This year, in one fell swoop, the 49 students in Econ 222 quadrupled the amount of sulfur dioxide (SO2) that Bates is keeping out of the nation’s air. A $1,200 challenge grant from an environmental organization in Colorado spurred the students to submit winning bids for nine permits in the annual U.S. Environmental Protection Agency SO2-allowance auction.

Thanks to the Community Office for Resource Efficiency, in Aspen, and matching funds from supporters on campus, the students boosted Bates into the top ranks of colleges and universities successfully participating in the EPA auction. By retiring the SO2 permits, the 49 students will prevent the emission of an additional nine tons of this pollutant created by coal-burning power plants.

“This equals the amount of SO2 that would be emitted if you were to leave 3,600 100-watt light bulbs burning for one year straight,” says Lynne Lewis, associate professor of economics and the originator of the college’s annual bidding effort.

Under the 1990 Clean Air Act Amendments, coal-burning utilities are required to have emissions permits. These permits are tradable, and the emissions-allowance auction held each March by the Chicago Board of Trade disposes of some 250,000 allowances.

The Bates students bid $292 for each of the permits in this year’s auction, held March 22. The bid brought to 12 tons the amount of SO2 that the two sections of Lewis’ “Environmental Economics” have retired since 2001.

Since the auctions began, in 1993, dozens of educational institutions from grade school through graduate school have bought and retired permits. The University of Maryland School of Law and affiliated organizations have accumulated by far the most, at 75. Bates is in second place, with 12, and the University of Michigan Law School and affiliates third, with 9.

The challenge grant that quadrupled the students’ total appeared after CORE Executive Director Randy Udall read about Bates’ success in the auction process.

“He asked if our class could match his $1,200 and buy a total of eight permits, as well as educate others about the program,” Lewis explains. “My students designed informational fliers, sold T-shirts that they designed and had a booth in Commons,” the college’s dining hall.

Several campus organizations and many individuals at Bates contributed to the grant-matching drive. “We sold SO2 by the pound,” Lewis says. “Five pounds for a buck — you can’t beat that!” In the end, the students even came up with enough money to top Udall’s challenge by one permit.

Every year, Lewis’ students study past auctions and current markets, and then try to estimate what the price will be. She says, “I believe in learning by doing. We spend a lot of time learning about economic incentives for pollution control — what they are, how they work, when they are most effective, and so on. To tie this exercise in with what we’re learning in the classroom is a phenomenal experience.”

“It’s really exciting to be able to participate in an actual auction,” and the CORE challenge took the excitement to a new level, she says. “I’m really proud of my students. They worked hard on this and bid smart — and we are making a difference, too.”

Because of both its soil chemistry and its location downwind of the nation’s dirtiest utilities, Maine is particularly vulnerable to the effects of sulfur dioxide released by the burning of coal (mercury from the same source is another environmental threat).

The 50 students in the two sections of the course each put $5 toward a bid for the U.S. Environmental Protection Agency’s 11th annual SO2-permit auction, hosted by the Chicago Board of Trade. As it has each year, the class will retire its permit.

“We’re not going to resell it, so that ton of sulfur dioxide will never be emitted into the atmosphere,” says Lynne Lewis, associate professor of economics at Bates and the originator of the college’s annual bidding effort.

The auction, held every March, is a mechanism in the EPA’s Acid Rain Program, which uses a market-based “cap and trade” approach to curtail air pollution. “It’s always sort of cool to see the theory applied in real life,” says senior biology major Mark Thomson, of Minneapolis, who took the course with Lewis.

“There’s something very tangible about seeing Bates’ name on the actual auction,” says Thomson. “And the fact that we obtained a permit is excellent, because you study different market-based incentive programs to reduce pollution, but to actually do it — and to say that we’re willing to pay because we don’t want acid rain in Maine — is a great opportunity.”

Lewis, who came to Bates in 2000, initiated the bid process at Bates in 2001. “One of the exciting parts of this program is that anyone can buy a permit,” she says. “It’s fairly straightforward.”

(The EPA Website offers ample information about the process, with a good starting point being the Acid Rain Program SO2 Allowances Fact Sheet.)

This year’s clearing price per permit — that is, the lowest successful bid — was $171.80. The Ohio-based American Electric Power, the nation’s largest electrical supplier, won 99.9 percent of the 125,000 permits on offer. Bates’ bid was $185.50, fourth-lowest of the 20 successful bids.

Determining how much to bid, Lewis says, is “the challenging part of the exercise, but also makes it fun to do with my class.”

She divided her students into teams and assigned each to research the bid history for the auction, suggest a bid and offer a defense of the amount. The final bid was the average of all bids. Student contributions left over were donated to the Acid Rain Retirement Fund, a program at the University of Southern Maine that was the only other Maine bidder this year.

Tradable permits “are something that economists have been touting for a long time as a good thing,” Lewis says. “With economic incentives for pollution control, you can achieve an environmental standard at a lower cost, which is good for everybody.”

She explains, “There is the potential for lowering clean-up costs because firms have flexibility in how they reach the standard. They can either buy a permit or clean up. And the number of permits is ratcheted down a little bit over the course of this program to meet the goals of the 1990 Clean Air Act amendments.”

“It’s important to tie the real world and the classroom together, the theory and the practice, by bringing practical, day-to-day examples” to students, adds Lewis, who also has her students keep scrapbooks of news items to interpret in light of what they learn.

“We’ve talked a lot about costs, benefits and valuation in the class. One of my goals is to help them learn to evaluate policy,” she says. “When they read the news, they can make good decisions, I hope.”

Moreover, “it’s great to do this exercise not only for learning purposes, in terms of how economic ideas get applied to the real world, but also in terms of giving students a sense of environmental responsibility and a connection to stewardship,” says Christopher Westcott, a student of Lewis’ and a senior environmental studies major from Princeton, N.J.