Overview of CCX®
Stephen McComb
Economist
312-229-5134
© 2007
Conservation Agriculture Carbon Offset
Consultation
October 28-30, 2008
Chicago Climate Exchange®, Inc.
Climate Exchange, PLC. Group
•
Chicago Climate Exchange (CCX)
•
Launched 2003 with 13 members, now 400+ members (US, CA, MX, BR)
•
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 SO2, CO2, NOx and related derivatives
Launched in December 2004, world’s first environmental derivatives exchange
•
Montreal Climate Exchange (MCeX)
•
•
Joint venture with the Montreal Bourse
Host Canadian GHG trading, other environmental markets – launched May 2008
•
Insurance Futures Exchange (IFEX)
•
Catastrophic event linked futures – Launched in 2008
•
•
Tianjin Climate Exchange
Joint Venture with CNPC Asset Management and the City of Tianjin – Launched September 26,
2008
© 2007
Chicago Climate Exchange®, Inc.
Why Emissions Trading?
- The US Acid Rain Program’s annual benefits in the year 2010 are expected to be $122 billion (Yr. 2000 $)
- 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.
Chicago Climate Exchange®, Inc.
© 2007
Real Electricity Prices Since 1990
Real Retail Electricity Prices (2007 $)
11.00
10.50
Cents / KWh
10.00
9.50
9.00
8.50
8.00
7.50
7.00
1988
© 2007
1990
1992
1994
1996
1998
2000
2002
2004
2006
Chicago Climate Exchange®, Inc.
2008
Currently Available Mitigation Options (IPCC)
Currently viable mitigation
actions
Energy Supply
Improved supply and distribution
efficiency
fuel switching
nuclear power
renewables, combined heat and
Capture and Storage
Transport
More efficient vehicles
biofuels
non-motorised transport (cycling,
walking)
Buildings
More efficient lighting +
appliances + HVAC
insulation
alternative refrigerants,
recycle/destruct fluorinated gases
(NB: word “destruct” not in IPCC
report)
© 2007
Can be
significantly
stimulated
through an
emissions cap
Significantly
stimulated
mainly via
project-based
crediting
Requires cap
and offset rules
to optimize
uptake
How addressed
through CCX
Rules?
Yes
Yes
Cap
Yes
Yes
Yes
Cap + offsets
Cap
Yes
Yes
Cap + offsets
Yes
Yes
(maybe)
Yes
Yes
n.a.
Cap + offsets
Cap + offsets
n.a
Yes
yes
yes
Cap + offsets
Yes
Yes
yes
yes
Yes
yes
Cap + offsets
Cap + offsets
(New CCX ODS
destruction rule!)
Chicago Climate Exchange®, Inc.
Currently Available Mitigation Options (IPCC)
Industry
end-use electrical equipment
heat and power recovery
material recycling/ substitution
control of non-CO2 gas emissions
process technologies
Agriculture
increase soil carbon via improved
crop/grazing land mgmnt
restore degraded lands
improved rice cultivation
livestock methane
energy crops to replace fossil fuel
improved energy efficiency
© 2007
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
No
No
Yes
(maybe)
Yes
Yes
(indirectly)
Yes
Yes
Yes
Yes
Yes
Cap + offsets
Cap + offsets
Cap + offsets
Cap + offsets
Cap + offsets
Yes
Yes
Offsets
Offsets
Not addressed√
Offsets
Cap + offsets
Offsets/indirectly via
conservation tillage
incentives
Chicago Climate Exchange®, Inc.
Currently Available Mitigation Options (IPCC)
Forestry
Afforestation; reforestation
forest management
reduced deforestation
harvested wood product
management
forest products/bioenergy to replace
fossil fuel use
Waste
Landfill methane recovery
waste to energy
waste water treatment
recycling and waste minimization
© 2007
No
Yes
No
No
No
Yes
Yes
No
Yes
No
(indirect via cap)
Yes
Yes
Yes
All four
forestation
management
goals
can be advanced
via on net carbon
flux crediting/
