Greenhouse gases rise to exchange-traded status
Date: 20-Jan-03
Country: USA
Author: Melissa Goldfine
Officials from the Chicago Climate Exchange announced last week its Internet-based market for greenhouse gases, such as methane and carbon dioxide, will begin trading in the spring of this year. The four-year pilot program aims to reduce greenhouse gas emissions by 50 million to 60 million tons by 2006.
CCX currently has 14 members, ranging from the City of Chicago to Ohio-based American Electric Power (AEP.N), the largest carbon dioxide emitter in the United States. Exchange officials are hopeful they will attract more members and will be able to extend the pilot program beyond 2006.
Currently, U.S. companies are not required to cap their emissions of greenhouse gases, released by burning fossil fuels. Greenhouse gases are thought by many scientists to cause global warming by trapping the sun's heat in the atmosphere.
Most industrial nations, with the notable exception of the United States - the world's largest polluter - have ratified the so-called Kyoto Protocol, penned in 1997. It requires signatories to reduce gas emissions below 1990 levels by 2012.
Buyers and sellers on CCX will commit to a 4 percent mandatory reduction of their emissions based on 1998-2001 levels. The plan allows companies that cut emissions more than they initially pledged to sell credits to firms unable to meet required reductions.
Companies trading on CCX also can earn credits for emission reductions programs, such as reforestation projects.
WRITING ON THE WALL?
Some companies have signed on to trade on CCX with the expectation that greenhouse gas emission reductions will eventually be mandatory. An exchange-type system, rather than government regulations forcing an absolute reduction of emission levels for companies, would benefit those which emit especially high levels of gases, such companies said.
"Because we're the leading emitter of carbon dioxide emissions, we have significant exposure on this issue," said Dale Heydlauff, senior vice president of governmental affairs at American Electric Power, adding that his company would almost certainly be a net buyer of other companies' emission credits.
"We want to be proactive so we can help shape the policy debate, and hopefully come out with policies that not only allow us to survive it, which was an initial fear, but to prosper under it," he said.
CCX is the first exchange of its kind in the United States. Britain, Denmark, Japan and the European Union have already ramped up emissions trading, as companies that curb emissions of greenhouse gases try to cash in. The European Union has a plan to cap a trade 45 percent of its greenhouse emissions which is targeted to begin in 2005.
Emissions of greenhouse gases are seen as a global problem, especially because the gases mix evenly around the world rather than stay near the same area from which they were released.
Environmental groups said that while any reduction of greenhouse gas emissions is a positive step, the difficulty is in convincing companies to cut emissions voluntarily.
"The fact that it's 14 companies illustrates that some companies are willing to step up over the threshold, and the problem is there are not enough volunteers," said David Doniger, policy director for the Climate Center of the Natural Resources Defense Council. "This shows how the cap-and-trade program can work, but voluntary programs don't substitute for the need for a national program."
Republican John McCain and Democrat Joseph Lieberman introduced Senate legislation that would slash emissions spewed by U.S. utilities and industrial plants that are linked to global warming. The bipartisan legislation comes amid data showing that 2002 was the second-warmest year on record and is expected to be opposed by the Bush administration.
Trading oversight for CCX will be provided by the National Association of Securities Dealers, but the organization is self-regulated, CCX officials said. The rules of the exchange are designed by exchange
