C
Captain Compassion
Guest
Climate exchanges prove to be big green house gassers
By ROBERT LEE HOTZ
Los Angeles Times
When Doug Gronau looks out the window of his Iowa farmhouse, he sees a
profitable investment in the effort to stop global warming.
Most people see cornfields.
His cropland, which he is prohibited from tilling, is a greenhouse gas
credit, packaged and sold on the Chicago Climate Exchange. An
anonymous trader snapped up the field's ability to absorb carbon
dioxide to offset -- on paper -- a tiny portion of the carbon dioxide
emitted by some distant factory.
Gronau, 57, expects a check for $2,800.
"That may not sound like a lot," he said, "but farming is hard and it
adds to your margin."
The Chicago Climate Exchange is the first and only legally binding
carbon emissions market in North America. In the absence of federal
controls on greenhouse gas emissions, it applies an axiom of economic
theory to the problem of global warming: People in search of profit
can be expected to do just about anything for a buck -- even save the
planet.
That concept of the market forms the cornerstone of regulatory efforts
to fight global warming.
Interest in carbon trading as an arcane but powerful tool to fight
global warming has intensified following the release last week of a
landmark United Nations report that found rising temperatures will
continue to increase even if greenhouse gas emissions can be held to
current levels.
The theory of the market is straightforward. For the right price, a
farmer like Gronau will agree to cultivate his fields without plowing,
so the soil retains carbon dioxide that would otherwise seep into the
air. That "carbon credit" can then be purchased by exchange members
and applied against their own emissions. Should the price of carbon
credits climb high enough, the theory goes, company executives one day
will find it cheaper to reduce their own industrial emissions.
It's a new form of environmental bookkeeping that theoretically
reduces emissions of carbon dioxide and the other trace gases
responsible for gradually rising global temperatures.
Since the exchange opened in 2003, almost two hundred companies --
including the Ford Motor Co., Du Pont, IBM Corp., Amtrak and American
Electric Power Co. -- have volunteered to buy and sell the right to
emit tons of carbon dioxide and five other key greenhouse gases.
California officials are beginning to frame market-based trading
schemes, inspired in part by the Chicago Climate Exchange, to curb
industrial carbon dioxide emissions by 25 percent over the next 14
years. State and federal regulators already use market trading to
control the sulfur emissions responsible for acid rain.
Critics, however, question whether new carbon emissions markets have
done anything more than generate profits for market traders, while
delaying genuine industrial changes that could forestall global
warming.
In Europe, where mandatory greenhouse gas controls were recently
imposed, the carbon emissions trading system has been marred by
foot-dragging, chicanery and profiteering -- even as its sales reached
$22 billion.
All that buying and selling did almost nothing to reduce the risk of
global warming, records show. Indeed, global levels of carbon dioxide
in 2005 were the highest ever registered.
"Have they achieved any real reductions in greenhouse gases?" asked
Veronique Bugnion, U.S. research director at Point Carbon, a European
firm that analyzes carbon trading markets. "There is not much evidence
of a reduction."
Carbon dioxide, the invisible, odorless gas that infuses every living
breath, seems an unlikely investment.
It seeps out anywhere there is a working smokestack or running motor.
As a signatory to the Kyoto Protocol, the European Union has taken the
lead in imposing caps on levels of carbon dioxide and other greenhouse
gases. Many climate experts expect the United States, which accounts
for about a quarter of all greenhouse gas emissions, will eventually
have to follow suit.
After the release of the U.N. report, the Bush administration
maintained its opposition to mandatory controls on U.S. greenhouse gas
emissions, while Democratic leaders in Congress considered different
approaches to control the heat-trapping gases.
Once companies are forced to pay to emit greenhouse gases, a commodity
as free as breath becomes private property worth billions.
In the cost-accounting of global warming, the undisturbed soil between
Gronau's cornrows retains enough carbon to offset a few of the 2
billion tons spewing from U.S. smokestacks and exhaust pipes every
year.
All told, Gronau set aside 1,600 acres of the 2,100 acres he usually
farms near Denison as a no-till carbon sink through the climate
exchange. That works out to half a ton of carbon per acre kept out of
the atmosphere every year. He could have upped his credit to three
quarters of a ton of C02 per acre by planting grass on his fallow
fields.
His no-till fields were bundled for sale through the exchange with
other farmland in Iowa, Nebraska, Kansas and Missouri in a program
managed by the Iowa Farm Bureau, one of 23 carbon "aggregators"
registered on the exchange. So far, the farm bureau has packaged and
sold 500,000 tons of carbon emission credits -- equal to a month's
output from a 1,000-megawatt coal plant.
Carbon credits can also be gained by burying carbon dioxide under the
oceans or sequestering it underground, reducing emissions through new
technology and alternative fuels, or reforestation, to name a few.
Worldwide, there are more than 3,000 projects in the works to offset
greenhouse gases, generating billions of dollars in revenues.
"When I was taught economics, I was taught that air and water were
free goods," said Richard Sandor, the founder of the Chicago Climate
Exchange.
But he added: "It was intuitively obvious to me that on a planet of 6
billion or 7 billion people that was no longer the case."