debiting
Yes
Yes
(possible role for
offsets)
Offsets + forest flux
rules
Offsets +
forest flux rules
Offsets+
Forest flux rules
Cap + offsets
Offsets
Cap + offsets
Offsets
(indirect via cap)
Chicago Climate Exchange®, Inc.
What is Chicago Climate Exchange?
A premier and unique financial institution designed to advance business, environmental and social goals.
Chicago Climate Exchange (CCX) is the world’s
first and North America’s only active voluntary,
legally binding integrated trading system to reduce
emissions of all six greenhouse gases, with offset
worldwide.
© 2007
Chicago Climate Exchange®, Inc.
CCX Members
Aerospace & Equipment
Rolls-Royce
United Technologies
Automotive
Ford Motor Company
Beverage Manufacturing
New Belgium Brewing Company
Chemicals
Dow Corning
DuPont
Rhodia Energy Brasil Ltda
Coal Mining
Jim Walter Resources, Inc.
PinnOak Resources LLC
Commercial Interiors
Knoll, Inc.
Steelcase Inc.
Counties
King County, Washington
Miami-Dade County, Florida
Sacramento County, California
Diversified Manufacturing
Eastman Kodak Company
Electric Power Generation
AGL Hydro Partnership
Allegheny Energy Inc.
Alliant Energy Corporate Services
Inc.
American Electric Power
American Municipal Power-Ohio
Associated Electric
Cooperative, Inc.
© 2007
Avista Corporation
Central Vermont Public Service
DTE Energy Inc
Duquesne Light Company
Dynegy Holdings Inc.
Green Mountain Power
Hoosier Energy Rural Electric
Cooperative, Inc.
Manitoba Hydro
Mirant Corporation
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 N.A.
Environmental Services
Atlantic County Utilities Authority
Lancaster County Solid Waste
Management Authority
Veolia Environmental Services
North America Corp
Wasatch Integrated Waste
Management Authority
Waste Management, Inc.
Ethanol Production
Corn Plus LLP
Financial Institutions
Bank of America Corporation
Food and Agricultural Products
& Services
Agrium U.S. Inc.
Cargill, Incorporated
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
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 Oakland
City of Melbourne, Australia
City of Portland
Petrochemicals
Petroflex Industria e Comercio SA
Recreation
Aspen Skiing Company
Retail
Safeway, Inc.
States
State of Illinois
State of New Mexico
Steam Heat
Concord Steam Corporation
Steel
Roanoke Electric Steel Corp.
Technology
Freescale Semiconductor
IBM
Intel Corporation
STMicroelectronics
Transportation
Amtrak
San Joaquin Regional Rail
Commission
University
Hadlow College
Michigan State University
University of Idaho
University of Iowa
University of Minnesota
University of Oklahoma
Tufts University
Pharmaceuticals
Baxter International, Inc.
Chicago Climate Exchange®, Inc.
0
© 2007
2003 start
33
31
30
29
22
22
19
11
9
4
3
Denmark
Slovakia
Hungary
Sweden
Ireland
Estonia
Lithuania
Slovenia
Latvia
Luxemborg
37
Portugal
Austria
45
56
New South Wales
Finland
60
Belgium
71
86
The Netherlands
Greece
94
Czech Republic
130
150
US NE States (RGGI)
California
151
171
Spain
France
174
232
Italy
Australia
237
100
Poland
200
245
300
United Kingdom
Canada
300
400
500
Germany
540
600
CCX
Hundred Million Metric tons CO2
CCX, Second Largest Live Carbon Market
400
Live Market
Market in development
Under discussion
2009 2012
Chicago Climate Exchange®, Inc.
CCX Market Architecture
Phase I: Members made legally binding commitments to reduce or trade 1% per year from 2003-2006,
for a total of 4% below baseline.
Baseline = Avg. emissions from 1998-2001, emissions in 2000 (Phase II)
