The Collapse of the CCX Carbon Emissions ContractLocation: Tokyo This may be a surprise for some, but "cap and trade" has been in place in the US for years. The trading is done via a firm called the Chicago Climate Exchange (CCX), a creation of Richard Sandor (the inventor of the CBOT bond futures). The contracts traded represent 100 metric tons of carbon emissions each (see contract specs). There is one catch with this cap & trade program though: the member firms' participation is voluntary. From CCX: CCX emitting Members make a voluntary but legally binding commitment to meet annual GHG emission reduction targets. Those who reduce below the targets have surplus allowances to sell or bank; those who emit above the targets comply by purchasing CCX Carbon Financial Instrument® (CFI®) contracts. So why would firms participate on a voluntary basis? A couple of reasons. One is they would like to be perceived as good citizens, the other is they wanted to get ready for the real cap & trade. With full expectations that Democrats in the office would implement this type of program, many firms joined voluntarily to get ahead of their competitors and learn the process. But when the long awaited legislation finally showed up, it wasn't
exactly what everyone expected. Under the so called Waxman-Markey
American Clean Energy and Security Act of 2009, companies would be
required to have “allowances” for all the greenhouse gases (carbon) they
emit. Between 2012 and 2026 about 90 percent of the allowances would be
given away for free. The chart below from the Heritage Foundation (which
by the way really wants this bill to go away) shows what percentage of
the emission allowances would be free.
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