The companies that have volunteered for his exchange want to learn how
to exploit the system in case mandatory controls are enacted by the
U.S. government.
Once members promise to reduce emissions, however, the commitment is a
legally binding contract.
"The binding nature of the constraints is what makes the [Chicago]
market work," said carbon finance analyst Karan Capoor at the World
Bank. "It provides the integrity. It is not just do what you want,
wink, wink, nudge, nudge."
Even as a voluntary exercise, the exchange so far has traded 13.6
million tons of carbon dioxide emissions with 200 companies, cities
and foundations at prices ranging from $4 to $8 a ton.
As chairman and chief executive of the climate exchange, Sandor could
easily become the first magnate of global warming.
Through a European subsidiary, his exchange already handles a lion's
share of the annual carbon emissions trade with the 25 countries in
the European Emissions Trading System.
Time magazine knighted him as a Hero of the Planet in 2002.
But he has also come to embody the concerns of environmentalists over
the business of global warming, in which the planet's natural capacity
to absorb carbon dioxide is turned into private property that can be
sold to the highest bidder.
Last year, 19 major environmental groups urged local governments to
boycott the Chicago exchange.
Their complaints are based, in part, on the track record in Europe,
where 7,300 companies managing 12,000 installations scramble to
survive in the world's largest carbon market.
All told, the European Union's Emissions Trading Scheme has handled
$22 billion worth of carbon transactions in the first nine months of
last year, the World Bank reported. Investors bought and sold 842
million tons of carbon dioxide emissions, trading recently at about
$9.80 a ton.
But instead of combating global warming, the European trade so far has
only meant higher prices for many utility customers, market analysts
and environmental finance experts said.
"There are some pretty serious teething problems," said Bugnion of
Point Carbon.
Should the federal government impose carbon limits the resulting
market for carbon emissions would be immense, analysts said.
Market researchers at the World Bank and U.N. experts predict that the
trade in carbon emissions could soon become the largest commodities
market in the world.
--
There may come a time when the CO2 police will wander the earth telling
the poor and the dispossed how many dung chips they can put on their
cook fires. -- Captain Compassion.
Wherever I go it will be well with me, for it was well with me here, not
on account of the place, but of my judgments which I shall carry away
with me, for no one can deprive me of these; on the contrary, they alone
are my property, and cannot be taken away, and to possess them suffices
me wherever I am or whatever I do. -- EPICTETUS
"Civilization is the interval between Ice Ages." -- Will Durant.
"Progress is the increasing control of the environment by life.
--Will Durant
Joseph R. Darancette
daranc@NOSPAMverizon.net
By ROBERT LEE HOTZ
Los Angeles Times
When Doug Gronau looks out the window of his Iowa farmhouse, he sees a
profitable investment in the effort to stop global warming.
Most people see cornfields.
His cropland, which he is prohibited from tilling, is a greenhouse gas
credit, packaged and sold on the Chicago Climate Exchange. An
anonymous trader snapped up the field's ability to absorb carbon
dioxide to offset -- on paper -- a tiny portion of the carbon dioxide
emitted by some distant factory.
Gronau, 57, expects a check for $2,800.
"That may not sound like a lot," he said, "but farming is hard and it
adds to your margin."
The Chicago Climate Exchange is the first and only legally binding
carbon emissions market in North America. In the absence of federal
controls on greenhouse gas emissions, it applies an axiom of economic
theory to the problem of global warming: People in search of profit
can be expected to do just about anything for a buck -- even save the
planet.
That concept of the market forms the cornerstone of regulatory efforts
to fight global warming.
Interest in carbon trading as an arcane but powerful tool to fight
global warming has intensified following the release last week of a
landmark United Nations report that found rising temperatures will
continue to increase even if greenhouse gas emissions can be held to
current levels.
The theory of the market is straightforward. For the right price, a
farmer like Gronau will agree to cultivate his fields without plowing,
so the soil retains carbon dioxide that would otherwise seep into the
air. That "carbon credit" can then be purchased by exchange members
and applied against their own emissions. Should the price of carbon
credits climb high enough, the theory goes, company executives one day
will find it cheaper to reduce their own industrial emissions.
It's a new form of environmental bookkeeping that theoretically
reduces emissions of carbon dioxide and the other trace gases
responsible for gradually rising global temperatures.
Since the exchange opened in 2003, almost two hundred companies --
including the Ford Motor Co., Du Pont, IBM Corp., Amtrak and American
Electric Power Co. -- have volunteered to buy and sell the right to
emit tons of carbon dioxide and five other key greenhouse gases.
California officials are beginning to frame market-based trading
schemes, inspired in part by the Chicago Climate Exchange, to curb
industrial carbon dioxide emissions by 25 percent over the next 14
years. State and federal regulators already use market trading to
control the sulfur emissions responsible for acid rain.
Critics, however, question whether new carbon emissions markets have
done anything more than generate profits for market traders, while
delaying genuine industrial changes that could forestall global
warming.
In Europe, where mandatory greenhouse gas controls were recently
imposed, the carbon emissions trading system has been marred by
foot-dragging, chicanery and profiteering -- even as its sales reached
$22 billion.
