I just wrote the check for $302.20 to the Acid Rain Retirement Fund on behalf of the Fall 2004 Appalachian State ECO 3620 (Env Econ) students. The ARRF's Mission Statement:
The Acid Rain Retirement Fund was founded to prevent air pollution by buying it right out of the sky. The U.S. Environmental Protection Agency issues pollution allowances or permits that enable companies to emit sulfur dioxide (SO2). These permits are auctioned off to the public and a permit for one ton of sulphur dioxide was recently about $130 (note: $126 in 2000, the prices have risen since then). The Acid Rain Retirement Fund raises funds and bids alongside polluters for as many pollution allowances as our funds can buy. We then retire that pollution credit permanently.
As we buy pollution allowances we remove that amount of sulfur dioxide from our ecosystem forever. As we retire more pollution allowances, the price will go up. Polluting companies will need to bid larger amounts of money to continue polluting. As the price of polluting goes up, companies will be more inclined to invest money in technologies that remove pollution before it reaches the smokestack.
According to the EPA's 2005 Acid Rain Allowance Auction Results, the clearing price in 2005 was $690 (EPA: the clearing price is the lowest price at which a successful bid was made). At this price, the class will purchase and retire 876 pounds of SO2 in 2006. In 2005, the ARRF purchased 5 tons of SO2 at a total cost of $3625.
Writing the check today is a bit later than promised. I told the Fall 2004 students that the money would be used for the 2005 auction. But then, beginning in January 2005, I tried to get my own account with the EPA. I filled out all of the necessary paperwork but never received a response from the EPA about my account number (or whatever the info I needed for the bid). Repeated attempts to call their hotline failed to connect with a real person.
I would have ended up writing a check to the ARRF anyway. My bid was going to be $300, a little bit above the 2004 clearing price (and the amount of money the class "donated"). This price is way below the $690 clearing price so the money would have been refunded.
Looking at the Bids for the Spot Auction most market participants knew that prices were going to rise from 2004 to 2005. All of the 116 bidders bid at least $300. All but 3 of these bid over $500. My bid would have been the lowest (tied with Granite Ridge Energy LLCc).
I'm so unplugged I still don't have the full story on why the 2005 prices rose by 166%. Any help?