Phase II: Members make a legally binding commitments to reduce to 6% below baseline by 2010.
© 2007
Chicago Climate Exchange®, Inc.
CCX Membership
► Participant Members
•
Offset Provider: Owner of an Offset Project that registers and sells Offsets on its
own behalf.
•
Offset Aggregator: Entity that serves as the administrative representative, on
behalf of Offset Project owners, of multiple Offset-generating projects.
•
Liquidity Provider: Entity or individual who trades on CCX for purposes other
than complying with the emissions reduction schedule, such as market makers
and proprietary trading groups.
Selected Offset Aggregators
3 Phases Energy Services
Carbon Farmers
Cargill, Inc
CO2 Australia Limited
Delta Institute
Econergy
Ecosecurities
Environmental Credit Carbon
Pool
Environmental Credit Corp.
First Capitol Risk Management
Intrepid Technologies, Inc.
Iowa Farm Bureau
Kentucky Corn Growers Assoc.
National Carbon Offset Coalition
North Dakota Farmers Union
Rice Dairy LLC
Standard Carbon
© 2007
Selected Offset Providers
Arreon Carbon UK Ltd.
Beijing Shenwu Thermal Energy
CO2 Australia
Ecosecurities
Energy Trading Co
Commonwealth Resource Management
Corp.
Gallo Cattle Company
Hubei Sanhuan Development Corporation
Lugar Stock Farm
Precious Woods Holdings
RCM International LLC
Sexton Energy LLC
Sustainable Forestry Management, Ltd.
Vessels Coal Gas Inc.
Weber County
Selected Liquidity Providers
Arreon Carbon
Amerex Energy
Black River Clean Energy
Breakwater Trading
Calyon Financial, Inc.
Cargill Power Markets
Evolution Markets
FCT Europe Ltd.
First New York Securities LLC.
Goldenberg, Hehmeyer & Co.
Haley Capital Management
JP Morgan Ventures Energy
Lehman Brother Commodity
Marquette Partners
Natsource LLC
Peregrine Financial Group
Rand Financial Services, Inc.
Shatkin Arbor, Inc.
Swiss Re Financial Products Corp.
Tradelink
Chicago Climate Exchange®, Inc.
CCX Emission Offsets
Purpose:
− Low cost reductions in sectors outside cap – known solutions
Eligibility:
− Beyond regulation, rare, recent, verifiable
− No cherry picking – emitters must take entity-wide reductions
General provisions:
− Conservative crediting
− Avoid perverse incentives
− Reserve pools for sequestration assurance
Target Actions with Major Mitigation Potential:
− Scalability:
− Agriculture: soils hold 183 years of global CO2 emissions
− Forestation: forests hold 75 years of global CO2 emissions
− Other benefits: clean water, soil health, less fuel burn, social benefits
© 2007
Chicago Climate Exchange®, Inc.
CCX Offsets Committee and Sub-Committees
CCX Executive Committee
Other Committees
CCX Committee on Offsets
CCX Committee
on Forestry
Other Forestry
Sub Cmts
Soil Carbon
Technical
Advisory
SubCommittee
© 2007
Rangeland
Technical
Advisory
SubCommittee
Landfill
Technical
Advisory
SubCommittee
Avoided
Methane
from Waste
Disposal
Technical
SubCommittee
Hydro
Power
Technical
Advisory
SubCommittee
Agricultural
Methane
Technical
Advisory
SubCommittee
Chicago Climate Exchange®, Inc.
Methane Combustion Projects
•
•
•
•
© 2007
Landfill, coal mine and agricultural methane capture and combustion
Projects operational on or after January 1, 1999
Voluntary installation that is not required by law
Crediting Rate: 21 mt CO2 per mt CH4 destroyed
Chicago Climate Exchange®, Inc.
CCX Offsets for Continuous Conservation Tillage and
Grassland Planting
• Conservation tillage removes carbon from air
•
•
•
•
(IPCC, Kyoto etc.)
Rare practice (<5% of U.S. cropland)
