Implementation of Market-based
Solutions to Climate Change
Michael J. Walsh, Ph.D.
Executive Vice President, Research
Chicago Climate Exchange®, Inc.
Reproduction or quotation is expressly forbidden without consent of the author.
©2008
CHICAGO CLIMATE EXCHANGE, INC.
“Business Increases pressure on G8 to set up
global emissions trading system”
“Steve Lennon, chair of the environment and energy
commission of the International Chamber of Commerce,
which represents hundreds of
thousands of companies in 130 countries, said:
“We see a global system of
emissions trading as inevitable”
Financial Times, June 10, 2005, page 1
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Global Status of Legislated Carbon Market Activity
European Union
Australia Canada
21%
Rest of World
43%
percentage share of
global emissions
US Russia
Ukraine Japan
36%
Green = live market or final planning stages
Yellow = signs of progress
Red = market activity limited to CDM
©2008
CHICAGO CLIMATE EXCHANGE, INC.
The Growing CCX Global Platform

Chicago Climate Exchange (CCX)
Launched 2003 with 14 members, now 400+ members (US, CA, MX, BR, NZ, AU,
CH)

European Climate Exchange (ECX)
FSA-regulated futures market for European CO2 Allowances
Launched April, 2005 – accounts for 80-90% of total exchange traded volume in the
EU ETS

Chicago Climate Futures Exchange (CCFE)
CFTC-regulated futures exchange for U.S. SO2 and NOx allowances
Launched in December 2004, world’s first environmental derivatives exchange

Montreal Climate Exchange (MCeX)
Joint venture with the Montreal Bourse
Hosts Canadian GHG trading, other environmental markets: launched May 30, 2008

New York Climate Exchange™ and Northeast Climate Exchange™
Developing instruments for northeast Regional Greenhouse Gas Initiative (RGGI)

