Chicago Climate Exchange

Even though climate regulation is voluntary in the U.S. (which withdrew from the Kyoto Protocol early in the Bush Administration) the Chicago Climate Exchange (CCX) has been established to trade greenhouse gas emissions credits.

From an article in Grist Magazine, My Kind of Down (from 6/14, sorry for the lag), the performance of this market is described:

CCX participants trade units called Carbon Financial Instruments, or CFIs, that are equal to 100 metric tons of carbon dioxide. Prices fluctuate depending on the number of buyers and sellers; at the time of this writing, the trading price was $1-$1.50 per metric ton. So, as an example: Ford Motor Company's baseline is just over 2 million metric tons of carbon. If Ford had emitted, say, 10 percent more in 2003, it would have cost the company about $300,000.

And then compared to the performance of the European market that facilitates trades among countries bound by the Kyoto Protocol:

Across the pond, by contrast, where Kyoto-bound countries are also trading emissions, the European Union's exchange is much stronger, with more than 12,000 industrial plants on board. This spring, a unit of carbon in the E.U.'s "Emission Trading Scheme" was worth about $18. So, using the same example, if Ford were a Swedish company that had polluted 10 percent more than its baseline, it would cost $3.6 million to balance out: a tougher pill to swallow. (As it happens, Ford cut its emissions in 2003 by nearly 23 percent.)

For those who value reductions in greenhouse gas emissions and avoidance of climate change these markets are good news. Polluters will be able to reduce emissions at lower cost which could potentially lead to further emissions reductions. The bad news is that the emissions reductions are voluntary and voluntary government environmental programs rarely lead to the optimal pollution control (i.e., environmental quality) level.

This sentiment is expressed by Michael Hanemann, winner of the AERE Publication of Enduring Quality Award in 1999:

"I believe that [CCX] is a helpful institution, but the absence of regulatory action by the federal government greatly reduces the number of parties that would be interested, and motivated to participate," says W. Michael Hanemann, professor of environmental economics at the University of California-Berkeley. "Why would you spend money buying an emissions reduction credit from somebody when you're not under a compulsion to reduce emissions?"

Good question.

But here is a dot.org that is accepting donations from the general public: Carbonfund.org ("we buy carbon ... and retire it!") akin to the Acid Rain Retirement Fund. According to their "carbon calculator" a one-person household generates about 40.61 tons of carbon/year. With an annual donation of $223.36 you can offset your carbon emissions (at a cost of about $5/ton). And a bonus, you get a certificate if you donate.

Even though climate regulation is voluntary in the U.S. (which withdrew from the Kyoto Protocol early in the Bush Administration) the Chicago Climate Exchange (CCX) has been established to trade greenhouse gas emissions credits.

From an article in Grist Magazine, My Kind of Down (from 6/14, sorry for the lag), the performance of this market is described:

CCX participants trade units called Carbon Financial Instruments, or CFIs, that are equal to 100 metric tons of carbon dioxide. Prices fluctuate depending on the number of buyers and sellers; at the time of this writing, the trading price was $1-$1.50 per metric ton. So, as an example: Ford Motor Company's baseline is just over 2 million metric tons of carbon. If Ford had emitted, say, 10 percent more in 2003, it would have cost the company about $300,000.

And then compared to the performance of the European market that facilitates trades among countries bound by the Kyoto Protocol:

Across the pond, by contrast, where Kyoto-bound countries are also trading emissions, the European Union's exchange is much stronger, with more than 12,000 industrial plants on board. This spring, a unit of carbon in the E.U.'s "Emission Trading Scheme" was worth about $18. So, using the same example, if Ford were a Swedish company that had polluted 10 percent more than its baseline, it would cost $3.6 million to balance out: a tougher pill to swallow. (As it happens, Ford cut its emissions in 2003 by nearly 23 percent.)

For those who value reductions in greenhouse gas emissions and avoidance of climate change these markets are good news. Polluters will be able to reduce emissions at lower cost which could potentially lead to further emissions reductions. The bad news is that the emissions reductions are voluntary and voluntary government environmental programs rarely lead to the optimal pollution control (i.e., environmental quality) level.

This sentiment is expressed by Michael Hanemann, winner of the AERE Publication of Enduring Quality Award in 1999:

"I believe that [CCX] is a helpful institution, but the absence of regulatory action by the federal government greatly reduces the number of parties that would be interested, and motivated to participate," says W. Michael Hanemann, professor of environmental economics at the University of California-Berkeley. "Why would you spend money buying an emissions reduction credit from somebody when you're not under a compulsion to reduce emissions?"

Good question.

But here is a dot.org that is accepting donations from the general public: Carbonfund.org ("we buy carbon ... and retire it!") akin to the Acid Rain Retirement Fund. According to their "carbon calculator" a one-person household generates about 40.61 tons of carbon/year. With an annual donation of $223.36 you can offset your carbon emissions (at a cost of about $5/ton). And a bonus, you get a certificate if you donate.