The federal 1990 Clean Air Act created US sulfur dioxide allowance trading to reduce emissions of sulfur dioxide, which is a component of acid rain and can harm the environment and human health.

US regulations require electric utilities to reduce SO2 emissions from 1980 levels. It is yet to be defined how the regulations will be changed in the future, but traders have bought allowances on worries there will be further rules on tightening of emissions.

In spot markets already trading, SO2 emitters, such as power plants, can earn allowances by installing expensive scrubbers at plants to reduce emissions, or by switching to low-sulfur coal or cleaner natural gas. Companies that choose not to make such investments buy those allowances in the market.

SO2 prices in US spot markets tripled last year and have risen slightly this year to about $700 a ton, according to brokers.

Andrew Ertel, President of Evolution Markets, a New York coal, natural gas and emissions credits broker, said the NYMEX contracts would increase the market's liquidity by improving efficiency. He said having NOX and SOX futures trade on NYMEX should allow hedge funds and investment banks to enter the market. "You really allow them to enter into the market in much shorter time period, with much greater efficiency with a wider range of counter parties," said Ertel.

Emissions prices have soared to the point that Ohio utility Cinergy Corp. said late last year the costs were a factor in its lower third-quarter earnings.