Cash for Carbon

The Chicago Climate Exchange is taking off. But will it soar?

By Kiera Butler

Illustration by Christopher Silas Neal

But when cities and states join the exchange, says Goldmark, things get more complicated. In August 2006, several environmental organizations, including Environmental Defense and the Natural Resources Defense Council, drafted a letter urging cities and states to enact their own more stringent programs instead of joining CCX. They argued that the exchange’s standards weren’t tough enough, pointing to loopholes that allow members to pollute with impunity. For example, a company that constructs new facilities after joining CCX can exempt one of those new buildings from the carbon reduction rules it has agreed to. (So far, Sandor says, no company has ever used used this exemption.) If cities do create their own programs, some believe CCX credits might not be transferable, given the exchange’s lax standards.

Sandor typically does not comment on environmentalists’ complaints, but one gets the sense that he finds them frustrating. “We stand by the proposition that in the development of capital markets, the ultimate product never looks like the product at the outset,” he says. “The Wright Brothers flew for 11 seconds at 60 feet, and that was the birth of flight. You don’t start with building a 747. We don’t want the perfect to be the enemy of the good.”

CCX has already taken off; the question going forward will be whether Sandor is as willing as he says to adjust to a world with mandatory carbon reduction programs. In August 2006, California legislators passed the Global Warming Solutions Act, which committed the state to reduce its emissions to 1990 levels by 2020. Seven northeastern states have already joined the Regional Greenhouse Gas Initiative, which, beginning in 2009, will require power plants to reduce their emissions to ten percent below the 2000 to 2004 levels by 2019. Tietenberg believes that in the coming years, mandatory programs will only become more common. If Sandor can adapt, he just might be able to keep CCX up for the long haul.


Reduction Roundup (by Sarah Parsons)

Worldwide, emissions reduction programs are still in their infancy, but in the past decade, a few models have taken off. Here’s how they work.

California Climate Action Registry: A state-backed, voluntary registry that allows organizations to record their greenhouse gas emissions. While the registry doesn’t require any emissions reductions, its organizers hope that tracking data will lead to cutbacks, since the California Global Warming Solutions Act has committed the state to reducing its carbon emissions significantly by 2020.

Regional Greenhouse Gas Initiative: A proposed cap-and-trade program for power plants that aims for a ten percent CO2 reduction by 2019. The program is set to begin in 2009, with seven states already signed on (Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York, and Vermont).

Kyoto Protocol: An international agreement setting mandatory greenhouse gas reductions for more than 160 participating nations. Member countries can meet their reduction requirements through a number of programs, including emissions trading. One interesting program is the Clean Development Mechanism, which allows wealthy nations to offset their emissions by funding reduction programs or sustainable development projects.

European Union Emissions Trading Scheme: Each EU country develops a National Allocation Plan to establish how many tons of greenhouse gases its companies may emit. Companies within the EU may buy or sell emissions allowances to one another, creating a smaller market within the greater Kyoto market. Legislators hope that this system will help the EU meet its Kyoto commitments more efficiently—and cheaply.

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Issue 25

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