
Environmental Encyclopedia 3
Carbon emissions trading
The real issue that has resulted from CET is the
trading market that has emerged. Opinions are varied re-
garding the advisability, and inherent dangers of CET. The
International Carbon Bank & Exchange offered insight on
CET through its web site. “Emissions trading reduces costs
by allowing a field of players to achieve emissions redutions
using market mechanisms. Over time, these mechanisms
will drive emissions down and finance the shift to clean
energy.”
In August 2001, the Joyce Foundation granted
$760,100 to fund the design phase of the Chicago Climate
Exchange (CCX). The grant was actually directed to the J. L.
Kellogg Graduate School of Management at Northwestern
University in support of the work being done by Dr. Richard
Sandor, an internationally-known trader. With the presiden-
tial administration of George W. Bush hesitant to apply a
“cap-and-trade” system, the direction of the CCX and open
market trading is viewed as providing a desirable alterna-
tive—particularly in light of the United States withdrawal
from the Kyoto Treaty. According the Environmental News
Network (ENN) in an article on the new design program,
“The CCX’s stated goal is to reduce participants’ greenhouse
gas emissions by five percent below 1999 levels over five
years. By comparison, the countries that ratified the Kyoto
Protocol must reduce emissions of carbon dioxide to an
average of 5.2% below 1990 levels during the five-year period
2008 to 2012.” By November 2001, the cities of Chicago
and Mexico City announced their participation in CET by
joining the CCX, with Chicago becoming the first American
city to do so. Chicago’s Mayor Richard Daley became honor-
ary chair of the exchange, still in the design phase. He noted
that, “For years our financial exchanges have been a vital
parto f the local and naitonal economy. This is a good
example of the kind of innovation that will help us solve
our energy and environmental problems,” according to the
Environment News Service. Other businesses and agencies
participating in the design phase of the CCX including,
Agrilance, a partnership of agricultural producer-owners,
local cooperatives and regional cooperatives; BP; Cinergy;
Ducks Unlimited
; DuPont; the energy company, Exeton;
International Paper; the Iowa Farm Bureau Federation;
Manitoba (CA) Hydro; National Council of Farmer Coop-
eratives; PG&E National Energy Group; Suncor Energy;
Swiss Re, a reinsurance firm;
The Nature Conservancy
;
and, Waste Energy.
On a broader scope of international trading, however,
the United States’ withdrawal from Kyoto was posing a
possible problem. Due to the lack of participation, U.S.
companies were seeing a possible short-term advantage in
international business competition due to lower costs with-
out the emissions trading—but those same companies, such
as DuPont, already cutting emissions, might face the long-
213
term shortchange depending on which way the international
climate change policy could effect trading those emissions.
In March 2002, Julie Vorman writing on the CET market
for Reuters quoted Eileen Claussen, president of the Pew
Center on Global Climate Change, noting that, “Despite
the United States inaction, it is abundantly clear that we are
beginning to see the outlines of a genuine greenhouse gas
market.” Also, according to Vorman, “The Pew Center re-
port said more than 65 trades of greenhouse gas emissions
totaling 55 million to 77 million tons have occurred over
the past five years [since the 1997 Kyoto Protocol was intro-
duced] but that those gifures probably underestimate the
market activity. The emissions reductions traded for between
60 cents and $3.50 (U.S. dollars) per ton of carbon dioxide
equivalent. (The date did not include trades within BP Pic
and Royal Dutch Shell, which launched their own internal
cap-and-trade programs in 1998 to cut emissions.)
The role of the agricultural industry in CET was being
explored along with its options with the CCX. According
to the American Farm Bureau, one of the plans under consid-
eration was a plan to pay farmers for agricultural practices
reducing carbon emissions into the atmosphere. “Farmers
would be compensated for implementing or continuing prac-
tices that reduce carbon emissions from the soils. Such prac-
tices include reducing tillage, conserving tillage, retiring
cropland, fertilizing with livestock manure, decreasing meth-
ane and reducing energy use. The compensation could po-
tentially come from the government or companies that are
interested in “trading” carbon credits.” The Kyoto Protocol
does not provide that option; but the Untied States wanted
to consider it as a part of the UNFCCC. Jon Doggett, a
senior director of governmental relations for the American
Farm Bureau Federation (AFBF) added the caveat that such
a practice of carbon sequestration in the soil—a practice
some Americans support in opposition to European leaders
who do not have the amount of land for such a program to
succeed as does the United States—could be harmful to
farmers in the long-term. Doggett noted that, “The indus-
tries that will be required to purchase the carbon credits
supply farmers with vital operating materials, including fuel
and
fertilizer
. As regulatory costs for companies rise, farmers
will pay for that as fuel and fertilizer costs go up. The
AFBF also pointed out that such storage might disrupt other
environmetally beneficial practices—such as that employed
by California producers after harvest when they flood their
land and provide a
habitat
for geese and ducks. The issues
of trading the benefits of one environmental concern for
that of another would remain a matter of debate well into
the century, no doubt.
Environmentalists continued to express concern that
CET practices, particularly ones that were regulated volunta-
rily on the open market, would not reduce the greenhouse