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Pioneering U.S. carbon exchange to close

The Chicago Climate Exchange (CCX) will discontinue its greenhouse gas cap-and-trade program next month, according to parent company Intercontinental Exchange Inc.

The CCX operated as a voluntary exchange for nearly a decade to position itself ahead of a mandatory carbon trading scheme.

The closure signals an abrupt change in fortune. A U.S. cap-and-trade plan appeared inevitable as recently as June 2009, when the U.S. House of Representatives passed the Waxman-Markey bill.

Blogger Steve Milloy colourfully noted the exchange's passage on PajamasMedia by linking the CCX to Al Gore and its business plan to Al Capone:

At its founding in November 2000, it was estimated that the size of CCX’s carbon trading market could reach $500 billion. That estimate ballooned over the years to $10 trillion.

Al Capone tried to use Prohibition to muscle in on a piece of all the action in Chicago. The CCX’s backers wanted to use a new prohibition on carbon emissions to muscle in on a piece of, quite literally, all the action in the world.

The CCX was the brainchild of Northwestern University business professor Richard Sandor, who used $1.1 million in grants from the Chicago-based left-wing Joyce Foundation to launch the CCX. For his efforts, Time named Sandor as one of its Heroes of the Planet in 2002 and one of its Heroes of the Environment in 2007.

The CCX seemed to have a lock on success. Not only was a young Barack Obama a board member of the Joyce Foundation that funded the fledgling CCX, but over the years it attracted such big name climate investors as Goldman Sachs and Al Gore’s Generation Investment Management.

But a funny thing happened on the way to the CCX’s highly anticipated looting of taxpayers and consumers — cap-and-trade imploded following its high water mark of the House passage of the Waxman-Markey bill. With ongoing economic recession, Climategate, and the tea party movement, what once seemed like a certainty became anything but.

CCX’s panicked original investors bailed out this spring, unloading the dog and its across-the-pond cousin, the European Climate Exchange (ECX), for $600 million to the New York Stock Exchange-traded Intercontinental Exchange (ICE) — an electronic futures and derivatives platform based in Atlanta and London. (Luckier than the CCX, the ECX continues to exist thanks to the mandatory carbon caps of the Kyoto Protocol.)

The ECX may soon follow the CCX into oblivion, however — the Kyoto Protocol expires in 2012. No new international treaty is anywhere in sight.

A fact sheet posted on the Chicago Climate Exchange web site claimed the CCX facilitated emissions reductions totaling nearly 700 million metric tons of carbon dioxide since 2003. That's roughly equal to taking 140 million cars off the road for a year.

The CCX is the second major U.S. voluntary carbon trading system to be shuttered this fall. The U.S. Environmental Protection Agency announced in September that it will shut down its voluntary Climate Leaders program next year.

The province of British Columbia in established a Crown corporation in 2008 called the Pacific Carbon Trust, with a mission to deliver BC-based greenhouse gas offsets. Like the CCX and EPA trading systems, the Pacific Carbon Trust was established in anticipation of a mandatory cap-and-trade plan.

Monte Paulsen reports on carbon shift for The Tyee.

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