Chicago Climate Exchange

From MarketsWiki
Jump to navigation Jump to search
ICE wiki logo.jpg

Chicago Climate Exchange
Founded 2003
Headquarters Chicago
Key People Dr. Richard Sandor, Chairman; Satish Nandapurkar, CEO/President; Michael J. Walsh, Executive VP
Products Emissions reduction and trading system for six greenhouse gases.
Twitter @CCX_CCFE

The Chicago Climate Exchange (CCX), which launched its trading platform in 2003, was the first U.S. emissions cap-and-trade market for all six greenhouse gases.[1] Founded by Richard Sandor, CCX was a voluntary market whereby members agreed to legally binding emission reductions with independent, third party verification by the Financial Industry Regulatory Authority.

CCX was acquired by the Intercontinental Exchange in 2010 for about $600 million. In 2012 ICE shut down the Chicago Climate Futures Exchange, citing low trading volumes, an inability of the U.S. to enact cap-and-trade legislation, and a pending requirement of the Dodd-Frank Act which required 85% of futures trading volume be screen-based.[2] ICE then shifted its U.S.-based climate contracts to its OTC platform in Europe.[3] [4]


In 2005, CCX launched the European Climate Exchange (ECX), and the Chicago Climate Futures Exchange (CCFE), a CFTC-regulated futures exchange for U.S. SO2 allowances and U.S. NOx Ozone Season allowances. [5] The exchange, CCFE and ECX all fell under the ownership of the publicly traded company called Climate Exchange Plc, which was listed on the AIM of the London Stock Exchange since 2006.

Exchange trading in the allowances the system generated, known as Carbon Financial Instruments (CFIs) ended December 31, 2010. However, CFI generation continues as a strictly voluntary greenhouse gas emissions offset system. CCX's new parent company Intercontinental Exchange, which acquired CCX in April 2010[6], announced the end of mandatory CFI trading by member companies in October 2010, on the heels of failed climate legislation in the U.S. Congress and a disappointing outcome to international climate change negotiations in Copenhagen, as well as a collapse in the price for allowances under the Regional Greenhouse Gas Initiative (RGGI). [7]

The Chicago Climate Exchange ranked number 48 in 2009 in the Futures Industry Association's global list of top 53 derivatives exchanges measured by volume, up 183.4% on 2008's volume figure.[8] The FIA list, published in early April 2010, reports that total volume for 2009 rose to 1.37 million from 2008's figure of 484,322.

CCX created two joint venture partnerships outside the United States. On May 30, 2008 CCX launched the Montréal Climate Exchange (MCeX) a joint-venture between CCX and the Montreal Exchange, (which is now TMX Group) to create and offer carbon and emissions futures for the Canadian market.[9] On Sept. 30, 2008, CCX opened headquarters in China with the China National Petroleum Corporation Asset Management Company, Ltd. to create China's first foreign-owned joint venture exchange called the Tianjin Climate Exchange (TCX).[10]


CCX has more than 450 members as of October 2009, from all sectors and offset projects worldwide.

Key People[edit]


The institution that is today the Chicago Climate Exchange (CCX) began with a grant in 2000 from the Joyce Foundation, a leading philanthropy based in Chicago known for its innovative approach to public policy issues, which supported the inception, creation, feasibility and design of CCX. The support was provided as part of a series of special Millennium grants made by the foundation to catalyze, support and reinforce ideas, concepts or institutions of lasting intergenerational significance.

An initial grant of $347,000 was made to the Kellogg Graduate School of Management at Northwestern University to provide technical support to Dr. Richard Sandor and colleagues to examine whether a cap-and-trade market was feasible in the U.S. to facilitate significant greenhouse gas reductions, using a voluntary regional Midwest model from which national and international lessons might be drawn.

A second grant of $760,000 was provided in 2001 to proceed with a design phase, which ran through 2002 and involved more than one hundred professionals in the corporate, public, non-governmental and academic sectors, who worked with Dr. Sandor, his colleague, Dr. Michael Walsh, and others to develop a core set of rules, protocols and design elements that would underpin and shape a pilot reduction and trading design.