Minimum 5 year commitment
Avoid perverse incentives
No offsets for historic practices, reduced fuel burn,
reduced run off and improved land value
© 2007
Chicago Climate Exchange®, Inc.
Sustainable Rangeland Management
• Minimum 5 year commitment
• Degraded and non-degraded land
• Practices:
– Sustainable Stocking Rates
– Rotational Grazing
– Seasonal Use
© 2007
Chicago Climate Exchange®, Inc.
CCX Forestry Offset Types
Afforestation
Managed Forests
Long Lived Wood
Planted January 1, 1990 on sites
unforested or degraded
Protocol almost finalized
Some carbon remains sequestered in
wood products after harvest
No date cut off
Commitment 15 years agreement
Baseline stock 2002 or 2006
Offsets for increase in carbon 2003- 2010
period
•Above and below ground biomass
•Increases in soil carbon
Quantification based tables (DOE 1605b
tables)
Maintain 20% of earned offsets reserve
pool to account for catastrophic losses and
other reversals
Verification:
10% in-field sample of both
acreage and enrollment
Beginning, end and periodic
verification
© 2007
Proof of sustainable forest management
PEFC: ATF, SFI, FSC
Offsets issued: Growth – Harvest + Long
Lived Wood
Credit for the fraction of stored carbon after
100yrs
Proof of sustainable forest management
PEFC: ATF, SFI, FSC
Carbon rights must be retained through
sales contract
Annual quantification based on CCX
approved model
Annual offsets are adjusted for land
acquisitions, dispositions, harvesting and
catastrophic losses
20% of issuance place into reserve pool
Long term maintenance of land under
forestry
Chicago Climate Exchange®, Inc.
Offsets Registered by Type
35.00%
32.23%
30.00%
27.52%
25.00%
20.00%
14.21%
15.00%
10.00%
7.48%
2.97%
3.53%
4.04%
2.58%
Renewable
Energy Wind
Fuel
Switching
Renewable
Energy
Energy
Efficiency
5.00%
1.31%
1.49%
1.92%
0.72%
ODS
Destruction
Renewable
Energy Biomass
HFC
Destruction
Agricultural
Methane
0.00%
Landfill
Methane
Forestry
Agricultural
Soil Carbon
Coal Mine
Methane
Most reductions are at the stack, Offsets account for 10% of verified cuts
© 2007
Chicago Climate Exchange®, Inc.
Offsets Registered by Country
60.00%
51.84%
50.00%
40.00%
30.00%
20.00%
16.84%
8.24%
10.00%
8.17%
5.93%
2.64%
2.02%
1.75%
1.61%
0.83%
0.10%
0.04%
an
d
ia
al
es
N
ew
Ze
on
a
os
t
C
In
d
R
ica
hi
le
C
il
Br
az
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ex
C
hi
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y
m
an
G
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ia
In
d
ua
y
U
ru
g
da
an
a
C
U
SA
`
0.00%
© 2007
Chicago Climate Exchange®, Inc.
CCX Price & Volume History
8
7
6
Price of CFI (USD $)
5
4
3
2
1
0
2004
2005
2006
2007
2008
100,000,000
90,000,000
80,000,000
70,000,000
60,000,000
Cumulative CFI Volume
(metric tons)
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
© 2007
Chicago Climate Exchange®, Inc.
Summary and Opportunities
• Modest participation from offsets sector to date
(approximately 10% of verified reductions)
• Carbon market incenting reduction that would not have
occurred otherwise
• Members of CCX are leading with legal commitment to
reduce emissions, part of a comprehensive system
• Offsets will bridge gap while emission reduction
technology catches up
© 2007
Chicago Climate Exchange®, Inc.
Bi Partisan Support
•
•
•
•
© 2007
“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
Chicago Climate Exchange®, Inc.
Offset Committee Members and Activities in
Technical Sub-Committees
Scott Subler
(Chair)
Environmental Credit Corp



