The Clean Air Act requires annual SO2 emissions to be brought 10 million tons below their 1980 level by year 2010. The Act also calls for significant reductions of NOx emissions by the year 2000. Among the innovative features of this program are its great flexibility and its heavy reliance on economic incentives, not government proscription.
Units affected by the program are free to choose how they meet their emission limits.
For example, compliance options might include switching to cleaner fuels, installing pollution controls, or reducing user demand for electricity. Each allowance represents an authorization to emit one ton of SO2. Other units can buy these allowances and apply them to meeting their current or future emissions requirements. For the market in allowances to work, buyers and sellers must be assured that each allowance represents exactly 1 ton of SO2, neither more nor less. In 1994, the first 263 utility units covered under the Acid Rain Program were required to install CEMS, pass a series of performance tests designed to demonstrate the accuracy of the instruments, and submit a year's worth of emissions data.