Two utilities hundreds of miles apart will announce today that they have signed a contract that calls for one to buy from the other the right to emit a chemical that causes acid rain, freeing the dirtier one from having to clean up its own plants as stringently.
It is the first such deal to be publicly disclosed, those involved and other experts say, and could break the ice for dozens of similar deals.
The Tennessee Valley Authority will buy the right to emit 10,000 tons of sulfur dioxide, the main cause of acid rain, from Wisconsin Power and Light Co. The Wisconsin company will reduce its emissions to a level 10,000 tons below what the law requires, and the TVA will get additional time to install smokestack scrubbers or replace high-sulfur coal with cleaner fuels.
The price was not disclosed, but is believed to be $2.5 million to $3 million.
The deal was made under a system established in the Clean Air Act of 1990 and will be regulated by the Environmental BTC Protection Agency. Acid rain, which is believed to be responsible for severe damage to lakes and forests, is one of two main targets of the Clean Air Act. The other target is smog and toxic chemical emissions.
Economists and some environmentalists have long called for a "market-based" system that encourages deals like the one to be announced today. They say such a system reduces the cost to the economy of cutting sulfur emissions, compared with a "command and control" system of ordering each utility to comply.
The goal of the Clean Air Act is to reduce such emissions by 10 million tons a year.
The TVA is buying "emission allowances" because it believes that at least in the short run the purchase price is less than what it would cost to clean up its own plants enough. For its part, Wisconsin Power can turn a profit by "overcomplying" with the federal law and selling the resulting allowances.