Chicago Climate Exchange ® , Inc. © 2007 Overview of CCX ® Conservation Agriculture Carbon Offset Consultation October 28-30, 2008 Stephen McComb Economist 312-229-5134
Dec 18, 2015
Chicago Climate Exchange®, Inc.© 2007
Overview of CCX®
Conservation Agriculture Carbon Offset Consultation October 28-30, 2008
Stephen McCombEconomist312-229-5134
Chicago Climate Exchange®, Inc.© 2007
Climate Exchange, PLC. Group• Chicago Climate Exchange (CCX)• Launched 2003 with 13 members, now 400+ members (US, CA, MX, BR)
• European Climate Exchange (ECX)• FSA-regulated futures market for European CO2 Allowances• Launched April, 2005 – accounts for 80-90% of total exchange traded volume in the EU ETS
• Chicago Climate Futures Exchange (CCFE)• CFTC-regulated futures exchange for SO2, CO2, NOx and related derivatives• Launched in December 2004, world’s first environmental derivatives exchange
• Montreal Climate Exchange (MCeX)• Joint venture with the Montreal Bourse• Host Canadian GHG trading, other environmental markets – launched May 2008
• Insurance Futures Exchange (IFEX)• Catastrophic event linked futures – Launched in 2008
• Tianjin Climate Exchange• Joint Venture with CNPC Asset Management and the City of Tianjin – Launched September 26,
2008
Chicago Climate Exchange®, Inc.© 2007
Why Emissions Trading?
- The US Acid Rain Program’s annual benefits in the year 2010 are expected to be $122 billion (Yr. 2000 $)
- Based on EPA’s latest air quality trends data the national composite average of SO2 annual mean ambient
concentrations decreased 48 percent between 1990 and 2005.
Chicago Climate Exchange®, Inc.© 2007
Real Electricity Prices Since 1990
Real Retail Electricity Prices (2007 $)
7.00
7.50
8.00
8.50
9.00
9.50
10.00
10.50
11.00
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Cent
s / K
Wh
Chicago Climate Exchange®, Inc.© 2007
Currently Available Mitigation Options (IPCC)
Currently viable mitigation actions
Can be significantly stimulated through an
emissions cap
Significantly stimulated mainly via
project-based crediting
Requires cap and offset
rules to optimize uptake
How addressed through CCX
Rules?
Energy SupplyImproved supply and distribution efficiency fuel switchingnuclear powerrenewables, combined heat andCapture and Storage
Yes
YesYes
Yes
Yes
Yes
Yes
Cap
Cap + offsetsCap
Cap + offsets
TransportMore efficient vehicles biofuels non-motorised transport (cycling, walking)
YesYes
(maybe)
YesYesn.a.
Cap + offsetsCap + offsets
n.a
BuildingsMore efficient lighting + appliances + HVAC insulation alternative refrigerants, recycle/destruct fluorinated gases (NB: word “destruct” not in IPCC report)
Yes
YesYes
yes
yesyes
yes
Yesyes
Cap + offsets
Cap + offsetsCap + offsets
(New CCX ODS destruction rule!)
Chicago Climate Exchange®, Inc.© 2007
Currently Available Mitigation Options (IPCC)
Industry end-use electrical equipmentheat and power recoverymaterial recycling/ substitutioncontrol of non-CO2 gas emissionsprocess technologies
YesYesYes Yes Yes
YesYesYes Yes Yes
Cap + offsetsCap + offsetsCap + offsetsCap + offsetsCap + offsets
Agricultureincrease soil carbon via improved crop/grazing land mgmntrestore degraded landsimproved rice cultivation livestock methane energy crops to replace fossil fuel improved energy efficiency
NoNo
NoNoYes
(maybe)
YesYes
Yes Yes
(indirectly)
YesYes
OffsetsOffsetsNot addressed√OffsetsCap + offsetsOffsets/indirectly via conservation tillage incentives
Chicago Climate Exchange®, Inc.© 2007
Currently Available Mitigation Options (IPCC)
ForestryAfforestation; reforestationforest managementreduced deforestationharvested wood product managementforest products/bioenergy to replace fossil fuel use
No
NoNoNoYes
Yes
Yes
Yes
All four forestation
management goals
can be advanced via on net carbon
flux crediting/ debiting
Yes
Offsets + forest flux rulesOffsets + forest flux rulesOffsets+Forest flux rulesCap + offsets
WasteLandfill methane recovery waste to energy waste water treatmentrecycling and waste minimization
NoYesNo
(indirect via cap)
YesYes
Yes(possible role for
offsets)
OffsetsCap + offsetsOffsets(indirect via cap)
Chicago Climate Exchange®, Inc.© 2007
Chicago Climate Exchange (CCX) is the world’s
first and North America’s only active voluntary,
legally binding integrated trading system to reduce
emissions of all six greenhouse gases, with offset
worldwide.
