Chicago Climate Exchange, Inc. Jeff Huang Vice President July 2009 1 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. CCX-Related Exchanges Chicago Climate Exchange ™ (CCX) - Voluntary • Launched 2003 with 14 members, now 450+ members • Self-Regulatory Service Provider: FINRA European Climate Exchange ™ (ECX) - Mandatory • Markets Served: EU ETS, Kyoto Protocol • FSA-regulated futures market for European CO2 Allowances • Launched by CCX April, 2005 – 80-90% of EU exchange traded volume Chicago Climate Futures Exchange ™ (CCFE) – Voluntary and Mandatory • Markets Served: US Clean Air Act, CCX, Kyoto Protocol, EU ETS, RGGI, CCAR • CFTC-regulated futures exchange • Launched by CCX in December 2004 Montreal Climate Exchange ™ (MCeX) – Mandatory • Market Served: Kyoto Protocol • Joint venture with the Montreal Bourse Tianjin Climate Exchange ™ (TCX) – Potentially Voluntary and Mandatory • Joint venture with China National Petroleum Corporation and the City of Tianjin India Climate Exchange™ – Potentially Voluntary and Mandatory • (In development) 2 © 2008 Chicago Climate Exchange®, Inc. CCX-US (Voluntary, Legally-Binding Emissions Reduction Schedule) Phase I (2003-2006): Members made legally binding commitments to reduce/trade to 4% below baseline by 2006 Phase II (2007-2010): Members make legally binding commitment to reduce/trade to 6% below baseline by 2010 ** Baseline: Average emissions from years 1998-2001 (Phase I), emissions from year 2000 (Phase II) ** 3 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. CCX Registry 4 © 2008 Chicago Climate Exchange®, Inc. CCX Trading Platform Bids and offers Completed trades (each contract is 100mt CO2) 5 © 2008 Chicago Climate Exchange®, Inc. CCX Membership – Economy Wide Most Stringent GHG Reduction Commitment in U.S. Key Sectors • Electric Power Generation • Diversified Manufacturing • Pulp and Paper • Financial Institutions • Electronics and Technology • Agricultural Products • Electronics • Chemicals • Environmental Services • Universities & Colleges 6 © 2008 6 A Selection of Members ®, Reproduction or quotation of this material is expressly forbidden without the consent of theExchange Author. Chicago Climate Inc. CCX® Membership Highlights 7 • Represents 17% of the Dow Jones Industrials, including: – Bank of America – DuPont – Intel – IBM – United Technologies • Represents 11% of the Fortune 100, including: – Ford – Motorola – Safeway – International Paper – Honeywell International Inc. • Represents 20% of the largest CO2 emitting utilities in the US, including: – AEP Mirant – Reliant Dynegy – Allegheny Energy TECO – DTE Alliant – NRG Energy American Electric Cooperative, Inc © 2008 Chicago Climate Exchange®, Inc. Comments of IBM “It's because by participating in the Chicago Climate Exchange, which really governs IBM's own business operations and our company's own carbon footprint, we are better able to understand the entire arena of creating an inventory of carbon emissions, accounting for them in an audit ready manner, presenting them to an exchange so they can be verified and considered to be tradable and how one does and doesn't make money on an exchange” Wayne Balta VP, Corporate Environmental Affairs IBM September 26, 2007 8 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. CCX Size Relative to National GHG Trading Coverage CCX includes more industrial emissions under its legally binding cap than any single country in the world 600 600 Hundred Million Metric tons CO2 [Included emissions] Source: EU ETS Phase II National Allocation Plans 500 453 445 400 400 [RGGI] 300 [AB32] 246 196 23 21 13 9 8 3 3 Latvia Luxemborg 29 Slovenia 31 Lithuania 31 Estonia 31 Ireland 37 Hungary 45 