India Climate Exchange
(In development)
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Climate Policy, Economic Thought
©2008
•
Arthur Pigou (early 1900s):
• environmental damages due to wrong prices
• tax harmful actions, subsidize positive ones
•
Ronald Coase (1960s)
• ill-defined property rights preclude fair settlements
• ownership, low transaction costs => negotiate, settle
•
Joseph Schumpeter (early 1900s):
• inventive process: invention, innovation, replication
CHICAGO CLIMATE EXCHANGE, INC.
Emissions Trading: Rationale
• Flexibility: lower cost to cut emissions compared to inflexible mandates
• Wise use of scarce resources: static efficiency
• more environmental protection per dollar spent
• Lower cost makes larger cuts politically acceptable
• Works with/harnesses business capabilities: another asset and materials flow to
be managed
• Price signal guides resources, indicates real cost
• Profits stimulate innovation: dynamic efficiency
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Example: Economic Benefits of Emissions Trading - Total Cost to
Society to Cut Emissions 2 Tons is Lowered Through Trading
industry pollution
control
cost structure
$400
cost per ton
$300
of
reductions $200
$225 per ton
Same overall emission
cuts realized (2 tons), cost
to society is reduced
through trading
Each plant
Plant A cuts 2 tons (sells one
cuts 1 ton,
ton of credit to Plant B),
total cost = $325
Plant B “hires” A (by
purchasing one ton),
total cost= 2 x $100 = $200
$225
(Plant B)
$100 per ton
$100
$100
(Plant A)
$100
$0
Plant A
©2008
Plant B
No
Trading
$100
Trading
CHICAGO CLIMATE EXCHANGE, INC.
Emissions Trading: Needed Conditions
• Multiple emission sources cause common problem (mixing)
• Able to define and monitor reduction objective
• Differences in mitigation costs across sources allow cost savings through trading:
• those facing low cost to cut emissions make extra
cuts and sell allowances to those facing high cost
• Enforce rules while maintaining other protections (e.g. local air rules)
• Functional legal/business environment:
• effective governance, enforceability
• rules stability and confidence therein
• reliability of contracts and commerce
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Emissions Trading: Basics
Example: Baseline, Target and
Actual Emission Levels
Emission Levels
120
100
Emission target:
95 tons (5% cut)
100 ton
baseline
10 ton
shortage
10 ton
surplus
80
85
tons
105
tons
60
40
20
0
Baseline
©2008
Seller
Buyer
CHICAGO CLIMATE EXCHANGE, INC.
Emissions Trading: Implementation
•
Set targets: overall and source-specific limits
• based on environmental goals, affordability
•
Assign tradable allowances to sources (=target)
•
Define eligible offset projects, issue credits
•
Monitor and report emissions, track transfers
• emissions database
• allowance registry
•
Periodic “true-up”: retire allowances in amount equal to emissions
• annual true-up for “accumulative” pollutants (e.g. SO2, CO2)
• seasonal true-up for time-sensitive pollutants (e.g. ozone/NOx)
©2008
CHICAGO CLIMATE EXCHANGE, INC.
U.S. Electric Power Sector SO2 Emissions
20,000
Thousand Tons
15,000
10,000
Existing Title IV Cap*
5,000
Projected Emissions
w/ CAIR*
CAIR Caps*
0
1980
1985
1990
1995
2000
2005
2010
2015
Source: USEPA
©2008
CHICAGO CLIMATE EXCHANGE, INC.
2020
Impact of trading on SO2 pollution
Annual Mean Ambient SO2 Concentration
1989-1991
2004-2006
Based on EPA’s latest air quality trends data the national composite average of SO2 annual mean ambient
concentrations decreased 48 percent between 1990 and 2005.
12
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Pre-1992 Forecasts of SO2 Allowance Prices
vs. Actual Allowance Prices
$2,500
Price per ton
$2,000
$2000 Fine Level
$1,500
$1500 EPA Emergency Supply
$1,000
$981 United Mine Workers
$785 Ohio Coal Office
$688 Electric Power Research Institute
$500
$0
©2008
$446 Sierra Club
$309 Resource Data
Intl.
$392 American Electric Power
$275 - average auction price, 1993-2008
"Phase 1 Middle" prices,
11
Source: Hahn and May, The Electricity Journal, March 1994
1
CHICAGO CLIMATE EXCHANGE, INC.
Schoolchildren buy and retire SO2 allowances:
low transaction costs allow efficient outcomes
Chicago Board of Trade, March 1994
(Photo Source: Mainichi Evening Eye)
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Emissions Trading In Practice
©2008
•
Multiple environmental and economic successes
•
U.S. SO2 market:
• 100% compliance
• emissions fell ahead of schedule
• active trade, low cost to consumer
•
Other successes: gasoline lead; L.A.; U.S. NOX
•
International carbon markets:
• CCX, EU ETS markets now live
• Australia, NZ, Canada, Japan markets planned
• U.S. market proposed in numerous legislative drafts
CHICAGO CLIMATE EXCHANGE, INC.
Global Climate Risks
• Atmospheric concentrations of carbon dioxide and
other greenhouse gases are up – no dispute
•Atmospheric concentrations of carbon dioxide an
other greenhouse gases are up – no dispute
• Risk: global temperature rise, more extreme heat
waves, drought and precipitation events: stress on water, energy, infrastructure
• Risk: Sea-level rise: thermal expansion, land-ice melt
• coastal damage
• inundation
• Risk: Spread of temperate disease, pests
• human health
• agricultural, forestry
• Risk: bad policy could yield less environmental progress for any given
investment in resources: how to optimize return on investment?
©2008
CHICAGO CLIMATE EXCHANGE, INC.