What is Chicago Climate Exchange?A premier and unique financial institution designed to advance business, environmental and social goals.
Chicago Climate Exchange®, Inc.© 2007
CCX MembersAerospace & EquipmentRolls-RoyceUnited Technologies
AutomotiveFord Motor Company
Beverage ManufacturingNew Belgium Brewing Company
ChemicalsDow CorningDuPontRhodia Energy Brasil Ltda
Coal MiningJim Walter Resources, Inc.PinnOak Resources LLC
Commercial InteriorsKnoll, Inc.Steelcase Inc.
CountiesKing County, WashingtonMiami-Dade County, FloridaSacramento County, California
Diversified ManufacturingEastman Kodak Company
Electric Power GenerationAGL Hydro PartnershipAllegheny Energy Inc.Alliant Energy Corporate Services Inc. American Electric PowerAmerican Municipal Power-OhioAssociated Electric Cooperative, Inc.
Avista CorporationCentral Vermont Public ServiceDTE Energy IncDuquesne Light CompanyDynegy Holdings Inc.Green Mountain PowerHoosier Energy Rural Electric Cooperative, Inc.Manitoba HydroMirant CorporationNRG Power Marketing Inc.Puget Sound Energy, Inc.Reliant Energy Services Inc.TECO Energy, Inc.
ElectronicsMotorola, Inc.Sony Electronics Inc.Square D/Schneider Electric N.A.
Environmental ServicesAtlantic County Utilities AuthorityLancaster County Solid Waste Management AuthorityVeolia Environmental Services North America CorpWasatch Integrated Waste Management AuthorityWaste Management, Inc.
Ethanol ProductionCorn Plus LLP
Financial InstitutionsBank of America Corporation
Food and Agricultural Products& Services Agrium U.S. Inc.Cargill, Incorporated
Food ProcessingMeister Cheese Co. LLCPremium Standard FarmsSmithfield Foods, Inc.
Forest Products Abitibi-Consolidated Aracruz Celulose S.A.Cenibra Nipo Brasiliera S.A.International Paper Klabin S.A.Masisa S.A.MeadWestvaco Corp.Neenah Paper IncorporatedStora Enso North AmericaSuzano Papel E Celulose SATembec Industries Inc.Temple-Inland Inc
ManufacturingBayer CorporationInterface, Inc.Ozinga Bros., Inc. Smurfit-Stone
MunicipalitiesCity of AspenCity of BerkeleyCity of BoulderCity of ChicagoCity of OaklandCity of Melbourne, AustraliaCity of Portland
PetrochemicalsPetroflex Industria e Comercio SA
PharmaceuticalsBaxter International, Inc.
RecreationAspen Skiing Company
RetailSafeway, Inc.
StatesState of IllinoisState of New Mexico
Steam HeatConcord Steam Corporation
SteelRoanoke Electric Steel Corp.
TechnologyFreescale SemiconductorIBMIntel CorporationSTMicroelectronics
TransportationAmtrakSan Joaquin Regional Rail
Commission
UniversityHadlow CollegeMichigan State UniversityUniversity of IdahoUniversity of IowaUniversity of MinnesotaUniversity of OklahomaTufts University
Chicago Climate Exchange®, Inc.© 2007
CCX, Second Largest Live Carbon Market
20122003 start 2009
300
245
237
232
174
171
151
130
94 86
71 60 56 45 37 33 31 30 29 22 22 19 11 9 4 3
400
150
540
0
100
200
300
400
500
600
CC
X
Ger
man
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Can
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Uni
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Kin
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Pol
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Italy
Aus
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Spa
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US
NE
Sta
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(RG
GI)
Cal
iforn
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Cze
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The
Net
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Gre
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Bel
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New
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Fin
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Den
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Hun
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Sw
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and
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Lith
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Latv
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Luxe
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Hu
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Mill
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Met
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s C
O2
Live Market
Market in development
Under discussion
Chicago Climate Exchange®, Inc.© 2007
CCX Market ArchitecturePhase I: Members made legally binding commitments to reduce or trade 1% per year from 2003-2006,
for a total of 4% below baseline.Baseline = Avg. emissions from 1998-2001, emissions in 2000 (Phase II)Phase II: Members make a legally binding commitments to reduce to 6% below baseline by 2010.
