Is Gore’s darling carbon exchange dead or what?

Al Gore

UPDATE 15 November: see end of post

Is it goodbye to carbon raids trades?

A story sweeping through blogdom announces the end of the Chicago Carbon Exchange and its carbon trading in the wake of a totally collapsed price for carbon. This means a victory for opponents of man-made global warming and the death of a scheme that separates people from their money for the sake of the climate but has no effect on the climate.

However, it appears the exchange is not closing down, carbon trading is not finished and the carbon price is not even in the basement. What on earth is going on?

Three days ago Lisa G let us know about the Chicago Carbon Exchange shutting down trading in carbon credits. She linked to a post at Big Journalism that reproaches the MSM for the absence of coverage of this important event. After all, they were full of stories of this exchange when it started up — why should they ignore its demise?

Success for carbon trading unlikely

Clearly, the failure of carbon trading in the world’s biggest capitalistic nation would be significant for the future of the human response to global warming. For if carbon trading wasn’t attractive to the sharks of US capitalism then the chances of success for trading carbon credits in the rest of the world would appear mighty slim.

So I went to write a post, link to the story and make a few comments. But I struck a problem. Big Journalism says:

Al Gore’s much ballyhooed Chicago Climate Exchange (CCX) has recently announced that it will no longer be engaging in carbon trading, an activity that was the sole purpose that it was created. This is an utter failure of purpose in global warming hysteria yet the Old Media is almost completely silent on this colossal failure.

But, at the Chicago Carbon Exchange itself, go to News, then the link CCX: Chicago Climate Exchange: By the Numbers loads a Fact Sheet dated October 21, 2010. Near the bottom of that there’s a link to “Advisory 2010-13: CCX Program Update”. That’s a small pdf headed “CCX Advisory 2010-13 October 21, 2010” with the sub-heading “Chicago Climate Exchange Program Update”. Spin, obviously — cessation under a different name, surely? But then I saw:

  • A new offsets registry program will be initiated for 2011 and 2012 CCX offsets
  • The new program will be called the CCX Offsets Registry Program and will operate independently of previous CCX phases.
  • It will include a publicly-available registry and a transfer mechanism to process transactions.
  • It will leverage existing CCX protocols and program rules, with modifications as appropriate.
  • Additional details will be announced in the coming weeks and will be based on input from the Offsets and Forestry Committees, which will continue to operate.
  • Project crediting will take place for vintage years 2011 and 2012.
  • Eligibility to register projects will be expanded to include direct emitters, whether or not they participated in CCX Phases I or II.
  • ANSI, or equivalent accreditation, will be required for all project verifiers.
  • The CCX emission reduction program will conclude as scheduled following the completion of Phase II at the end of 2010.
  • The verification and true-up period for compliance year 2010 emissions will take place in 2011.
  • Registry and trading services will remain available for all CCX Phase I and Phase II allowances and offset contracts through the middle of 2011.

Most of that is impenetrable jargon but I wondered whether a “publicly-available registry and a transfer mechanism to process transactions” constitutes a trading system. It sounds as though it might, but there’s no mention of “trading”.

Yeah, probably spin. We’re closing down but we won’t actually say so.

Strange price behaviour

But then it became more interesting. At the bottom of the Chicago Climate Exchange’s Fact Sheet is a link (more info) to this little graph showing recent carbon prices:

CCX carbon trading price Aug 09 to Oct 10

What strange behaviour at the end! The price shows a lovely recovery in August, completely dies in September, but then stages a more wondrous return to life than Lazarus with a stunning leap in October to a price not seen since 2008. Very encouraging. Wonder why they’re closing down? Clue: our ETS assumes the international price of CO2 will soon reach $50 per tonne.

A “weighted” average?

What do they mean by a “weighted” average price? Is that how the exchange keeps the price out of the basement?

But, even more interestingly, there’s another graph doing the rounds and it doesn’t match this one. At WUWT, Anthony shows the graph, also from the Carbon Exchange:

CCX carbon trading price 2004 to 2010

This shows a complete collapse in the carbon price — virtually nothing all this year. The strong recent recovery of the price shown in the first graph is all the more remarkable for the fact that this graph shows that $3.50 was last reached in the middle of 2008!

There’s also the matter of sales volumes. The Monthly Report at the CCX gives this graph of volume to accompany the first price graph shown above:

CCX carbon trading volumes Aug 09 to Oct 10

These volumes might match the longer-term graph, but it’s hard to tell. The brief spurt in the last two months seems to give the lie to the impression created by the first graph, that recent volumes have been zero, although it could be simply a matter of the different scales in the two graphs. We need to know the figures.