Chair, Agricultural Methane Technical Sub Committee
Avoided Landfill Technical Sub-Committee
Energy Efficiency Technical Sub-Committee
Bill Hamlin
Manitoba Hydro

Chair, Hydro Power Technical Sub-Committee
Annabeth Reitter
NewPage Corporation

Environmental Compliance Committee
Scott Weaver
AEP

Energy Efficiency Technical Sub-Committee
Tod Delaney
First Environment
Amy Van Kolken
Banister
Waste Management

Landfill Gas Technical Sub-Committee
Bob Fledderman
Mead Westvaco

Chair, CCX Committee on Forestry
Larry Merritt
Ford

Environmental Compliance Committee
Dave Miller
Iowa Farm Bureau


Advisor, Agricultural Soil Carbon Technical Sub-Cmt.
Advisor, Rangeland Soil Carbon Technical SubCommittee
Lisa Shpritz
Bank of America

Best in Class Buildings Committee
David Skole
Michigan State University
Ben Conte
EcoSecurities
© 2007
Chicago Climate Exchange®, Inc.
Agricultural Soil Science Technical Sub-Committee
Dr. Alan Franzluebber
Agricultural Research Service, USDA
Dr. Charles Rice
Department of Agronomy , Kansas State University
Dr. Keith Paustian
Department of Soil and Crop Sciences, Colorado State University
Dr.Rattan Lal
School of Natural Resources, Ohio State University
Dr. Mark Liebig
Agricultural Research Service, USDA
Dr. Lee Burras
Iowa State University
Dr. Sjoerd Willem Duiker
Department of Soil and Crop Sciences, Pennsylvania State University
Dr. Mark Alley
Department of Crop and Soil Environmental Sciences
Virginia Polytechnic Institute and State University
Dr. John Grove
College of Agriculture, University of Kentucky
© 2007
Chicago Climate Exchange®, Inc.
Rangeland Soil Science Technical Sub-Committee
Dr. Joel Brown (Chair)
USDA NRCS
Dr. Justin Derner
ARS WY
Dr. Rebecca Phillips
ARS North Dakota
Dr. Jerry Schuman
ARS WY
Dr. Tony Svejcar
ARS Oregon
© 2007
Chicago Climate Exchange®, Inc.
Agricultural Methane Technical Sub-Committee
Scott Subler (Chair)
Environmental Credit Corp
Garth Boyd
CMA Consulting
George Hoguet
Native Energy
Jeffrey Frost
Agrefresh
Luca Zullo
Cargill Inc.
© 2007
Chicago Climate Exchange®, Inc.
Landfill Gas Technical Sub-Committee
Todd Davlin
Granger Holdings
Matt Lamb
RSG Associates
Christie Magerkurth
First Environment
Amy Van Kolken Banister
Waste Management
Brooks Norris
Lancaster County Solid Waste Management Authority
David Heitz
Geosyntec Consultants
© 2007
Chicago Climate Exchange®, Inc.
Avoided Methane from Waste Disposal Technical
Sub-Committee
Sharad Deshpande (Chair)
Environmental Credit Corp
Scott Subler
Environmental Credit Corp
Sally Brown
University of Washington
Jean Schwab
US EPA
Jim Warner
Lancaster Solid Waste Authority
Brian Bahor
Covanta Energy
William R. Schubert
Waste Management
Brenda Smyth
California Integrated Waste Management Board
© 2007
Chicago Climate Exchange®, Inc.
Forestry Committee
Bob Fledderman (Chair)
Mead Westvaco
Jim Rakestraw (Vice Chair)
International Paper
Matt Smith
Forecon, Inc.
Silvia Gomez
Greenoxx
Robert Burke
Lugar Tree Farms
Dr. McFarland
Michigan State University
Todd Parker
Delta Institute
Neil Sampson
NCOC
John Shideler
NSF
Christoph Bulholzer
Precious Woods
© 2007
Chicago Climate Exchange®, Inc.
Avoided Deforestation Technical Sub-Committee
Sandra Brown
Winrock International
Luiz Cornacchioni
Suzano Papel e Celulose
Diane Fitzgerald
American Electric Power
Silvia Gomez
Greenoxx Global Environmental Program
Thomas Lovejoy
The Heinz Center
Debra Moskovits
The Field Museum
Steve Ruddell
World Wildlife Fund
Eneas Salati
Brazilian Foundation for Sustainable Development
Neil Sampson
Vision Forestry, LLC
Francisca Tondreau
Masisa S.A
William Stanley
The Nature Conservancy
Virgilio Viana
State of Amazonas, Brazil
Benjamin Vitale
Conservation International
© 2007
Chicago Climate Exchange®, Inc.