Austria 56 Denmark 59 Slovakia 69 Portugal 86 Finland California France Spain US NE States (RGGI) Italy Poland United Kingdom Canada Australia Germany CCX 0 Czech Republic 87 100 Sweden 130 New South Wales 133 Belgium 152 Greece 170 The Netherlands 209 200 CCX Member-wide emissions are equivalent to: •15% of U.S. stationary emission sources •25% of emissions covered under EU ETS 9 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. Liquidity Providers Liquidity Provider: Entity or individual who trades on the Exchange for purposes other than complying with the CCX emissions reduction schedule, such as market makers and proprietary trading groups. Selected Liquidity Providers 10 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. ® ® CCX CFI Cash/Futures/Options Based on U.S. Voluntary, Legally-Binding Program 120 *CFI Futures Contract Launched August 2007 Options 100 **CFI Options Contract Launched February 2008 Futures Million (metric tons) Cash 80 60 *As of 7/16/09 40 20 0 2004 11 2005 2006 2007 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. 2008 2009 Chicago Climate Exchange®, Inc. CCFE® Market Dynamics • CFTC Designated Contract Market • Clearing services provided by Clearing Corporation • Market Surveillance provided by the National Futures Association (NFA) • CCFE Products offer: – – – – – • Standardized contracts Price transparency / price discovery Anonymity Elimination of counterparty credit risk Leverage benefits Market hours: 7:00 am to 3:00 pm CST © 2008 Chicago Climate Exchange®, Inc. CCFE Products US Emissions – US EPA Clean Air Markets • • • Sulfur Financial Instrument® (SFI ®) Futures and Options Nitrogen Financial Instrument™ - Ozone Season (NFI™ -OS) Futures Nitrogen Financial Instrument™ - CAIR Annual (NFI™ -A) Futures and Options US Carbon Products • • • • Regional Greenhouse Gas Initiative (RGGI) Futures and Options Carbon Financial Instrument ® (CFI ®) Futures and Options U.S. Carbon Financial Instrument (CFI-US®) Jan‘13–Dec ‘15 Futures & Options California Climate Action Reserve Tons (CCAR-CRT®) Futures and Options Equity-Index Products • • ECO-Clean Energy Index (ECO) Futures Dow Jones Sustainability World Index (DJSI-W) Futures * IFEX™ Insurance • • • U.S. Tropical Wind ($10, $20, $30, $40 and $50 Billion) Florida Tropical Wind ($10, $20, $30, $40 and $50 Billion) Gulf Coast Tropical Wind ($10, $20, $30, $40 and $50 Billion) Renewable Energy Products • • • • New Jersey Renewable Energy Certificate (REC-NJ) Futures Connecticut Renewable Energy Certificate (REC-CT) Futures Massachusetts Renewable Energy Certificate (REC-MA) Futures Voluntary Renewable Energy Certificate (REC-V) Futures "Dow Jones, World Sustainability IndexSM" are service marks of Dow Jones & Company, Inc. Dow Jones has no relationship to the Chicago Climate Futures Exchange, other than the licensing of the Dow Jones World Sustainability Index and its service marks for use in connection with the Dow Jones World Sustainability Index Futures products. © 2008 4 Chicago Climate Exchange®, Inc. Timeline of CCFE Product Launches Launch Product December 2004 SFI Futures February 2007 NFI-OS Futures April 2007 SFI Options July 2007 ECO-Clean Energy Index Futures August 2007 CFI Futures September 2007 NFI-A Futures October 2007 IFEX Futures February 2008 CFI Options March 2008 NFI-A Options August 2008 RGGI Futures & Options November 2008 DJSI Futures November 2008 CFI-US Futures December 2008 CFI-US Options February 2009 CCAR-CRT Futures & Options April 2009 REC Futures (NJ, CT, MA & Voluntary) © 2008 Chicago Climate Exchange®, Inc. CCFE® Clearing Members © 2008 Chicago Climate Exchange®, Inc. CCFE® Market Growth • Volume Growth: • 2005 - 171 contracts • 2006 – 28,924 contracts • 2007 – 283,758 contracts • 2008 – 484,320 contracts • 2009 YTD – 674,733 contracts *as of 6/5/09 © 2008 Chicago Climate Exchange®, Inc. Thousands CCFE® Average Daily Volume Growth Since 2007 12 10 8 6 4 2 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun '07 '07 '07 '07 '07 '07 '07 '07 '07 '07 '07 '07 08 08 08 08 08 08 08 08 08 08 08 08 '09 '09 '09 '09 '09 '09 © 2008 Chicago Climate Exchange®, Inc. CCFE® Open Interest Growth Since 2006 160,000 140,000 RGGI Futures NFI-OS Futures IFEX ECO-Index Futures CER Futures and Options CFI Futures and Options NFI-A Futures and Options SFI Futures and Options 120,000 100,000 80,000 60,000 40,000 20,000 - *as of 6/5/09 © 2008 Chicago Climate Exchange®, Inc. CCFE Futures Platform © 2008 Chicago Climate Exchange®, Inc. CCFE Options Platform © 2008 Chicago Climate Exchange®, Inc. Current Active U.S. Carbon Markets • Government Mandated – Regional Greenhouse Gas Initiative (RGGI) • 10 Northeastern States • 188 million ton cap – stabilization of emissions through 2014 • Voluntary, legally binding – CCX • 450 Members • Approx 600 million tons under cap • 6% Reduction of emissions by 2010 from 2000 levels • Voluntary Offset Standards • Chicago Climate Exchange (CCX) • California Climate Action Registry (CCAR) • Voluntary Carbon Standard (VCS) • Gold Standard © 2008 Chicago Climate Exchange®, Inc. RGGI Futures & Options • • • • Physically deliverable futures contract (and European style options on futures) for Regional Greenhouse Gas Initiative Allowances – the first governmentmandated CO2 emissions trading program in the U.S Each contract represents 1000 RGGI allowances, which represent 1,000 short tons of CO2 Launched: August 2008 Tick Size: $0.01 ($10.00 per contract) Transaction Fees: $1.60 per contract per side (Member); $2.00 (Non-Member) • Current Margin requirement: $450 per contract • Market Highlights: • • Current Open Interest* 31,441 contracts • Over 237,717,000 allowances traded on CCFE *as of 5/28/09 © 2008 Chicago Climate Exchange®, Inc. RGGI: 1st Mandatory Carbon Market in U.S. Exhibits Dramatic Growth • • • • • • 1st RGGI Auction: 12,565,387 Allowances 2nd RGGI Auction: 31,505,898 Allowances 3rd RGGI Auction: 33,689,278 Allowances 4th RGGI Auction: 30,887,620 Allowances Total Auctioned: 107 million Allowances RGGI Derivatives Traded on CCFE: 369 million Allowances 160,000 140,000 25,000 RGGI Options Volume 20,000 120,000 100,000 80,000 60,000 RGGI Futures Volume 15,000 Avereage Daily Volume 10,000 40,000 20,000 - 5,000 Ju ne ay M Ap ril ar ch M Fe br ua ry ry Ja nu a ec em be r D N ov em be r ct ob er O be r Se pt em Au gu st - *As of 6/8/2009 © 2008 Chicago Climate Exchange®, Inc. ACES On June 26, the U.S. House of Represntatives passed the “American Clean Energy and Security Act” by a vote of 219-212. If Enacted, ACES would establish an economy wide cap-and trade program for greenhouse gases (GHGs) beginning in 2012. Absolute Reduction Targets • 3% by 2012 from 2005 level • 17% by 2020 from 2005 level • 42% by 2030 from 2005 level • 83% by 2050 from 2005 level Renewable Energy Standard (RES) • Electric utilities must meet 20% of electricity demand through renewable energy and energy efficiency by 2020 Economy-Wide Coverage • 2012: 67% of U.S. emissions covered • 2014: 78% of U.S. emissions covered • 2016: 85% of U.S. emissions covered Offsets • 2 billion mt allowed per year • 1 of 2 billion mt for domestic offsets • 1 of 2 billion mt for international offsets © 2008 Chicago Climate Exchange®, Inc. ACES Reduction Schedule (Allowance Allocated) © 2008 Chicago Climate Exchange®, Inc. CCFE CFI®-US Mandatory U.S. GHG Allowances As of November 2008: CCX Carbon Financial