How to Reduce Greenhouse Gases
• Lower carbon fuel: natural gas, CO2 neutral fuel (biomass)
• More efficient fuel use: MPG, lighting, insulation
• Methane capture/combustion
• Abatement devices, alternative chemicals
• Carbon sequestration:
• reforestation, carbon accumulation, preservation
• agricultural soils
• geologic
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Getting Started With A Pilot Market: A Concept Becomes Reality,
Yet Still No Implementation by Western Hemisphere Governments
©2008
CHICAGO CLIMATE EXCHANGE, INC.
What is Chicago Climate Exchange?
Chicago Climate Exchange (CCX®) is the world’s
first and North America’s only voluntary, legally
binding greenhouse gas reduction, audit,
registration and trading program for emission
sources and offset projects in North America,
Brazil and globally.
©2008
CHICAGO CLIMATE EXCHANGE, INC.
CCX Market Architecture (2003-2010)
Phase I: Members made legally binding commitments to reduce or trade 1% per year from 20032006, for a total of 4% below baseline.
Phase II: Members make a legally binding commitment to reduce to 6% below baseline by 2010.
Baseline = Avg. emissions from 1998-2001, emissions in 2000 (Phase II)
CCX is synergistic with and complementary to all emerging policy, precludes none – whether
state, regional, national, voluntary or mandatory.
©2008
CHICAGO CLIMATE EXCHANGE, INC.
GHG Reduction Targets: CCX, Proposed Legislation
130
Emission targets relative to year 2000 levels
trend
Trend = +1%/yr
120
110
CCX "B"
(extrapolated
@-.75%/y)
100
proposed
LiebermanWarner
proposed
FeinsteinCarper
90
80
70
2000
CCX ongoing and
extended paths
2005
proposed
California
Federal/Cal
Proposals “catchup” to CCX path
around 2020-2030
2010
2015
proposed
BingamanSpecter
2020
2025
2030
Year
©2008
CHICAGO CLIMATE EXCHANGE, INC.
CCX Membership
(Over 400 - All Sectors)
Aerospace & Equipment
Rolls-Royce
United Technologies
Commercial Interiors
Knoll, Inc.
Steelcase Inc.
Agricultural Products
Agrium U.S. Inc.
Cargill, Incorporated
Monsanto Company
Counties & States
King County, Washington
Miami-Dade County, Florida
Sacramento County, California
State of Illinois
State of New Mexico
Automotive
Ford Motor Company
Beverage Manufacturing
New Belgium Brewing
Chemicals
Dow Corning
DuPont
Rhodia Energy Brasil Ltda
Coal Mining
Jim Walter Resources, Inc.
PinnOak Resources LLC
©2008
*Application in process
Diversified Manufacturing
Eastman Kodak Company
Environmental Services
Atlantic County Utilities
Lancaster County Solid WMA
Veolia Environmental Services
Wasatch Integrated WMA
Waste Management, Inc.
Electric Power
AGL Hydro Partnership
Allegheny Energy Inc.
Alliant Energy
American Electric Power
American Municipal Power-Ohio
Associated Electric Cooperative
Avista Corporation
Central Vermont Public Service
DTE Energy Inc
Duquesne Light Company
Green Mountain Power
Hoosier Energy Rural Electric
Manitoba Hydro
NRG Power Marketing Inc.
Puget Sound Energy, Inc.
Reliant Energy Services Inc.
TECO Energy, Inc.
Electronics
Motorola, Inc.
Sony Electronics Inc.
Square D/Schneider Electric
CHICAGO CLIMATE EXCHANGE, INC.
CCX Membership
(Over 400 - All Sectors)
Ethanol Production
Corn Plus LLP
Financial Institutions
Bank of America
Food Processing
Meister Cheese Co. LLC
Premium Standard Farms
Smithfield Foods, Inc.
Forest Products
Abitibi-Consolidated
Aracruz Celulose S.A.
Cenibra Nipo Brasiliera S.A.
International Paper
Klabin S.A.
Masisa S.A.
MeadWestvaco Corp.
Neenah Paper Incorporated
Stora Enso North America
Suzano Papel E Celulose SA
Tembec Industries Inc.
Temple-Inland Inc
©2008
*Application in process
Manufacturing
Bayer Corporation
Interface, Inc.
Ozinga Bros., Inc.
Smurfit-Stone
Municipalities
City of Aspen
City of Berkeley
City of Boulder
City of Chicago
City of Fargo
City of Oakland
City of Melbourne, Australia
City of Portland
Petrochemicals
Petroflex Industria e Comercio
Pharmaceuticals
Baxter International, Inc.
Recreation
Aspen Skiing Company
Retail
Safeway, Inc.
Technology
Freescale Semiconductor
IBM
Intel Corporation
STMicroelectronics
Transportation
Amtrak
San Joaquin Regional Rail
University
UC San Diego
Hadlow College
Michigan State University
University of Idaho
University of Iowa
University of Minnesota
University of Oklahoma
Tufts University
CHICAGO CLIMATE EXCHANGE, INC.
©2008
0
2009 Start
2003 Start
2012 Start
CHICAGO CLIMATE EXCHANGE, INC.
22
22
19
11
Sweden
Ireland
Estonia
Lithuania
3
29
Hungary
Luxemborg
30
Slovakia
4
31
Denmark
Latvia
33
Austria
Included emissions
9
37
Portugal
130
170
CCX includes more industrial emissions under
its legally binding cap than any country in the
world
Slovenia
45
56
New South Wales
Finland
60
Belgium
71
86
The Netherlands
Greece
94
Czech Republic
California
US NE States (RGGI)
151
171
Spain
France
174
206
Australia
United Kingdom
232
Italy
100
237
200
Poland
339
400
Canada
500
496
540
600
Germany
CCX
Hundred Million Metric tons CO2
Size of Live, Emerging, Possible GHG Markets
Live Market
Market in development
Under discussion
300
CCX Associate Members (“Carbon neutral”-selection)
Architecture/Planning
Mithun, Inc.
Brokerage Services
Amerex Energy
Consulting
Domani, LLC
Global Change Associates
Natural Capitalism, Inc.
RenewSource Development,
L.P.
Rocky Mountain Institute
Diplomatic Sector
Embassy of Denmark, Washington DC
Financial Services
Access Industries, Inc.
MB Investments, LLC
Financing Agencies
Ohio Air Quality Development Authority
Green Power Marketers
