The Heat Is Online

Chicago Exchange Kicks Off Emissions Trading

Carbon Dioxide Emission Allowances - Now for Sale

Reuters News Service, Oct. 2, 2003

CHICAGO - One metric ton of carbon dioxide emissions is worth an average 98 cents this year, dropping to an average 84 cents in 2005, according to the first auction of emission allowances announced this week by the new Chicago Climate Exchange.

Richard Sandor, the exchange's chairman and chief executive officer, said the auction marked the first multinational, public trading of greenhouse gases. Scientists believe greenhouse gases, released by burning fossil fuels, cause climate change by trapping the sun's heat in the atmosphere.

The sealed-bid auction attracted 22 bidders for 100,000 metric tons of carbon dioxide allowances for 2003, resulting in 20 successful bids. For 2005, 25,000 metric tons of the gas were offered, with all five bidders successful, exchange officials said.

The exchange, which Sandor said will provide continuous electronic trading of allowances for greenhouse gases beginning in late October, has 22 members, including utility American Electric Power Co. Inc., carmaker Ford Motor Co. cellphone and semiconductor company Motorola Inc. and the city of Chicago.

The members have agreed to cut their North American emissions by 1 percent a year over four years and can trade allowances that reflect their emission cuts on the exchange.

If their emissions were higher than those allowances, they could buy more from the market. If they were lower, they could sell them, according to Sandor. However, each member would be responsible for achieving its required reduction in emissions every year.

While committing to a voluntary decrease in emissions, members can benefit from improved operating efficiencies resulting from the reductions that can aid their operations in other countries that restrict emissions. Members can also possibly profit from buying and selling the allowances, exchange officials said.

The emissions cuts are voluntary, companies in the U.S. are not required to cap their emissions of greenhouse gases. Those gases are thought by many scientists to cause global warming by trapping the sun's heat in the atmosphere.

Bruce Braine, a vice president at American Electric Power, which owns several coal-burning power plants, said the exchange would establish prices for emissions to help the utility determine whether to be a buyer or seller.