At Pajamas Media, there’s a good summary of the creation of the CCX and the profit Richard Sandor, the exchange’s founder, made when he collected $98.5 million when it was sold a few months ago. We also read:

Despite ending carbon trading, the CCX isn’t vanishing altogether. It intends to transition into the murky world of dealing in carbon offsets. Once again, however, with the tide leaving on carbon regulation and increased concerns about fraudulent carbon offsets, the future of that market is quite uncertain.

Maybe that’s the simple truth of it, and it’s just not obvious from the language the exchange uses. In other words, carbon trading has stopped and it’s because the price is in the basement.

Can our ETS survive alone?

Since our ETS depends on trading our carbon credits with other countries at some point, and the carbon price is, or will be, dependent on the international market, the failure of an important segment of that market must be lethal. Surely this sounds the death knell for our ETS?

We shall ask Rodney Hide to ask a further question of the Climate Change Minister, Nick Smith. Let’s see how confident he is that our ETS can survive in isolation. Of course, the absence of international markets will mean that the money the forestry owners intend to collect from the carbon “credits” their plantations “earn” will have to come from Kiwi taxpayers, and not from selling credits overseas.

It would be difficult then to obscure the fact that the ETS is just a tax by another name, wouldn’t it?

If the government of the day wishes to withdraw gracefully from the ETS arrangements, how difficult and expensive will that prove to be in the absence of international trading?

How’s the global temperature right now? Ocean temperatures? Sea levels? Polar ice? All normal? That’s good news. Now, about the need for an ETS…

UPDATE 15 November:

I’ve addressed the Chicago Climate Exchange with an email along this wise:

There are news and blog reports that you have ceased trading in carbon credits.

Your CCX Advisory of October 21, 2010, “Chicago Climate Exchange Program Update” seems to indicate a cessation of trading, but it is, to my admittedly uninformed eye, ambiguous. It claims the scheduled end of something called the “CCX emission reduction program”, yet registry and trading services will “remain available” until the middle of 2011.

Your web site today describes the tradable commodity as the CFI contract, representing 100 metric tons of CO2 equivalent.

The first of the published goals listed on your web site today is “To facilitate the transaction of GHG allowance trading.”

Would you please confirm to me whether you do or you do not now allow trading in carbon credits? Would you please confirm whether you plan to cease such trading and, if so, when?

Do you agree with reports that you have ceased such trading (such as here at the Telegraph) and, if not, will you be issuing a statement denying them?

Thank you and best regards,

Richard Treadgold

They may laugh, but if they reply I shall post it here.

5 Thoughts on “Is Gore’s darling carbon exchange dead or what?

  1. val majkus on November 12, 2010 at 11:33 pm said:

    I did see that comment by Lisa and made a comment myself; John O’Sullivan had an article on WUWT published on 8/11 and that’s where I saw it first
    nice photo of Al Gore
    and comment Daniel H says:
    November 8, 2010 at 2:28 pm
    There was actually an interesting news story about this in the Financial Times last week. So it hasn’t been a total media blackout since FT has a large readership and competes with the WSJ. It’s a fairly mainstream newspaper. The site requires that you register (for free) in order to read articles, but here’s an excerpt:

    End of US carbon trading looms
    By Hal Weitzman in Chicago
    Published: November 1 2010 22:34 | Last updated: November 1 2010 22:34

    The owner of the US’s only nationwide cap-and-trade market has signalled the death of the seven-year-old industry, saying companies were no longer interested in trading carbon emissions credits in the absence of government legislation.

    IntercontinentalExchange, the US futures exchange group, in July bought UK-listed Climate Exchange, operator of the European Climate Exchange – which trades CO2 allowances as part of the mandatory European Union Emissions Trading Scheme – as well as the Chicago Climate Exchange and the Chicago Climate Futures Exchange.

    Although CCX’s market is voluntary, since launching in 2003 it attracted large US companies such as Ford, Bank of America, Cargill, IBM and Intel. Members made a voluntary but legally binding commitment to meet greenhouse gas emission reduction targets either by cutting emissions or by buying emissions permits sold by members.

    The business depended on the notion that the US would impose carbon emissions caps on companies and give its blessing to a market for trading credits, turning CCX’s voluntary trading into a mandatory market…

    You can read the rest here:
    http://www.ft.com/cms/s/0/3fe91576-e5de-11df-af15-00144feabdc0.html

  2. Richard C (NZ) on November 13, 2010 at 9:16 am said:

    And if COP16 fails at Cancun…………

    • val majkus on November 13, 2010 at 1:50 pm said:

      hope so! I wish Australia would extricate itself from the UN – that institution is so yesterday

  3. great post, thanks for the mention… I wonder if you’ll get a response clarifying the ‘cease trading’ language.

    If the big trading boys and countries all put down the carbon credit toys making NZ a one sided ETS, would NZ be the winner if noone else plays the game?

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