Chicago Climate Exchange®, Inc.© 2007
CCX Membership► Participant Members
• Offset Provider: Owner of an Offset Project that registers and sells Offsets on its own behalf.
• Offset Aggregator: Entity that serves as the administrative representative, on behalf of Offset Project owners, of multiple Offset-generating projects.
• Liquidity Provider: Entity or individual who trades on CCX for purposes other than complying with the emissions reduction schedule, such as market makers and proprietary trading groups.
Selected Offset Aggregators3 Phases Energy ServicesCarbon FarmersCargill, IncCO2 Australia LimitedDelta InstituteEconergyEcosecuritiesEnvironmental Credit Carbon PoolEnvironmental Credit Corp.First Capitol Risk ManagementIntrepid Technologies, Inc.Iowa Farm BureauKentucky Corn Growers Assoc.National Carbon Offset CoalitionNorth Dakota Farmers UnionRice Dairy LLCStandard Carbon
Selected Liquidity ProvidersArreon Carbon Amerex EnergyBlack River Clean EnergyBreakwater TradingCalyon Financial, Inc.Cargill Power MarketsEvolution MarketsFCT Europe Ltd.First New York Securities LLC.Goldenberg, Hehmeyer & Co.Haley Capital ManagementJP Morgan Ventures EnergyLehman Brother CommodityMarquette PartnersNatsource LLCPeregrine Financial GroupRand Financial Services, Inc.Shatkin Arbor, Inc.Swiss Re Financial Products Corp.Tradelink
Selected Offset ProvidersArreon Carbon UK Ltd. Beijing Shenwu Thermal EnergyCO2 AustraliaEcosecuritiesEnergy Trading CoCommonwealth Resource Management Corp.Gallo Cattle CompanyHubei Sanhuan Development Corporation Lugar Stock FarmPrecious Woods HoldingsRCM International LLCSexton Energy LLCSustainable Forestry Management, Ltd.Vessels Coal Gas Inc. Weber County
Chicago Climate Exchange®, Inc.© 2007
CCX Emission OffsetsPurpose:
− Low cost reductions in sectors outside cap – known solutions
Eligibility: − Beyond regulation, rare, recent, verifiable− No cherry picking – emitters must take entity-wide reductions
General provisions: − Conservative crediting− Avoid perverse incentives− Reserve pools for sequestration assurance
Target Actions with Major Mitigation Potential: − Scalability:
− Agriculture: soils hold 183 years of global CO2 emissions − Forestation: forests hold 75 years of global CO2 emissions
− Other benefits: clean water, soil health, less fuel burn, social benefits
Chicago Climate Exchange®, Inc.© 2007
CCX Offsets Committee and Sub-Committees
CCX Committee
on Forestry
CCX Committee on Offsets
CCX Executive Committee
Other Committees
Soil Carbon Technical Advisory Sub-Committee
Rangeland Technical Advisory Sub-Committee
Landfill Technical Advisory Sub-Committee
Avoided Methane from Waste Disposal Technical Sub-Committee
Hydro Power Technical Advisory Sub-Committee
Agricultural Methane Technical Advisory Sub-Committee
Other Forestry Sub Cmts
Chicago Climate Exchange®, Inc.© 2007
Methane Combustion Projects
• Landfill, coal mine and agricultural methane capture and combustion
• Projects operational on or after January 1, 1999
• Voluntary installation that is not required by law
• Crediting Rate: 21 mt CO2 per mt CH4 destroyed
Chicago Climate Exchange®, Inc.© 2007
CCX Offsets for Continuous Conservation Tillage and Grassland Planting
• Conservation tillage removes carbon from air (IPCC, Kyoto etc.)