On March 14, 2008, the Montreal Climate Exchange (MCeX), a joint venture of the Montreal Exchange (MX) and the Chicago Climate Exchange (CCX) announced plans to launch trading of futures contracts on Canada carbon dioxide equivalent (CO2e) units on May 30, 2008, subject to regulatory approval.[11]

Charter Members In 2003, CCX launched trading operations, with the following 13 charter members: American Electric Power; Baxter International Inc.; City of Chicago; DuPont; Ford Motor Co.; International Paper; Manitoba Hydro Corp.; MeadWestvaco Corp.; Motorola Inc.; STMicroelectronics; Stora Enso North America; Temple-Inland Inc.; and Waste Management Inc.

Philosophy Behind Emissions Trading[edit]

The first major environmental success of the emissions trading concept was demonstrated in the 1980's U.S. program to phase out lead from motor fuel. This was followed by the highly successful U.S. Environmental Protection Agency sulfur dioxide (SO2) emissions trading program, which continues to prove the concept on a large scale. To reduce acid rain, an overall cap on SO2 emissions was imposed on electric power plants. Power generators that find it expensive to cut sulfur emissions can buy allowances from those that make extraordinary cuts at low cost. While the first compliance year was 1995, trading started several years earlier. The first EPA auction was administered by the Chicago Board of Trade in 1993. Through private transactions and annual auctions, electric power generators trade emission allowances to arrive at an efficient use of mitigation resources.

The SO2 program has been extremely successful: emissions were reduced faster than required and costs are far below most forecasts. There has also been steady growth in the trading of allowances, from 700,000 tons of registered trades in 1995 to approximately 12 million tons in 2001. The market has now reached a value of approximately $2 billion each year for registered trades. Estimates suggest there are annually $2 billion a year in SO2 allowance derivatives such as options, forwards and other unregistered trades.

Application of flexible, market-based mechanisms for reducing greenhouse gas emissions has achieved widespread intellectual and political support. This acceptance of emissions trading was reflected in the Kyoto Protocol, which established several emissions trading mechanisms. Signatory countries to this treaty adopt legally binding commitments to reduce emissions to levels below those experienced in 1990.

CCX Goals --To facilitate the transaction of GHG allowance trading with price transparency, design excellence and environmental integrity.

--To build the skills and institutions needed to cost-effectively manage GHGs.

--To facilitate capacity-building in both public and private sectors to facilitate GHG mitigation.

--To strengthen the intellectual framework required for cost effective and valid GHG reduction.

--To help inform the public debate on managing the risk of global climate change.


The commodity traded at CCX was the CFI (Carbon Financial Instrument) contract, each of which represented 100 metric tons of CO2 equivalent. CFI contracts were composed of Exchange Allowances and Exchange Offsets. Exchange Allowances were issued to emitting members in accordance with their emission baseline and the CCX Emission Reduction Schedule. Exchange Offsets were generated by qualifying offset projects.

Emission Reduction Commitment CCX Members made a voluntary but legally binding commitment to meet annual greenhouse gas (GHG) emission reduction targets. Those who reduced below the targets had surplus allowances to sell or bank; those who emitted above the targets complied by purchasing CCX Carbon Financial Instrument Futures (CFI) contracts.

Offset Program CCX's integrated greenhouse gas (GHG) reduction and trading system included a full portfolio of offset projects. CCX issued tradable Carbon Financial Instrument (CFI) contracts to owners or aggregators of eligible projects on the basis of sequestration, destruction or displacement of GHG emissions.

Offset projects could be registered by members, offset providers and offset aggregators. Offset Providers and Offset Aggregators do not have significant GHG emissions. Entities that have significant GHG emissions were eligible to submit offset project proposals only if they had committed to commit their own emissions to the CCX Emission Reduction Schedule as Members.

An Offset Provider is an owner of an offset project that registers and sells offsets on its own behalf. An Offset Aggregator is an entity that serves as the administrative representative, on behalf of offset project owners, of multiple offset-generating projects. Offset projects involving less than 10,000 metric of CO2 equivalent per year should be registered and sold through an Offset Aggregator.

CCX developed standardized rules for issuing CFI contracts for the following types of projects:

  • Agricultural Methane
  • Landfill Methane
  • Agricultural Soil Carbon
  • Forestry
  • Renewable Energy
  • Coal Mine Methane
  • Rangeland Soil Carbon


In 2007, health care company Abbott Laboratories became the first FORTUNE 500 company to commit to going carbon neutral for its U.S. fleet of vehicles. The company joined CCX and committed to the CCX reduction of greenhouse gases and trading program.[12]

"See Also"