I've been talking about emissions markets in my Master's level Environmental Econ course for the last week. In case you're wondering, here's the trend in Sulfur Dioxide prices since the Acid Rain program was implemented.
UPDATE: Sometimes the discussion in the comments section is worth moving to the main post:
Commenter Will: Tim, what's up with that price spike?
Me: My understanding is that it was a perfect storm of demand increases:
1) Natural gas prices spiked in late 2005 (increasing the demand for coal-powered electricity)
2) Proposed CAIR rules allowed for 4-1 or 3-1 use of Title IV allowances to meet the CAIR cap (increasing demand for Title IV permits)
3) Rollback of New Source Review requirements decreased the cost of new coal fired plants--increasing the demand for permits.
It may be worth noting that Will is an EPA economist. Now might be a good time to ask whether you should be worried that an EPA employee is asking me why prices spiked in an EPA run program.
