The Chicago Climate Exchange (CCX)

1. The Chicago Climate Exchange (CCX) Instigating Change or Business-As-Usual? Chelsea Acosta Brittany Camp Amar Kelkar Grace Leonard Christel Trutmann Ellie Walsh Roland Wang Environmental Governance 30 April, 2008

2. Question and Outline • Is the CCX effective in pushing environmental change, or are companies manipulating the system without reducing emissions? • Overview of CCX • Review of members • Universities, Chemical Industry (DuPont) • Offsets • FINRA • Criticisms

3. Key Terms • Carbon offsets • Carbon Financial Instrument (CFI) • Baseline emissions • GHGs • “Business-as-usual”

4. Member States Illinois New Mexico Member Counties King County, WA Miami-Dade, FL Sacramento, CA Member Cities Chicago Portland Oakland Aspen Berkley Boulder Fargo Melbourne, Australia States, Counties and Cities Members

5. Emission Responsibilities Members • Energy use in city buildings • City lighting • Contracted work Motivations • Public relations • Preemptive start before federal market • Clean air

6. University members of the CCX Members

7. A university in the marketplace… Members • “What are the university’s major actions as a member? (In terms of buying/selling credits, and offsets)” • A. “…our extra credits have been accumulating in the registry. I believe it will be a larger campus decision as to what we do with those credits… We could sell them and reinvest in renewable energy projects… or even let it go into the general fund (worst case). My concern is that we do something meaningful. By default, if we don’t sell the credits we can retire them and take that carbon off the market. That’s the purest thing to do.” • -P. Ferman Milster, P.E. • Associate Director – Utilities & Energy Management • University of Iowa

8. CCX and the Chemical Industry Members • For CCX: • Large potential reductions • Fueling the trade with a huge base of carbon credits • For DuPont • Show investors that they are environmentally friendly • Already reducing anyway • Motivation?

9. Members Public and Investors angry about Chlorofluorocarbons (CFCs) • DuPont Products w/ CFC’s: • R-22 • R-134a • Freon 12 • 25% market share in 1980’s • 1987: Montreal Protocol, agreeing a 50% decrease in CFC consumption over a 10 year period

10. DuPont and the CCX Members • Reductions already being made • Largest reductions in CFC’s • Successful membership - used as a means to publicize their reduction efforts • Already had monitoring system in place • Independent goals for sustainability by 2015

11. CCX: Approved Offset Projects • Forest Sequestration • Alternative Energy Projects • Agricultural Offsets • Destruction of Released CO2

12. Do offsets actually reduce CO2 emissions?

13. No-tilling

14. What does FINRA do for CCX? • FINRA: Financial Industry Regulatory Authority • FINRA acts as the third-party watchdog for the CCX Involved in: • Registering new participating groups • Educating the participants on rules and regulations of the trading system • Enforcing of rules and reporting if companies violate policies • Policies include rules within the CCX and actual laws • Acting as the watchdog of the CFI Trading (Market Oversight) • Determining emissions baselines for new participants • Verifying yearly emissions from participating groups • Reporting and verifying offset programs

15. Criticisms • Private enterprise with little public input • Trading system not transparent • Loopholes in the rules • CCX rules too business friendly • Low emission reduction goals • Elusive calculation of baseline emissions • Power of the CCX or good corporate citizenship?

16. Conclusions • The CCX has great potential to catalyze environmental change • But the CCX is not taking its position seriously • Current trading system is not effective • Members are manipulating the system for profit

17. Policy Recommendations • Eliminate sale of credits from last year • With Higher reduction goals (>1%) • Emulate the 1980’s cap-and-trade system • Stricter punishments • Reduce commissions on CFI trades

18. Questions?