The Chicago Climate Exchange CCX Instigating Change or

The Chicago Climate Exchange (CCX) Instigating Change or Business-As-Usual? Chelsea Acosta Brittany Camp Amar Kelkar Grace Leonard Christel Trutmann Ellie Walsh Roland Wang Environmental Governance 30 April, 2008

Question and Outline l Is the CCX effective in pushing environmental change, or are companies manipulating the system without reducing emissions? l Overview of CCX Review of members l l l Universities, Chemical Industry (Du. Pont) Offsets FINRA Criticisms

Key Terms l l l Carbon offsets Carbon Financial Instrument (CFI) Baseline emissions GHGs “Business-as-usual”

Members States, Counties and Cities l Member States l l Illinois New Mexico l Member Cities l l Member Counties l l l King County, WA Miami-Dade, FL Sacramento, CA l l l Chicago Portland Oakland Aspen Berkley Boulder Fargo Melbourne, Australia

Members Emission Responsibilities l l l Energy use in city buildings City lighting Contracted work Motivations l l l Public relations Preemptive start before federal market Clean air

Members University members of the CCX

Members A university in the marketplace… Q. “What are the university’s major actions as a member? (In terms of buying/selling credits, and offsets)” A. “…our extra credits have been accumulating in the registry. I believe it will be a larger campus decision as to what we do with those credits… We could sell them and reinvest in renewable energy projects… or even let it go into the general fund (worst case). My concern is that we do something meaningful. By default, if we don’t sell the credits we can retire them and take that carbon off the market. That’s the purest thing to do. ” -P. Ferman Milster, P. E. Associate Director – Utilities & Energy Management University of Iowa

Members CCX and the Chemical Industry l For CCX: l l l Large potential reductions Fueling the trade with a huge base of carbon credits For Du. Pont l l l Show investors that they are environmentally friendly Already reducing anyway Motivation?

Members Public and Investors angry about Chlorofluorocarbons (CFCs) l l l Du. Pont Products w/ CFC’s: R-22 R-134 a Freon 12 25% market share in 1980’s 1987: Montreal Protocol, agreeing a 50% decrease in CFC consumption over a 10 year period

Members Du. Pont and the CCX l l l Reductions already being made Largest reductions in CFC’s Successful membership - used as a means to publicize their reduction efforts Already had monitoring system in place Independent goals for sustainability by 2015

CCX: Approved Offset Projects l Forest Sequestration l Alternative Energy Projects l Agricultural Offsets l Destruction of Released CO 2

Do offsets actually reduce CO 2 emissions?

No-tilling

What does FINRA do for CCX? l l l l FINRA: Financial Industry Regulatory Authority l FINRA acts as the third-party watchdog for the CCX Involved in: Registering new participating groups Educating the participants on rules and regulations of the trading system Enforcing of rules and reporting if companies violate policies l Policies include rules within the CCX and actual laws Acting as the watchdog of the CFI Trading (Market Oversight) Determining emissions baselines for new participants Verifying yearly emissions from participating groups Reporting and verifying offset programs

Criticisms l l l l Private enterprise with little public input Trading system not transparent Loopholes in the rules CCX rules too business friendly Low emission reduction goals Elusive calculation of baseline emissions Power of the CCX or good corporate citizenship?

Conclusions l The CCX has great potential to catalyze environmental change l But the CCX is not taking its position seriously l Current trading system is not effective l Members are manipulating the system for profit

Policy Recommendations l Eliminate sale of credits from last year l With Higher reduction goals (>1%) l Emulate the 1980’s cap-and-trade system l Stricter punishments l Reduce commissions on CFI trades

Questions?