Chicago Climate Exchange = FAIL, Now California opens “Pacific Carbon Exchange”

By Anthony Watts
December 16, 2010

UPDATE: related story shows what can happen when emissions trading doesn’t have proper checks and balances – Carbon trading tempts firms to make greenhouse gas

California hasn’t learned from the failure of the Chicago Climate Exchange this year, when a ton of Carbon traded for a mere 5 cents. Nobody wanted to buy it even at that ridiculously low price. But, like a zombie, carbon trading rises again in brain dead broken California.

final day on CCX - click to enlarge

Now the the AB32 madness begins, and PCarbX (which sounds like some over the counter antacid remedy) is the new trading scheme. I give it two years, max. Here’s the story from the San Francisco Chronicle.

California poised to enter carbon-trading market
By Andrew S. Ross

Today could be seen as the biggest day yet for California’s climate change law, assuming, as expected, the state Air Resources Board signs off on the rules to implement it.

It will also be a big day for Aaron Singer, CEO of San Francisco startup Pacific Carbon Exchange, (at left) which is engaging in an enterprise thought dead in the water not so long ago: carbon trading.

“It’s the official starting gun for California and for Western regional carbon markets,” Singer said. “It means we get to make this business a growing reality.”

Central to the law, which goes into effect in 2012, is a “cap and trade” system designed to limit the amount of carbon from the state’s 500 largest emitters – mostly power plants, energy companies and heavy industry.

Companies emitting less than their state-mandated limit can trade their unused allowance – also known as carbon credits, or offsets – with companies that may be seeking to emit more than their mandated share.

“This is a significant milestone,” said Josh Margolis, CEO of Cantor CO2e, a San Francisco offshoot of New York’s Cantor Fitzgerald, referring to the board’s expected action. “In the trading world, it’s been a decadelong anticipation.”

With the Bay Area Council serving as the firm’s incubator, Singer has been working on its trading infrastructure for the past two years and is in the process of obtaining the certifications and accreditations from the U.S. Commodity and Futures Exchange Commission.

In the meantime, PCarbX, as it is known, plans to begin some futures and options trading next year, pending a full rollout when the bell officially rings in January 2012.

In September, it also signed a memorandum of understanding with the Shanghai Environment and Energy Exchange to explore the establishment of more carbon markets in the United States and China.
Other entrants: PCarbX is not alone. In addition to Cantor CO2e, others in the “environmental commodity” business who are reported to be coming to California include the global Intercontinental Exchange and the Green Exchange, both with U.S. headquarters in New York. “We expect healthy competition,” Singer said.

“As a San Francisco-based entity with ties to policymakers, they’re in a unique position,” said Adam Raphaely, director of environmental markets at Karbone, an environmental commodity brokerage and project finance company in New York. “We see a potential relationship there.”

Neither is California alone, even though Congress and the Obama administration gave up on a national cap-and-trade policy this year.

The Western Climate Initiative, a cap-and-trade program, which includes several Western states and Canadian provinces, is due to go into effect – also in 2012.

Still, for all the anticipation, carbon trading here is likely to start small, especially as the Air Resources Board is initially giving emission allowances away for free, rather than the $10 minimum per ton the agency had proposed in its rules. And companies don’t necessarily have to trade through exchanges.

“You won’t see a big bang, but, rather, a buildup in intensity,” said Margolis, who has estimated the market could be worth anywhere from $3 billion to $58 billion by 2020 – the target year for California’s emissions to be lowered.

“This is much more than simply a business opportunity,” Singer said. “We’re here to serve the aims of AB32 and help the next generation of clean tech investment for our state.”

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/12/15/BUO21GQG0D.DTL#ixzz18L4gAqtW
















The EU ETS has put a price on carbon emissions and shown that it is possible to trade in greenhouse gas emissions. Emissions from installations in the scheme are falling as intended. The changes to be introduced in 2013, notably a progressive move towards auctioning of allowances, will further enhance its effectiveness.