• Rare practice (<5% of U.S. cropland)• Minimum 5 year commitment• Avoid perverse incentives• No offsets for historic practices, reduced fuel burn,
reduced run off and improved land value
Chicago Climate Exchange®, Inc.© 2007
Sustainable Rangeland Management
• Minimum 5 year commitment• Degraded and non-degraded land• Practices:
– Sustainable Stocking Rates– Rotational Grazing– Seasonal Use
Chicago Climate Exchange®, Inc.© 2007
CCX Forestry Offset Types
Afforestation Managed Forests Long Lived Wood
Planted January 1, 1990 on sites unforested or degraded
Commitment 15 years agreement
Offsets for increase in carbon 2003- 2010 period•Above and below ground biomass•Increases in soil carbon
Quantification based tables (DOE 1605b tables)
Maintain 20% of earned offsets reserve pool to account for catastrophic losses and other reversals
Verification:
10% in-field sample of both acreage and enrollment
Beginning, end and periodic verification
Protocol almost finalized
No date cut off
Baseline stock 2002 or 2006
Proof of sustainable forest management
PEFC: ATF, SFI, FSC
Offsets issued: Growth – Harvest + Long Lived Wood
Annual quantification based on CCX approved model
Annual offsets are adjusted for land acquisitions, dispositions, harvesting and catastrophic losses
20% of issuance place into reserve pool
Long term maintenance of land under forestry
Some carbon remains sequestered in wood products after harvest
Credit for the fraction of stored carbon after 100yrs
Proof of sustainable forest management PEFC: ATF, SFI, FSC
Carbon rights must be retained through sales contract
Chicago Climate Exchange®, Inc.© 2007
Offsets Registered by Type
0.72% 1.31% 1.49% 1.92%2.58% 2.97% 3.53% 4.04%
7.48%
14.21%
27.52%
32.23%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
ODSDestruction
RenewableEnergy -Biomass
HFCDestruction
AgriculturalMethane
RenewableEnergy -
Wind
FuelSwitching
RenewableEnergy
EnergyEfficiency
LandfillMethane
Forestry AgriculturalSoil Carbon
Coal MineMethane
Most reductions are at the stack, Offsets account for 10% of verified cuts
Chicago Climate Exchange®, Inc.© 2007
Offsets Registered by Country
51.84%
16.84%
8.24% 8.17%5.93%
2.64% 2.02% 1.75% 1.61% 0.83% 0.10% 0.04%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
USA`
Canad
a
Urugu
ayIn
dia
Germ
any
China
Mex
ico
Brazil
Chile
Costa
Rica
Indo
nesia
New Z
ealan
d
Chicago Climate Exchange®, Inc.© 2007
0
1
2
3
4
5
6
7
8
Cumulative CFI Volume (metric tons)
Price of CFI (USD $)
2004 2005 2006 20082007
CCX Price & Volume History
Chicago Climate Exchange®, Inc.© 2007
Summary and Opportunities
• Modest participation from offsets sector to date (approximately 10% of verified reductions)
• Carbon market incenting reduction that would not have occurred otherwise
• Members of CCX are leading with legal commitment to reduce emissions, part of a comprehensive system
• Offsets will bridge gap while emission reduction technology catches up
Chicago Climate Exchange®, Inc.© 2007
Bi Partisan Support• “the Chicago Climate Exchange is providing an innovative means of
involving American businesses and citizens in the effort to protect the environment…I listed my farm in Indiana on the Chicago Climate Exchange to set an example for farmers and foresters in my state and throughout America…For example, the exchange mechanism could be utilized by turning unused farmland into tree farms that sequester carbon while providing farmers with extra money… In short, American farmers could become the vanguard in using market forces to the benefit of both the environment and the pocketbook…”
• Senator Richard Lugar (R-IN), Chairman of Senate Foreign Relations Committee
• “To deal directly with climate change, something we failed to do in the last energy bill, we should use a market-based strategy that gradually reduces harmful emissions in the most economical way…..Right here in Chicago, the Chicago Climate Exchange is already running a legally binding greenhouse gas trading system”
