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CCX: The U.S. Carbon and Environmental Deriviatives Exchange
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CCX: The U.S. Carbon and Environmental Deriviatives Exchange

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About CCX

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    CCX: The U.S. Carbon and Environmental Deriviatives Exchange CCX: The U.S. Carbon and Environmental Deriviatives Exchange Presentation Transcript

    • CCX ® : The U.S. Carbon and Environmental Derivatives Exchange© 2008 Chicago Climate Exchange®, Inc.
    • What is Chicago Climate Exchange?A premier and unique financial institution designed to advance business, environmental and social goals. Chicago Climate Exchange (CCX ®) is the world’s first and North America’s only active voluntary, legally binding integrated trading system to reduce emissions of all six greenhouse gases, with offset projects in North America and worldwide © 2008 Chicago Climate Exchange®, Inc.
    • Climate Exchange Plc. (CLE.L) Tianjin Climate Exchange© 2008 Chicago Climate Exchange®, Inc.
    • Dr. Richard Sandor, Founder and Chairman© 2008 Chicago Climate Exchange®, Inc.
    • Global Carbon Emissions growing over 35 billion metric tons Global Carbon Emissions (Billion Metric Tons) Rest of World, 8.0 Europe, 5.0 Australia, 0.5 United States, 7.2 Japan, 1.4 Russia, 2.0 India, 3.0 China, 8.5© 2008 Chicago Climate Exchange © 2008 Chicago Climate Exchange®, Inc.
    • US Appetite for Carbon Trading is Strong • 1st RGGI Auction: 12,565,387 Allowances • 2nd RGGI Auction: 31,505,898 Allowances • 3rd RGGI Auction: 33,689,278 Allowances • 4th RGGI Auction: 33,060,160 Allowances • Total Auctioned: 110,820,723 Allowances • RGGI Derivatives Traded on CCFE: 325,352,000 Allowances160,000 7,000140,000 RGGI Options Volume 6,000120,000 5,000 RGGI Futures Volume100,000 4,000 80,000 Avereage Daily Volume 3,000 60,000 40,000 2,000 20,000 1,000 - - © 2008 Chicago Climate *As of close 06/30/2009 Exchange®, Inc.
    • THE AGENDA · ENERGY & ENVIRONMENT Reduce our Greenhouse Gas Emissions 80 Percent by 2050 • Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050. • Make the U.S. a Leader on Climate Change. www.whitehouse.gov© 2008 Chicago Climate Exchange®, Inc.
    • CCX Market Architecture (2003-2010)Phase I: Members made legally binding commitments to reduce or trade 1% per year from 2003-2006, to resultin 4% below baseline by end of 2006.Phase II: Members make a legally binding commitment to reduce to 6% below baseline by 2010.Baseline = Avg. emissions from 1998-2001, emissions in 2000 (Phase II) 8 © 2008 Chicago Climate Exchange®, Inc.
    • CCX Membership Highlights ® • Represents 17% of the Dow Jones Industrials, including: – Bank of America – DuPont – Intel – IBM – United Technologies • Represents 11% of the Fortune 100, including: – Ford – Motorola – Safeway – International Paper – Honeywell International Inc. • Represents 20% of the largest CO2 emitting utilities in the US, including: – AEP - Mirant – Reliant - Dynegy – Allegheny Energy - TECO – DTE - Alliant – NRG Energy - American Electric Cooperative, Inc© 2008 Chicago Climate Exchange®, Inc.
    • Price© 2008 12 /12/2 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 00 3/1 3 2/2 00 6/1 4 2 /2 00 9/1 4 2 /2 12 0 /12 04 /20 3/1 04 2/2 00 6/1 5 2 /2 00 9/1 5 2/2 12 0 /12 05 /20 3/1 05 2 /2 00 6/1 6 2/2 00 9/1 6 2 /2 12 00 /12 6 /20 3/1 06 2 /2 00 6/1 7 2 /2 00 9/1 7 2/2 12 00 /12 7 /20*As of close 07/07/2009 3/1 07 2 /2 00 6/1 8 Chicago Climate 2 /2 00 9/1 8 2 /2 12 00 /12 8 CCX CFI Historic Price Chart /20 3/1 08 2 /2 00 9Exchange®, Inc. 6/1 2 /2 00 9
    • CFI® Historic Volumes (metric tons) 120 ADV CCX (contracts) 2005 60 100 2006 400 2007 900 2008 2,900 Options 80 2009 2,420 Million (metric tons) Futures 60 Cash 40 20 0 2004 2005 2006 2007 2008 2009© 2008 Chicago Climate *As of close 07/07/2009 Exchange®, Inc.
    • Recognition “To deal directly with climate change, something we failed to do in the last energy bill, we should use a market-based strategy that gradually reduces harmful emissions in the most economical way… Right here in Chicago, the Chicago Climate Exchange is already running a legally binding greenhouse gas trading system.” President (then Senator, D-IL) Barack Obama, April 3, 2006 “Offsetting the House of Representative’s greenhouse gas emissions through CCX is a hat-trick for the Country – a win for the government, a win for industry, and a win for our Nation’s expanding economy.” White House Chief of Staff (then Congressman, D-IL) Rahm Emanuel, November 5, 2007© 2008 10 Chicago Climate Exchange®, Inc.
