Richard Sandor is chairman and chief executive officer of Chicago Climate Exchange (CCX); a legendary figure in the market who is leading the world’s carbon trading effort. He tells Colin Packham why he believes the market will continue to grow and reveals his pleasure in the impact of his work so far
It is not often that derivatives have been hailed as having
a positive influence on the one of the worlds impending
dangers but with the continued success and growing popularity
of emission derivatives, it may just be about to change.
The emission derivatives market continues to grow but the
target set by the international community of a 5% reduction on
1990 levels has been described by some as optimistic. However,
Sandor says that the market is on course to meet those targets.
We have just completed our audit for the first four years
of the programme and instead of 4% members have cut emissions
by 10%. This represents more than 185 million tonnes, 200
million tonnes if you include offsets in forest management. Of
that, 85% is industrial reductions, proclaims Sandor.
Sandor credits the recent uptake of interest into these
markets as down to the impact of the US election nomination
process, media attention of which culminated on February 5
known as Super Tuesday when 24 US states went to the polls to
have their say on a Democratic and Republican Party nominee for
US president. Sandor describes how the results that emerged
from these elections saw candidates who all support
cap-and-trade for emissions. While he concludes that the
nominees for US president includes, John McCain, Barack Obama
and Joe Libberman, (seemingly ruling out Democrat nominee
Hillary Clinton), he summarizes that the environmental
derivatives markets were changed because of these
frontrunners environmental policies.
Whatever the reasoning behind the recent success, the
results of CCX trading volumes have been nothing short of
staggering. We have been on a constant rise. We moved
from a million and half tonnes on 2005 to 10.3 million tonnes
in 2006 to 23 million last year and year-to-date we have done
something in the order of 18 million tonnes, a feat that
Sandor describes as incredible. The success of the
carbon market has also been replicated in the exchanges
sulphur contracts. Sandor outlines this, revelling in the fact
that in the exchanges first year of business in 2003 a
mere 400 sulphur contracts were traded compared to 30,000 in
2006, followed by volume of 290,000 last year and in just the
first two months of this year 100,000 contracts have been
Our markets are growing anywhere from 100% to
800%, says Sandor. He describes how this volume is being
driven by a balance of participants, in particular, financial
players and industrials.
Sandor concludes that this growth is stemming from the
realisation in the market that whoever the victor of the
forthcoming US elections proves to be, the next administration
is moving towards a declaration of emissions reduction that
previous leaders have failed to commit to. A Republican
or Democrat President will deal with climate change, through a
system of cap-and-trade, he says.
However, the success of the emissions market is not confined
to the US, with one of the most successful exchanges to emerge
recently in terms of volume being European Climate Exchange.
This entity although based in Europe is of the same parent
group as CCX. In July 2007, it also signed a joint venture with
Montreal Exchange, to launch the Montreal Climate Exchange,
which will trade the first Canadian emission derivatives.
Sandor says that the exchange is very bullish about
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