Instruments with January 2013 expiration and later require delivery of U.S. Federal GHG Emission Allowances, called CFI®-US CFI®-US is the first tool for directly hedging economic exposure associated with: • Whether a U.S. Federal Cap-and-Trade is established • When such a U.S. Federal Cap-and-Trade is established • The prices of tradable emission allowances established under such a Federal Cap-and-Trade 11/19/08: First Trades Futures contracts that expire in December 2013, 2014 and 2015 were traded with prices ranging from $11.75 to $15.00 per metric ton 26 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. European Climate Exchange ™ (ECX) • Launched by CCX April 2005, based in London • U.K. FSA-regulated futures exchange • Futures and Options on: • European Union Allowances (EUAS) • UN Certified Emission Reductions (CERs) • Commands 90-99% of exchange traded futures and options volume • Traded over 5 billion metric tons to date 27 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. ECX Monthly Volumes (EUAs and CERs) © 2008 Chicago Climate Exchange®, Inc. ECX Open Interest © 2008 Chicago Climate Exchange®, Inc. CER/EUA Market Share EUA Futures & Options: Exchange Volumes April 2009 CER Futures & Options: Exchange Volumes April 2009 EEX 0.3% Nordpool EEX 2.4% 0.4% Nordpool Green Exchange 0.5% 0% ECX / ICE 99% © 2008 Bluenext 0.0% ECX / ICE 97.3% Chicago Climate Exchange®, Inc. EUA/CER Historical Prices © 2008 Chicago Climate Exchange®, Inc. 国际环境交易在中国正式启动 32 © 2008 Chicago Climate Exchange®, Inc. CCX Activities in China May 2006: First Chinese Companies join CCX August 2006: CSRC requests consultancy with CCX CEO for China Bond Futures Market July 2007: Guanghua School of Management invites Dr. Sandor invited to join international advisory council Fall 2007: MOST-UNDP invites CCX to consult on development of carbon market to meet Millennium Development Goals January 2008: CCX and CNPCAM sign MOU for JV in China April 2008: China Quality Certification Center (CQC) becomes CCX accredited verifier July 2008: CCX, CNPCAM, City of Tianjin form Tianjin Climate Exchange September 2008: TCX Opening Ceremony at TCX HQ 33 © 2008 Chicago Climate Exchange®, Inc. Key Goals in 11th Five Year Plan Sulfur Dioxide (SO2) Reduce 10% below 2005 levels by 2010 Water Quality - Chemical Oxygen Demand (COD) Reduce 10% below 2005 levels by 2010 Energy Intensity Reduce 20% below 2005 levels by 2010 © 2008 Chicago Climate Exchange®, Inc. 3 4 Tianjin Climate Exchange (TCX) Joint Venture with: • CNPC Asset Management • City of Tianjin • Chicago Climate Exchange (CCX) Mission: • Implement environmental goals of 11th Five Year Plan • Address national and international emissions and energy management challenges, • Improve environmental quality and seek balance between environmental/economic benefits Official Sanction: Tianjin Climate Exchange (TCX) will implement the Binhai Comprehensive Reform Plan, approved on March 13, 2008 by the State Council of the People’s Republic of China (PRC) to establish an emissions trading market in Tianjin Binhai New Area. 35 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc. TCX Initial Product Areas Sulfur Dioxide (SO2) Initial Product/Program Area 11 FYP: Reduce 10% below 2005 levels by 2010 Water Quality - COD – Initial Product/Program Area 11 FYP: Reduce 10% below 2005 levels by 2010 Energy Intensity - Initial Product/Program Area 11 FYP: Reduce 20% below 2005 levels by 2010 Voluntary GHGs CDM CERs © 2008 Chicago Climate Exchange®, Inc. 3 6 Tianjin Climate Exchange – Opening Ceremony 37 © 2008 Reproduction or quotation of this material is expressly forbidden without the consent of the Author. Chicago Climate Exchange®, Inc.