    • CCX Emission Offset Types• Verified Offset projects sequester or eliminate GHGs to earn Carbon Financial Instruments (CFI) sold on CCX electronic platform to CCX membership Current pre-defined offset categories: • Agricultural Methane • Landfill Methane • Agricultural Soil Carbon • Forestry • Renewable Energy • Coal Mine Methane • Rangeland Soil Carbon • Others in development Independent verification required by authorized entities: SGS, DNV, First Minnesota dairy farmer receives first check from sales of Environment, BvQi CCX Offsets for methane destruction (Approx. $10k for 1 year)13 © 2008 Chicago Climate Exchange®, Inc.
    • Forest Carbon: Global Perspective 2007 Intergovernmental Panel on Climate Change Working Group III Report Mitigation of Climate Change: “Forestry can make a very significant contribution to a low-cost global mitigation portfolio that provides synergies with adaptation and sustainable development. However, this opportunity is being lost in the current institutional context and lack of political will to implement and has resulted in only a small portion of this potential being realized at present (high agreement, much evidence).”© 2008 Chicago Climate Exchange®, Inc.
    • CCX Forest Carbon Rules Overview • Current CCX rules recognize all four mitigation options outlined by IPCC – Maintaining or increasing forest area: afforestation/reforestation – Maintaining carbon stored in forests: reducing deforestation and degradation – Sustainable forest management to increase stand- and landscape-level carbon density – Increasing off-site carbon stocks in wood products, enhancing product and fuel substitution (biofuels treated as carbon neutral when combusted)© 2008 Chicago Climate Exchange®, Inc.
    • Important Features of CCX Forest Carbon Rules • Annual third party verification required on all carbon pools • Discounts applied based on robustness of quantification techniques • Forest carbon reserve pools maintained in event of catastrophic loss • Sales limits imposed on commercial forest companies (market balancing provisions are applied to all members) • Entities with emissions not allowed to enroll forest carbon without taking the CCX legally binding emission reduction commitment© 2008 Chicago Climate Exchange®, Inc.
    • Range of CCX Forest Carbon Crediting CCX rules allow crediting on basis of increased forest carbon stocks depending on the entity’s emissions profile: • Commercial forest companies having industrial facilities – Must include emissions in CCX reduction commitment – Option to realize crediting for management that increases live tree carbon stocks – Option to realize crediting from carbon stored in Long-Lived Wood Products – These two options are separate • Offset providers (do not have significant emissions) – Afforestation / Reforestation – Management to increase live tree carbon stocks – Long-Lived Wood Products© 2008 Chicago Climate Exchange®, Inc.
    • CCX U.S. Forestry Aggregators • Agragate • Delta P2/E2 • FORECON Ecomarket Solutions • MACED • National Carbon Offset Coalition • Valley Wood© 2008 Chicago Climate Exchange®, Inc.
    • Eligible Forest Practices in House Bill • Afforestation / reforestation of unforested acres • Forest management (including harvested wood products) • Management of peatland / wetland • Conversion of grassland and forested land • Reduced deforestation / avoided forest conversion • Urban tree planting • Agroforestry • Adaption of plant traits / technologies that increase sequestration by forests© 2008 Chicago Climate Exchange®, Inc.
    • Eligibility Requirements in House Bill • 20 year crediting period for forestry • Must be in eligible state or voluntary program for early action • Jan 1 09 starting date requirement – Projects starting after Jan 1 01 that are registered are eligible for compensation equal to average price between 1/1/06 thru 1/1/09© 2008 Chicago Climate Exchange®, Inc.
    • CCX Offsets Eligibility • Chairman Waxman: – “The gentlewoman is correct in that the provisions of sections 795 and 740 are intended to fairly compensate farmers and their partners who have enrolled in voluntary programs with strong standards for environmental integrity would meet the requirements of section 740. We expect that offset credits registered with the Chicago Climate Exchange, along with credits from other recognized voluntary programs, will provide an important source of offset credits in the early years of the program.”© 2008 Chicago Climate Exchange®, Inc.