services nor allowed to charge fees. Beginning with the fourteenth annual auction in March 2006, CBOT chose to stop administering the auctions for EPA. This means EPA now handles all aspects of the auctions. (EPA)