Sulfur Dioxide (SO2)

In 2000, the EPA ushered in Phase II of the SO2 program. Under Title IV of the 1990 Clean Air Act Amendments, SO2 emissions must be reduced by 10 million tons from 1980 levels. The program currently affects all new utilities and existing utility generators with an output capacity of greater than 25 megawatts. Phase II sets a permanent SO2 cap of and creates EPA allowances for 8.95 million tons for the affected utilities.

The SO2 market is a relatively mature and liquid market, with an active spot market and multiple hedging instruments including forwards, options, future vintage trading and swaps.