All that buying and selling did almost nothing to reduce the risk of
global warming, records show. Indeed, global levels of carbon dioxide
in 2005 were the highest ever registered.
"Have they achieved any real reductions in greenhouse gases?" asked
Veronique Bugnion, U.S. research director at Point Carbon, a European
firm that analyzes carbon trading markets. "There is not much evidence
of a reduction."
Carbon dioxide, the invisible, odorless gas that infuses every living
breath, seems an unlikely investment.
It seeps out anywhere there is a working smokestack or running motor.
As a signatory to the Kyoto Protocol, the European Union has taken the
lead in imposing caps on levels of carbon dioxide and other greenhouse
gases. Many climate experts expect the United States, which accounts
for about a quarter of all greenhouse gas emissions, will eventually
have to follow suit.
After the release of the U.N. report, the Bush administration
maintained its opposition to mandatory controls on U.S. greenhouse gas
emissions, while Democratic leaders in Congress considered different
approaches to control the heat-trapping gases.
Once companies are forced to pay to emit greenhouse gases, a commodity
as free as breath becomes private property worth billions.
In the cost-accounting of global warming, the undisturbed soil between
Gronau's cornrows retains enough carbon to offset a few of the 2
billion tons spewing from U.S. smokestacks and exhaust pipes every
year.
All told, Gronau set aside 1,600 acres of the 2,100 acres he usually
farms near Denison as a no-till carbon sink through the climate
exchange. That works out to half a ton of carbon per acre kept out of
the atmosphere every year. He could have upped his credit to three
quarters of a ton of C02 per acre by planting grass on his fallow
fields.
His no-till fields were bundled for sale through the exchange with
other farmland in Iowa, Nebraska, Kansas and Missouri in a program
managed by the Iowa Farm Bureau, one of 23 carbon "aggregators"
registered on the exchange. So far, the farm bureau has packaged and
sold 500,000 tons of carbon emission credits -- equal to a month's
output from a 1,000-megawatt coal plant.
Carbon credits can also be gained by burying carbon dioxide under the
oceans or sequestering it underground, reducing emissions through new
technology and alternative fuels, or reforestation, to name a few.
Worldwide, there are more than 3,000 projects in the works to offset
greenhouse gases, generating billions of dollars in revenues.
"When I was taught economics, I was taught that air and water were
free goods," said Richard Sandor, the founder of the Chicago Climate
Exchange.
But he added: "It was intuitively obvious to me that on a planet of 6
billion or 7 billion people that was no longer the case."
The companies that have volunteered for his exchange want to learn how
to exploit the system in case mandatory controls are enacted by the
U.S. government.
Once members promise to reduce emissions, however, the commitment is a
legally binding contract.
"The binding nature of the constraints is what makes the [Chicago]
market work," said carbon finance analyst Karan Capoor at the World
Bank. "It provides the integrity. It is not just do what you want,
wink, wink, nudge, nudge."
Even as a voluntary exercise, the exchange so far has traded 13.6
million tons of carbon dioxide emissions with 200 companies, cities
and foundations at prices ranging from $4 to $8 a ton.
As chairman and chief executive of the climate exchange, Sandor could
easily become the first magnate of global warming.
Through a European subsidiary, his exchange already handles a lion's
share of the annual carbon emissions trade with the 25 countries in
the European Emissions Trading System.
Time magazine knighted him as a Hero of the Planet in 2002.
But he has also come to embody the concerns of environmentalists over
the business of global warming, in which the planet's natural capacity
to absorb carbon dioxide is turned into private property that can be
sold to the highest bidder.
Last year, 19 major environmental groups urged local governments to
boycott the Chicago exchange.
Their complaints are based, in part, on the track record in Europe,
where 7,300 companies managing 12,000 installations scramble to
survive in the world's largest carbon market.
All told, the European Union's Emissions Trading Scheme has handled
$22 billion worth of carbon transactions in the first nine months of
last year, the World Bank reported. Investors bought and sold 842
million tons of carbon dioxide emissions, trading recently at about
$9.80 a ton.
But instead of combating global warming, the European trade so far has
only meant higher prices for many utility customers, market analysts
and environmental finance experts said.
"There are some pretty serious teething problems," said Bugnion of
Point Carbon.
Should the federal government impose carbon limits the resulting
market for carbon emissions would be immense, analysts said.
Market researchers at the World Bank and U.N. experts predict that the
trade in carbon emissions could soon become the largest commodities
market in the world.
--
There may come a time when the CO2 police will wander the earth telling
the poor and the dispossed how many dung chips they can put on their
cook fires. -- Captain Compassion.
Wherever I go it will be well with me, for it was well with me here, not
on account of the place, but of my judgments which I shall carry away
with me, for no one can deprive me of these; on the contrary, they alone
are my property, and cannot be taken away, and to possess them suffices
me wherever I am or whatever I do. -- EPICTETUS
"Civilization is the interval between Ice Ages." -- Will Durant.
"Progress is the increasing control of the environment by life.
--Will Durant
Joseph R. Darancette
daranc@NOSPAMverizon.net
