Markets in Everything, Except Greenhouse Gases

by on September 5, 2010 at 1:03 pm in Current Affairs, Economics, Law | Permalink

In 2002 Time named Richard Sandor a “Hero of the Planet” for founding the Chicago Climate Exchange (CCX). The CCX traded permits based on voluntary but binding commitments from firms to cutback on carbon emissions and other greenhouse gases.  Without enforced limits, however, or, if you prefer, without property rights in emissions, the market is not self-sustaining and CCX is cutting workers and may be wound down.

CCX founder Richard Sandor had hoped the exchange would become the hub for a national regulated market for greenhouse gas emissions to be kick-started by a U.S. climate change bill.

But prices for the carbon credits traded on the bourse since its 2003 launch, which were based on voluntary but legally binding emissions reduction commitments by its members, have crashed to around 10 cents a tonne from all-time highs of over $7 in 2008, and trading volumes have largely dried up.

Although the U.S. has vowed to cut its greenhouse gas emissions by 17 percent below 2005 levels by 2020, and despite the House of Representatives narrowly passing an ambitious climate bill in June 2008, several similar bills have stalled in the Senate in the past year.

“(The layoffs) seem to indicate that this market player thinks any U.S. climate action is still a way off,” said commodities house FCStone…

1 Brian September 5, 2010 at 4:34 pm

It’s about time for this market to run into problems. It seems to me that the media have severely under-reported on the emissions verification scandal. At times much of the global verification capacity was under censure from regulators and yet there hasn’t been an uproar.

Everybody wanted the market to grow so everybody had an incentive to turn a blind eye to the problem. The more cheating, the cheaper the credits for the buyers. The more cheating the more credits sold by the sellers.

2 Mike September 5, 2010 at 7:36 pm

Given your thoughts on the housing bubble, Alex, perhaps this isn’t an area you should offer your opinion on?

Or, as with housing, do you believe Goldman Sachs needs another product to slice into derivatives?

3 Vangel September 5, 2010 at 10:40 pm

Without a government mandate there is no need for carbon trading. The carbon market was always artificial and would never have arisen in a free market system.

4 mulp September 6, 2010 at 4:03 am

The free lunch conservatives have demonstrated they want free lunches and only free lunches. They are demanding government supply free land for pillage and plunder for coal and oil. The right to pollute the water and turn the landscape into ash without cost, The right to credit without having to repay it and government funded nuclear design and government subsidized fuel.

And when Obama and Democrats offered those in exchange for cap and trade with lots of free lunch carbon credits, the free lunch conservatives demanded more free lunches.

So, Obama is going to use his power to dictate to industry what they must do. And with many projects requiring government approval, the EPA will have a lot of power to dictate. Nothing gets built if the EPA’s authority is being challenged in court.

Not to mention OSHA rules…

On the other hand, other preferred projects will be expedited.

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6 Max September 7, 2010 at 12:42 am

As an AP Environmental student lats year, I am glad to see the someone taking action against green house gases. I do believe that the governemnt should do more, of what MR. Sador is doing. Hopefully it will help out with creating jobs not cutting them.

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