Carbon Trade Ends on Quiet Death of Chicago Climate Exchange

ICECAP

By John O’Sullivan

Republican mid-term election joy deals financial uncertainty among green investors as the Chicago Climate Exchange announces the end of U.S. carbon trading.

The Chicago Climate Exchange (CCX) announced on October 21, 2010 that it will cease carbon trading this year. However, Steve Milloy reporting on Pajamasmedia.com (November 6, 2010) finds this huge story strangely unreported by the mainstream media.

To some key analysts the collapse of the CCX appears to show that international carbon trading is “dying a quiet death.” Yet Milloy finds that such a major business failure has drawn no interest at all from the mainstream media. Milloy noted that a “Nexis search conducted a week after CCX’s announcement revealed no news articles published about its demise.”

The collapse of the trading market is a personal embarrassment to the current U.S. President.

Barack Obama was a board member of the Joyce Foundation that funded the fledgling CCX. Professor Richard Sandor, of Northwestern University had started the business with a $1.1 million in grants from the Chicago-based left-wing Joyce Foundation endorsed by Obama. Fortunately for Sandor he was able to net $98.5 million for his 16.5% stake in CCX when it was sold.Failure of European Climate Market May Follow

Business Collapse is Setback for Washington

Milloy pointedly draws attention to the fact that when founded in November 2000, CCX’s carbon trading market was predicted to grow from $500 billion to $10 trillion. Milloy writes, “although the trading in carbon emissions credits was voluntary, the CCX was intended to be the hub of the mandatory carbon trading established by a cap-and-trade law and trading carbon was, “the only purpose for which it was founded.” But with the resurgence Republicans in the mid-terms a new cohort of global warming skeptics have been installed in the corridors of power.

Unlike the American voluntary scheme, the European cousin of the CCX, the European Climate Exchange (ECX), continues to trade due to the mandatory carbon caps of the Kyoto Protocol. But the ECX may also fail unless a new climate treaty to replace the Kyoto Protocol is introduced. That treaty expires in 2012. But the ineffectual Copenhagen Climate Conference (2009) exposed an inability among international politicians to agree on climate change. If this stalement persists then the European ECX may likely suffer the same fate as Chicago’s CCX.

More Job Losses in Green Trading Sector

Only by November 02, 2010 had the story had been picked up briefly by Chicagobusiness.com (Crain’s). Reporter, Paul Merrion adds that while CCX will cease trading of new emission allowances at the end of the year, “it will continue trading carbon offsets generated by projects that consume greenhouse gases, such as planting trees.”

Admitting that there will be “deep staff cuts,” Chief Financial Officer Scott Hill of Atlanta-based IntercontinentalExchange Inc. further conceded, “We had about 66 people when we bought the company [CCX]. I think we’ll be closer to 25 by the end of the year. And then we’ll reduce further into the first quarter.” ICE had bought Climate Exchange PLC, which operated CCX, the European Climate Exchange and the Chicago Climate Futures Exchange, in April 2010 for around $634.5 million.

U.S. Corporations and Investors in Retreat

Speaking to the New York Times ( March 2010) Kristel Dorion, a developer with 10 years of experience putting together offset projects under the United Nations’ Clean Development Mechanism (CDM), foresaw that investors were “quickly shifting focus elsewhere.”

Since its launch in 2003 the CCX succeeded in attracting major players such as Ford, Bank of America, IBM and Intel. By signing up as voluntary contributors these corporations made been making voluntary but legally binding commitment to meet greenhouse gas emission reduction targets either by cutting emissions or by buying emissions permits sold by other CCX members.

But Dorion warned, “The ones that are pulling out are all the American-based companies.”

Republican successes in America’s mid-term election are likely push the possibility of climate legislation even further off the political agenda. Nonetheless, California outlined its plans for it’s own cap-and-trade scheme with the ambition of a joint trading scheme by 2012 across members of the Western Climate Initiative, an alliance of 11 states and Canadian provinces. Read more at Suite101: Carbon Trade Ends on Quiet Death of Chicago Climate Exchange here