The success of the EU ETS has inspired other countries and regions to launch cap and trade schemes of their own. The EU hopes to link up the ETS with compatible systems around the world to form the backbone of a global carbon market.”
http://ec.europa.eu/clima/policies/ets/index_en.htm

“Trading carbon credits is rapidly growing as investors realise the potential profits it can hold. Download our free research report now to learn how to trade them.”
http://www.carbon-ex.lu/ga-learn-to-trade-carbon.php

EU ETS Phase III (2013 – 2020)

“Phase III of the EU ETS builds upon the previous two phases and is significantly revised to make a greater contribution to tackling climate change. A more ambitious, EU-wide cap on emissions; auctioning as the preferred means of allocation; and reduced access to project credits from outside the EU will result greater emission reductions, greater certainty and more predictable market conditions.”
http://www.decc.gov.uk/en/content/cms/emissions/eu_ets/phase_iii/phase_iii.aspx

“On Monday July 18, the benchmark EU carbon price, EUA futures for December 11 delivery, closed at €12.22 on the Intercontinental Exchange (ICE). The price for Dec 2013 EUAs, the first year of the third phase of the EU ETS, closed at €13.73. UN-backed carbon offsets have suffered in similar fashion, benchmark Dec 11 CERs slumping to just €9.90, below the cost of creating such offsets in many cases. Prices in this period have been more volatile than the general ups and downs the market sees under the day-to-day influence of energy prices. Dec 11 EUAs fell 17 per cent in the third week of June alone.”
http://www.carbonpositive.net/viewarticle.aspx?articleID=2353

“The ICE ECX EUA Options Contract is an option on the ECX EUA Futures Contract. At expiry, one lot of ECX EUA Options will excercise into one lot of ECX EUA Futures. ECX EUA Options are European style such that it is automatically exercised at expiry in the money.”
https://www.theice.com/productguide/ProductDetails.shtml?specId=196
http://en.wikipedia.org/wiki/European_Climate_Exchange

Settlement price graphic on page 6:
https://www.theice.com/publicdocs/futures/ICE_Monthly_Utility_Report.pdf


Chicago Climate Exchange Names Founding Members
Chicago Climate Exchange and Joyce Foundation via Washington Post | 1.17.2003

Excerpt of first source:

Chicago Climate Exchange Names Founding Members

Leaders from Automotive, Chemical, Commercial Real Estate, Environmental Services, Electric Power Generation, Electronics, Forest Products, Municipal, Pharmaceutical and Semiconductor Sectors to join North American Voluntary Private Sector Program to Reduce and Trade Greenhouse Gases
(CSRwire)

CHICAGO,IL - Efforts to develop market-based solutions to global warming reach a milestone today as leading U.S. and international companies and the City of Chicago announce they will be the Founding Members of Chicago Climate Exchange (CCX®), a voluntary cap-and-trade program for reducing and trading greenhouse gas emissions. In an unprecedented voluntary action, these entities have made a legally binding commitment to reduce their emissions of greenhouse gases by four percent below the average of their 1998-2001 baseline by 2006, the last year of the pilot program.

The founding members of CCX include:

American Electric Power (AEP),
Baxter International Inc., the City of Chicago,
DuPont,
Equity Office Properties Trust,
Ford Motor Company,
International Paper,
Manitoba Hydro,
MeadWestvaco Corporation,
Motorola, Inc., STMicroelectronics,
Stora Enso North America, Temple-Inland Inc. and
Waste Management,Inc.
(snip)

CCX will administer this pilot program for emission sources, farm and forest carbon sinks, offset projects and liquidity providers in North America. To foster international emissions trading, offset providers in Brazil can also participate. The development of CCX resulted from feasibility and design studies that were funded by grants from the Chicago-based Joyce Foundation and administered by Northwestern University’s Kellogg Graduate School of Management. Environmental Financial Products, LLC conducted the research and development effort.

Excerpt of second source:
http://projects.washingtonpost.com/2008-presidential-candidates/barack-obama/

The Joyce Foundation's Annual Reports list Barack Obama as one of the 12 members of the Board of Directors from 1998 until 2001.

Barack Hussein Obama Biography Excerpt:

Experience Businesses Owned, Past Careers, Board Memberships, Etc.:

Center for Neighborhood and Technology
Chicago Annenberg Challenge
Cook County Bar
Cook County Bar Association Community Law Project

Board Member, Joyce Foundation

Lawyer's Committee for Civil Rights Under the Law
Leadership for Quality Education
Member, Trinity United Church of Christ
Board Member, Woods Fund of Chicago