• Senator Barack Obama (D-IL), April 3, 2006
Chicago Climate Exchange®, Inc.© 2007
Offset Committee Members and Activities in Technical Sub-Committees
Scott Subler (Chair)
Environmental Credit Corp Chair, Agricultural Methane Technical Sub Committee Avoided Landfill Technical Sub-Committee Energy Efficiency Technical Sub-Committee
Bill Hamlin Manitoba Hydro Chair, Hydro Power Technical Sub-Committee
Annabeth Reitter NewPage Corporation Environmental Compliance Committee
Scott Weaver AEP Energy Efficiency Technical Sub-Committee
Tod Delaney First Environment
Amy Van Kolken Banister
Waste Management Landfill Gas Technical Sub-Committee
Bob Fledderman Mead Westvaco Chair, CCX Committee on Forestry
Larry Merritt Ford Environmental Compliance Committee
Dave Miller Iowa Farm Bureau Advisor, Agricultural Soil Carbon Technical Sub-Cmt. Advisor, Rangeland Soil Carbon Technical Sub-
Committee
Lisa Shpritz Bank of America Best in Class Buildings Committee
David Skole Michigan State University
Ben Conte EcoSecurities
Chicago Climate Exchange®, Inc.© 2007
Agricultural Soil Science Technical Sub-Committee
Dr. Alan Franzluebber Agricultural Research Service, USDA
Dr. Charles Rice Department of Agronomy , Kansas State University
Dr. Keith Paustian Department of Soil and Crop Sciences, Colorado State University
Dr.Rattan Lal School of Natural Resources, Ohio State University
Dr. Mark Liebig Agricultural Research Service, USDA
Dr. Lee Burras Iowa State University
Dr. Sjoerd Willem Duiker Department of Soil and Crop Sciences, Pennsylvania State University
Dr. Mark Alley Department of Crop and Soil Environmental SciencesVirginia Polytechnic Institute and State University
Dr. John Grove College of Agriculture, University of Kentucky
Chicago Climate Exchange®, Inc.© 2007
Rangeland Soil Science Technical Sub-Committee
Dr. Joel Brown (Chair) USDA NRCS
Dr. Justin Derner ARS WY
Dr. Rebecca Phillips ARS North Dakota
Dr. Jerry Schuman ARS WY
Dr. Tony Svejcar ARS Oregon
Chicago Climate Exchange®, Inc.© 2007
Agricultural Methane Technical Sub-Committee
Scott Subler (Chair) Environmental Credit Corp
Garth Boyd CMA Consulting
George Hoguet Native Energy
Jeffrey Frost Agrefresh
Luca Zullo Cargill Inc.
Chicago Climate Exchange®, Inc.© 2007
Landfill Gas Technical Sub-Committee
Todd Davlin Granger Holdings
Matt Lamb RSG Associates
Christie Magerkurth First Environment
Amy Van Kolken Banister Waste Management
Brooks Norris Lancaster County Solid Waste Management Authority
David Heitz Geosyntec Consultants
Chicago Climate Exchange®, Inc.© 2007
Avoided Methane from Waste Disposal Technical Sub-Committee
Sharad Deshpande (Chair) Environmental Credit Corp
Scott Subler Environmental Credit Corp
Sally Brown University of Washington
Jean Schwab US EPA
Jim Warner Lancaster Solid Waste Authority
Brian Bahor Covanta Energy
William R. Schubert Waste Management
Brenda Smyth California Integrated Waste Management Board
Chicago Climate Exchange®, Inc.© 2007
Forestry Committee
Bob Fledderman (Chair) Mead Westvaco
Jim Rakestraw (Vice Chair) International Paper
Matt Smith Forecon, Inc.
Silvia Gomez Greenoxx
Robert Burke Lugar Tree Farms
Dr. McFarland Michigan State University
Todd Parker Delta Institute
Neil Sampson NCOC
John Shideler NSF
Christoph Bulholzer Precious Woods
Chicago Climate Exchange®, Inc.© 2007
Avoided Deforestation Technical Sub-Committee
Sandra Brown Winrock International
Luiz Cornacchioni Suzano Papel e Celulose
Diane Fitzgerald American Electric Power
Silvia Gomez Greenoxx Global Environmental Program
Thomas Lovejoy The Heinz Center
Debra Moskovits The Field Museum
Steve Ruddell World Wildlife Fund
Eneas Salati Brazilian Foundation for Sustainable Development
Neil Sampson Vision Forestry, LLC
Francisca Tondreau Masisa S.A
William Stanley The Nature Conservancy
Virgilio Viana State of Amazonas, Brazil
Benjamin Vitale Conservation International