Green Mountain Energy Company
Information Technology
Open Finance LLC
Intercontinental Exchange
Legal Services
Foley & Lardner, LLP
Sullivan & Cromwell, LLP
Retiring/Offsets
Carbonfund.org
Terrapass, Inc.
Non-Governmental Organizations
American Coal Ash Association
Energy and Management Services American Council on Renewable Energy
Orion Energy Systems Ltd
Delta Institute
Sieben Energy Associates
Houston Advanced Research Center
Thermal Energy International
Midwest Energy Efficiency Alliance
©2008
Religious Organizations
Jesuit Community of Santa Clara
University
Renewable Energy
Airtricity
Intergy
Reknewco, Ltd.
Documentary Production
Cloverland, Inc.
Engineering
Rumsey Engineers, Inc.
Vanasse Hangen Brustlin, Inc.
Risk Management
The Professional Risk
Managers’International
Association
Private Colleges
Presidio School of Management
Social Investment
KLD Research & Analytics
Pax World
Technology
Millennium Cell
Polar Refrigerant Technology
Trade Associations
Confederation of British Industry
CHICAGO CLIMATE EXCHANGE, INC.
CCX Participant Members (selection)
Offset Aggregators
C-Green Aggregator, LLC
Delta Institute
Environmental Carbon Credit Pool,
LLC
Environmental Credit Corp.
First Capital Risk Management, LLC
Iowa Farm Bureau
National Carbon Offset Coalition
North Dakota’s Farmers Union
Offset Providers
Beijing Shenwu Thermal Energy Trading
Hubei Sanhuan
Gallo Cattle
Granger Holdings
Intrepid Technologies, Inc.
Lugar Stock Farm
Precious Woods Holdings
Sexton Energy
Sustainable Forestry Management, Ltd.
Liquidity Providers
AGS Specialists, LLC
Galtere International Master
Amerex Energy
Fund, LP
Breakwater Trading, LLC
GFI Securities, LLC
Calyon Financial, Inc.
Goldenberg, Hehmeyer & Co.
Cargill Power Markets, LLC
Grand Slam Trading, Inc.
Eagle Market Makers, LLC
Grey K Environmental Fund, LP
Evolution Markets, LLC
Haley Capital Management
EXO Investments
ICAP Energy, LLC
FCT Europe, Ltd.
Kottke Associates, LLC
First New York Securities, LLC.
The League Corp.
Friedberg Mercantile Group,
Marquette Partners, LP
Ltd.
Natsource, LLC
©2008
Peregrine Financial Group
Rand Financial Services, Inc.
Serrino Trading Co.
Shatkin Arbor, Inc.
S.R. Energy, LLC
SwissRe Financial Products
Corp.
TEP Trading 2 Ltd.
TradeLink, LLC
Tradition Financial Services,
Ltd.
TransMarket Group, LLC
CHICAGO CLIMATE EXCHANGE, INC.
Benefits of CCX
Practical and strategic drivers:
• Competitive advantages through leadership:
 reduce greenhouse gas emissions in a rules-based, independently audited market system
 obtain practical expertise through “hands-on” participation
 build institutions: first-mover; global linkages
 get ahead of disparate regulations, prepare for policy
 reduce long-term mitigation costs
 improve focus on energy efficiency, identify free savings
 build carbon price into minds of operators and planners
 trading profits, possible early action crediting
 positioning in face of major growth in social investing
 meet fiduciary commitments to shareholders and other stakeholders
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Rationale For Business Leadership to
Build the Carbon Market
“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
IBM
VP, Corporate Environmental Affairs
September 26, 2007
©2008
CHICAGO CLIMATE EXCHANGE, INC.
CCX® Comprehensive Market Structure
Member’s Electronic Market Registry
Comprehensive Rules System
•Emitters: Standard baseline,
multi-year allowance stream
equal to reduction targets
• Offset Providers (project credits)
• Liquidity Providers
• Associate Members
Webaccessible
secure
Electronic
Trading
Platform
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Emission Reductions and Project-based Offsets in CCX
Years 2003 through 2006* (metric tons CO2)
250,000,000
219,725,450
metric tons CO2
200,000,000
188,422,450
150,000,000
86%
100,000,000
50,000,000
22,903,000
10%
8,400,000
Project-based
Offsets
Forest
Management
0
Internal On-site
Emission
Reductions at
Member Facilities
*As of 5-20-08. A portion of new member
emission reductions are currently undergoing
verification.
©2008
4%
Total
CHICAGO CLIMATE EXCHANGE, INC.
CCX Monthly Price & Volume
10,000,000
$8.00
$7.50
9,000,000
$7.00
$6.50
8,000,000
$6.00
$5.50
$5.00
6,000,000
$4.50
5,000,000
$4.00
$3.50
4,000,000
$3.00
Price
3,000,000
$2.50
(US$/metric ton CO2)
$2.00
2,000,000
$1.50
$1.00
1,000,000
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
Sep-06
Jun-06
Mar-06
Dec-05
Sep-05
Jun-05
Mar-05
Dec-04
Sep-04
Jun-04
Mar-04
0
Dec-03
$0.50
Date
©2008
CHICAGO CLIMATE EXCHANGE, INC.
$0.00
Price
Volume (MT)
7,000,000
Chicago Climate Exchange Average Daily Volume
(metric tons CO2)
350,000
Value of daily turnover:
approx: $2.4 million
(annualized = $600
million/yr)
300,000
250,000
200,000
Value of Annual Allocation
approx: $3.8 billion
150,000
2008 vintage spot price:
100,000
CCX CFI:
$7.40
50,000
0
2005
©2008
2006
2007
2008
CHICAGO CLIMATE EXCHANGE, INC.
Defining CCX Offsets: Principles
Target Actions with Major Mitigation Potential
−
Non-CO2 gasses: low-cost, multi-benefit
−
Agriculture: soils hold 183 years of global CO2 emissions
−
Forestation: forests hold 75 years of global CO2 emissions
−
Advance broader societal goals: sustainable agriculture and forestry,
energy efficiency, renewables
−
Advance all mitigation options
identified by IPCC, others
SES Field Inspector conducting
soil sampling in no-till corn
©2008
CHICAGO CLIMATE EXCHANGE, INC.
CCX Emission Offsets Program

