Carbon Trading Could Help Renewable Energy

A voluntary system of trading greenhouse gas emission credits in the United States would reduce GHG in a cost-effective manner and offer new opportunities for renewable energy firms, according to 25 major companies that will participate in a market design phase.

CHICAGO, Illinois, US, 2001-06-04 [] Ford, DuPont, Suncor Energy, STMicroelectronics, International Paper, Alliant Energy, Calpine, Cinergy, NiSource, PG&E, Wisconsin Energy and ZAPCO are some of the companies that will participate in the ‘Chicago Climate Exchange’ to be set up by Environmental Financial Products of Chicago. The feasibility study was funded by the Joyce Foundation through a special $374,000 Millennium Initiative grant to the Kellogg Graduate School of Management at Northwestern University. “Our findings suggest that a voluntary pilot market, starting in the U.S. midwest, is feasible and can be expanded over time,” says study author Richard Sandor, a scholar at the Kellogg School and CEO of Environmental Financial Products. “The widespread corporate interest in preparing rules and regulations for this voluntary market affirms the private sector’s demand for flexible, market-based mechanisms to address climate change.” Voluntary trading would help cost-effectively reduce greenhouse emissions and offers new opportunities for environment-based income for farmers, foresters and renewable energy firms, he adds. The study suggests a goal of reducing GHG emission by 5 percent below 1999 levels over five years among participants. An advisory board has been formed to gather strategic input, with members including former U.S. Senators and Governors, the Deans of two business schools, Joseph Kennedy of Citizens Energy Group, the heads of the Brazilian Foundation for Sustainable Development and the World Resources Institute, and Maurice Strong, former Under-Secretary General of the United Nations. “The Chicago Climate Exchange would represent a major step forward while an appropriate regulatory framework for greenhouse gases evolves,” says Paula DiPerna of the Joyce Foundation. “A regional success on a global challenge like climate change could be transformational. Because of its variety of economic activities, including its strong agricultural sector, the Midwest is the perfect place to begin demonstrating the regional-global interface.” The Exchange will demonstrate that GHG trading can achieve real reductions in emissions across different business sectors, and develop standard frameworks for monitoring emissions, determining offsets and conducting trades needed for a successful market. The market would start in Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin, include emission offset projects in Brazil, and expand over time. Participating companies would be issued tradable emission allowances and emitting firms would reduce their emissions by 5 percent by 2005. Potential offset projects include wind and solar power, and capture of agricultural and landfill methane. Offsets can also be generated by carbon sequestration projects such as forest expansion and conservation soil management, which effectively remove carbon dioxide from the atmosphere. With assets of $900 million, the Joyce Foundation provides grants to enhance the quality of life in the midwest. “The generation that most benefited from the industrialization that is likely the cause of climate change has an intergenerational responsibility to address the problem rather than just passing it on,” explains DiPerna. “Global warming is a real and present danger,” adds Senator Joe Lieberman (D-Connecticut). “Our Earth is slowly overheating, with potentially dire consequences if we do not act. Carbon trading is a creative and efficient way of moving toward meaningful reductions in greenhouse gas emissions.”
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