Taxing sulfur dioxide emission allowances

Journal Article · Wed Sep 15 00:00:00 EDT 1993 · Fortnightly; (United States)

OSTI ID:5166382

Nelson, G L ^[1]

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1. Reid Priest, Washington, DC (United States)

The acid rain control program authorized by Title IV of the Clean Air Act Amendments of 1990 (CAAA) was designed to reduce the adverse effects of acid rain by limiting emissions of sulfur dioxide (SO[sub 2]) into the atmosphere. The program is a complex scheme involving the issuance, consumption, holding, and trading of emission allowances for SO[sub 2]. Not surprisingly, electric utilities will face federal income tax issues in connection with the program. Under the emission allowance program, the U.S. Environmental Protection Agency (EPA) will issue emission allowance to owners or operators of certain utility power plants at no cost to the recipients. An emission allowance is an authorization to emit one ton of SO[sub 2] during or after the calendar year for which it is issued. If a utility power plant subject to the program emits SO[sub 2] in excess of its allowances, the owner or operator will be subject to a penalty of $2,000 a ton, and must offset the excess emissions with allowances in the subsequent year. Allowances may be bought and sold. Phase I of the program begins January 1, 1995, and will apply to 110 utility generating units. Phase II takes effect January 1, 2000, and will include most electric utility generating units. EPA will withhold a specified number of allowances for direct sale and auction. The resulting proceeds will be paid to the utilities from which the allowances were withheld. The Internal Revenue Service (IRS) has provided somewhat limited guidance on several tax issues raised by the program. Significant tax issues and the positions articulated by the IRS (if any) are discussed in this article.

• OSTI ID: 5166382
• Journal Information: Fortnightly; (United States), Vol. 131:17
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING
POLICY AND ECONOMY
ELECTRIC UTILITIES
POLLUTION REGULATIONS
TAXES
SULFUR DIOXIDE
AIR POLLUTION CONTROL
PERMITS
US EPA
ADMINISTRATIVE PROCEDURES
CHALCOGENIDES
CONTROL
NATIONAL ORGANIZATIONS
OXIDES
OXYGEN COMPOUNDS
POLLUTION CONTROL
PUBLIC UTILITIES
REGULATIONS
SULFUR COMPOUNDS
SULFUR OXIDES
US ORGANIZATIONS
296000* - Energy Planning & Policy- Electric Power
293000 - Energy Planning & Policy- Policy
Legislation
& Regulation