Verified Offset projects sequester or eliminate GHGs, earn
Carbon Financial Instruments marketable to CCX members

Pre-defined offset projects:
−
−
−
−
−
Landfill, agricultural coalmine methane destruction
Carbon sequestration: reforestation, agricultural soils: standardization
Renewable energy, fuel switching, energy efficiency, ODS destruction
Independent verification by authorized entities: SGS, DNV
Others in development, as per member requests
Minnesota dairy farmer receives
first check from sales of
methane-destruction CCX Offsets
©2008
CHICAGO CLIMATE EXCHANGE, INC.
CCX Offset Projects--Standardized Verification by
World-Leading Entities

Agricultural Methane Capture and Combustion
Agri-Waste Technology, Inc.
SES Inc.
TUV SUD Industrie Service GmbH

Forestry
BVQi
Forecon Inc.
SGS
TUV SUD Industrie Service GmbH
Winrock International

Agricultural Soil Carbon Sequestration
Agri-Waste Technology, Inc
Association of Illinois Soil and Water Conservation Districts
North Dakota Association of Soil Conservation Districts
SES Inc.
Agriculture Financial Services Corporation
Saskatchewan Crop Insurance Corporation

Energy Efficiency
Econergy Corporation International
Franklin Energy Services
ICF Consulting Canada Inc.
TUV SUD Industrie Service Gmbh

