Print This PageAgriculture Can Help Keep Carbon in Balance
Viewpoint: Environmental and Financial Markets Converge
Dr. Richard L. Sandor, Chairman and CEO, Chicago Climate Exchange
Market-based
mechanisms such as emissions trading have become widely accepted as cost-effective
methods for addressing environmental concerns, including air quality. Carbon
markets to address climate change issues are the next frontier, and their potential
is huge. The Chicago Climate Exchange (CCX) is well-positioned to develop this
opportunity with traders and corporations. We gave the first paper proposing
the development of a market for carbon credit trading at the 1992 Earth Summit
in Rio de Janeiro. The idea initially met with skepticism, but over the course
of the decade, it gained force.
There are now more than 360 CCX members. They represent a range of organizations: U.S. and European corporations, including Ford, Motorola, Bayer, Rolls-Royce, and Monsanto; universities in Iowa and Minnesota; and cities such as Chicago, Illinois, and Portland, Oregon. International members come from Australia, Brazil, China, and India. Baseline emissions by CCX members currently account for almost 15 percent of U.S. stationary source emissions, an amount greater than Germany’s annual allocation under the EU trading system. That makes CCX the largest market outside of the EU Emissions Trading Scheme.
The CCX program recognizes many greenhouse gas mitigation options, including on-site emission reductions, allowance trading, and use of a limited range of verified and tradable offset projects. Chicago Climate Exchange members who cannot reduce their own emissions can purchase credits from those who make extra emission cuts, or they can buy offsets from individual mitigation projects, including no-till or low-till farming plans. Studies suggest that agricultural lands have the potential to sequester approximately 275 to 763 million metric tons of carbon dioxide each year, roughly 3.75 percent to 10 percent of total U.S. emissions. Farmers who practice minimum tillage have the potential to sequester up to half a ton of carbon per acre on their farms each year.
By trading credits on the Exchange, farmers can earn more from their operations while improving the climate picture and building organic matter to enrich their soil. It’s a winning proposition all around.
Our members are building the monitoring, verification, legal, banking and trading infrastructure that will be needed to make this market function. We continue to attract the attention of other markets in the United States and around the world that are interested in addressing the issue. Many are interfacing with our program.
We are building a bridge to the European Union through the European Climate Exchange, which started trading in April 2005. The contours of a truly global marketplace for emissions are emerging. CCX’s role is to inform the public debate on the real cost of climate change mitigation so that policy-makers and the public will be better informed for future decisions. If we can accomplish that, we will have succeeded.
The author is chairman and CEO of the Chicago Climate Exchange (CCX) and a research professor at the Kellogg Graduate School of Business at Northwestern University.
