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The New York Times ran a very comprehensive article about the Chicago Climate Exchange (CCX), the private commodities market, where carbon offsets are traded. Richard Sandor, CEO, describes it as the engine of an environmental revolution:

The trading of greenhouse gas allowances, also known as carbon trading, may be capitalism’s best answer to the problem of global warming. To avoid a dangerous degree of climate change, many scientists say, greenhouse gas emissions worldwide will have to be cut by 50 to 70 percent over the next 50 years. The only hope of achieving that, short of an unforeseen technological breakthrough or the passage of draconian environmental laws, is to inspire radical change in the economic system. In a carbon-trading scheme, you must pay to pollute: price tags are placed on greenhouse gas emissions and then the market (not the government) essentially figures out the cheapest, most efficient way to reduce them. “The beauty of carbon trading,” Dan Dudek, chief economist at Environmental Defense, a nonprofit advocacy group, explained to me, “is that it takes a primal human impulse — greed — and redirects it toward saving the planet rather than destroying it.”

It's a fascinating artcle that highlights one of the pieces of the puzzle of reducing carbon emissions in this century.

Over at TerraPass, they comment on the article thusly:

A criticism of the CCX is that the reductions from corporate members aren’t really a result of membership on the exchange. The reductions are simply the actions of good corporate citizens who would have cut emissions anyway, and membership in the exchange is basically a way for those corporations to get credit for their good deeds.

But it is a serious matter for the CCX more generally, and will remain so as long as membership in the exchange is voluntary. Eventually the day will come that all U.S. companies will operate under a mandatory cap-and-trade system, this adverse (or positive) selection bias will disappear, and make for a nice unfair competitive advantage for the companies that first learned how to integrate carbon economics into their operations.

You'll be reading and hearing much more about this as we progress into this new century.

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