cce climare exchange

1. Chicago Climate Exchange
An Example of a Voluntary
Emissions Trading Market

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CCX
• Voluntary, but legally binding greenhouse
gas reduction and trading system for
emission sources;
• Trades gas emission allowances for six
greenhouse gases;
• Trading started 2003: companies joining the
exchange committed to reducing their
aggregate emissions by 6% by 2010;

3. • Operated by the public company Climate
Exchange PLC, also owns European Climate
Exchange;
•Founded by Richard Sandor, ex-Economics
Professor UC-Berkeley;
•Exhange trades in emissions of six gases: Carbon
Dioxide, Methane, Nitrous Oxide, Sulfur
Hexaflouride, Per fluorocarbons, and
Hydrofluorocarbons

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• More than 350 members:
• Corporations: Ford, Dupont, and Motorola
• Utilities: American Electric Power, Green
Mountain
• States and municipalities: New Mexico,
Oakland, Chicago
• Educational institutions: University of
California, San Diego, Tufts, University of
Minnesota, Michigan State;
• Farmers: National Farmers Union, Iowa Farm
Bureau
• Government financed entities: Amtrak

5. Emissions Reduction Schedule
• Cap and trade system: members make a legally
binding emission reduction commitment;
• Members are allocated annual emission allowances
in accordance with their emissions Baseline and the
CCX Emission Reduction Schedule;
• Members who reduce beyond their targets have
surplus allowances to sell or bank;
• Those who do not meet the targets comply by
purchasing CCX Carbon Financial
Instrument contracts;
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6. • Each CFI contract represents 100 metric tons of CO2 equivalent
(CO2e).
• Geographic Coverage: Emission sources and offset
projects worldwide.
• Emission Targets and Timetable: Phase I (2003-
2006) emission reduction targets were 1% per year, below an average
of baseline period 1998-2001.
• Phase II parameters extend the reduction period through 2010 and a
total of 6% reduction commitment by 2010 for new Members joining in
Phase II.
• Emission Baseline: Average of annual emissions during years 1998
through 2001 or the single year 2000 for new Phase II Members. 6

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• CCX has an aggregate baseline of 226 million metric tons of
Carbon Dioxide equivalent
• Equals the UK’s annual allocation under the EU ETS;
• Makes the CCX market comparable to one of the larger
countries in the EU CO2 market, or 4% of U.S. annual GHG
emissions
• Quote from website:
“ CCX is the only available mechanism through which US based
entities may engage in the integrated carbon market with a
linked reduction and trading system”
http://www.chicagoclimatex.com/
http://www.ccfe.com/

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Offsets
• Agricultural soil sequestration
• Reforestation
• Landfill and methane combustion
• Switching to biomass based fuels
• Uses “independent” verification systems

9. Trading History and
Systems
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December 2003 CCX launches trading of the Carbon Financial
Instrument (CFI), a CO2 spot contract
2004 Further £15 million raised to back the launch
of the Chicago Climate Futures Exchange
(“CCFE”) in the U.S. and the European
Climate Exchange (“ECX”) in Europe
October 2004 The Commodity Futures Trading Commission
approved CCFE’s application to operate as a
Designated Contract Market in the U.S.
December 2004 CCFE launches the Sulfur Financial
Instrument (SFI), a futures contract on the
U.S. EPA SO2 emissions allowance
April 2005 The European Emissions Trading System
(“EU ETS”) futures contracts are launched on
ECX under a revenue sharing agreement with
the ICE Futures in London
December 2005 Montréal Exchange and Chicago Climate
Exchange announce joint creation of a
Canadian environmental products exchange,
Montréal Climate Exchange

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October 2006 Option contract launched on the European Carbon future
February 2007 CCFE launches the Nitrogen Financial Instrument (“NFI”),
a futures contract on the U.S. EPA NOx emission allowance
April 2007 CCFE launches an options contract on the SFI futures
contract
May 2007 CCX announces formation of the California Climate
Exchange to develop and trade financial instruments
relevant to the California Global Warming Solutions Act,
AB 32
June 2007 CCFE launches futures contract on Wilderhill Clean
Energy Index (ECO index)
United States House of Representatives votes by 216 to
176 to offset its CO2 emissions through CCX
September 2007 Climate Exchange plc and Deutsche Bank launch trading in
catastrophe event-linked futures on CCFE (IFEX)
December 2007 CCX announced the signing of a memorandum of
understanding with the Chinese National Petroleum
Corporation Assets Management (“CNPCAM”) to create a
joint venture company to explore the feasibility and
implementation of an emissions trading platform in China
February 2008 CCFE launches CFI options contract

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The CCX Registry
The CCX Registry is the electronic database that serves as the
official record holder and transfer mechanism for CFI
contracts. All CCX Members have CCX Registry Accounts
The CCX Trading Platform
The CCX Trading Platform is an internet-accessible marketplace for
executing trades among CCX Registry Account holders, and to
complete and post trades that are established through private
bilateral negotiations
The Clearing and Settlement Platform
The Clearing and Settlement Platform processes daily information
from the CCX Trading Platform on all trade activity. This system is
directly linked to the Registry to facilitate same day delivery of CFI
contracts from trading activity, provided as a service to Registry
Account holders.

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•Transaction participation eligibility is limited to CCX
members who qualify as eligible commercial entities;
• Internet-based, electronic trading system for
submission of bids and offers for anonymous, cleared
agreements executed on price and time priority;
•Electronic bilateral agreements between members;
• Pre-negotiated block trades and cash transactions
may be negotiated at any time, but must be reported to
CCX in accordance with its rules

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•Role of FINRA (Financial Industry Regulatory Authority):
•To independently verify all CCX Members' Baseline and annual
emissions reports for Phase I and Phase II program years for accuracy
and completeness, and to ensure compliance with the Emission
Reduction Schedule;
•To monitor CCX trading activity using its state-of-the-art market
surveillance technologies
•To review all verifier's reports for offset projects;
•Compliance with the CCX Emission Reduction Schedule is enforced
by the CCX Environmental Compliance Committee

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17. Futures and Options
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• Chicago Climate Futures Exchange (CCFE) is a CFTC
designated contract market;
• Offers standardized and cleared futures contracts on
emission allowances and other environmental products ;
• Clearing services provided by The Clearing Corporation
( only active independent futures clearinghouse);
• Market surveillance services are provided by the
National Futures Association --- industry wide, self-
regulatory organization;

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