Landfill Methane
ARM Group Inc.
Det Norske Veritas (DNV)
Econergy Corporation International
First Environment Inc.
Richardson Smith Gardner and Associates, Inc
Kleinfelder
TUV SUD Industrie Service GmbH
©2008
35
SGS is a world leading inspection, verification,
testing and certification company, and is
recognized as a global benchmark for quality and
integrity. With more than 48'000 employees, SGS
operates a network of over 1’000 offices and
laboratories around the world.
DNV is a leading independent greenhouse gas
verifier operating globally. Their GHG experts
are used by international organizations,
governments, and industry, delivering
independent, third party services for climate
change activities.
CHICAGO CLIMATE EXCHANGE, INC.
CCX Membership Accomplishments
•
Four compliance cycles successfully executed: major emissions cuts achieved
•
Four years of continuous transparent public carbon prices
•
Hundreds of Meetings of CCX Governance Committees: rules address nearly
all now-viable GHG mitigation options identified by IPCC
•
Over 11,000 trades executed, cleared and delivered
•
Major knowledge gain by diverse members, as well as verifiers, traders, etc.
•
Full integration of multiple offset types, with scale
•
All mitigation activities covered under CCX rules are contained in draft U.S.
cap-and-trade legislative proposals
©2008
CHICAGO CLIMATE EXCHANGE, INC.
U.S. House of Representatives Purchases Emission Offsets Through
CCX as Part of “Greening the Capitol” Initiative
Auction results Announced November 1, 2007
U.S. House acquired balanced portfolio of 30,000 metric tons CO2 of verified U.S.
domestic offset projects involving: agricultural methane, coalmine methane, landfill
methane, agricultural soils, reforestation, renewable fuels*
CCX Chairman & CEO, Dr. Richard L. Sandor; U.S. Representative Rahm Emanuel;
U.S. House of Representatives CAO Dan Beard; U.S. Representative Dan Lipinski;
U.S. Representative Mark Kirk
* auction was oversubscribed with a weighted average clearing price of $2.97 per ton
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Key Issues to Watch in U.S. Legislation
• Included sectors, targets, gasses, timetables (start date, true-up periods)
• Availability and cost of domestic and international offsets
• Safety valves? (price, quantity, policy?)
• Openness to domestic and international project-based offsets
• Parallel technology and policy development efforts (e.g. CAFE standards)
• International market and policy linkages
• Initial Allocation of tradable permits
• grandfathering
• auctions
• benchmarking
• accommodation of growth/new entrants?
©2008
CHICAGO CLIMATE EXCHANGE, INC.
Main Features of Leading
GHG Limitation Proposals in U.S. Senate
Legislative
Proposal
Lieberman/
Warner
(with: Coleman
R-MN, Harkin
D-IA, Dole RNC, Cardin DMD, Collins RME, Klobuchar
D-MN.
(S. 2191)
Bingaman/
Specter
(with:Akaka,
D-HI, Harkin,
D-IA, Casey,
D-PA,
Murkowski, RAK, Stevens,
R-AK
(S. 1766)
©2008
2020
emission
Targets
Equal to
1990 level
2030
emission
Targets
22% below
1990 level
1990 level
Equal to
2006 level
(~5% above
2000 levels)
Coverage/style
Most of the
economy
covered;
downstream for
large coal
burners,
upstream for
liquid fuels +
natural gas
Most of the
economy
covered;
downstream for
large coal
burners,
upstream for
liquid fuels +
natural gas
Early
Actions
Credited?
Yes,
documented
emission cuts
plus early
“projects”
Yes –
documented
emission cuts
Other
Large/growing
auctions - proceeds
for efficiency,
technology etc.
allows borrowing
from future (with
interest); market
overseen by “Carbon
Market Efficiency
Board”
Auctions smaller
than L-W, but grow
Price cap starts
at
$12/ton, rises
{5%/yr + inflation
rate}
CHICAGO CLIMATE EXCHANGE, INC.
Bi-Partisan Views on CCX
“The Chicago Climate Exchange is providing an innovative means of involving American businesses
and citizens in the effort to protect the environment…I listed my farm in Indiana on the Chicago
Climate Exchange to set an example for farmers and foresters in my state and throughout America…For
example, the exchange mechanism could be utilized by turning unused farmland into tree farms that
sequester carbon while providing farmers with extra money… In short, American farmers could become
the vanguard in using market forces to the benefit of both the environment and the pocketbook…”
Senator Richard Lugar (R-IN), Chairman of Senate Foreign Relations Committee
“To deal directly with climate change, something we failed to do in the last energy bill, we should use a
market-based strategy that gradually reduces harmful emissions in the most economical way…..Right
here in Chicago, the Chicago Climate Exchange is already running a legally binding greenhouse gas
trading system”
Senator Barack Obama (D-IL), April 3, 2006
“The CCX is leading the way toward a future in which reducing greenhouse gases could bring not only
environmental rewards, but financial ones too.”
Al Gore, from An Inconvenient Truth, 2006 (book version).
“What would be wrong, at least on a theoretical basis, with taking what you have come up with by way
of requirements for your (CCX) members and essentially mandating that everybody in the country
comply with those?”
Senator Jeff Bingaman (D-NM), Chairman Senate Energy & Natural Resources Committee,
April 4, 2006
©2008
CHICAGO CLIMATE EXCHANGE, INC.