A coalition of 19 public interest and environmental advocacy groups, including the Natural Resources Defense Council and Environmental Defense has advised states and cities against joining the Chicago Climate Exchange, the nation’s first voluntary carbon-trading marketplace. What gives?

In a letter released on Aug. 1, the groups criticized the program for its low emissions reduction goals and loopholes for violators, and they warned that cities and states that participate in voluntary exchange programs may be less likely to create or participate in mandatory emissions trading programs in the future.

Founded in late 2003 by entrepreneur Richard Sandor, the Chicago Climate Exchange is a cap-and-trade program: participants measure their emissions output against a set limit, and those who emit less than that limit can sell their “extras” for cash, while those who emit more must buy more emission credits. While most of the exchange’s participants are private corporations, six cities (Aspen, Berkeley, Boulder, Chicago, Oakland, and Portland) and the state of New Mexico have joined as well.

“It’s perfectly fine to have programs for companies to learn from,” said Dale Bryk, senior attorney for the Natural Resources Defense Council. “We’re just saying we don’t want states to participate because we want them to be developing their own legislation.”

A year and several months after enrolling in Chicago Climate Exchange, New Mexico has fallen roughly one million metric tons short of its current emissions reduction target. Now, the state must buy approximately 10,000 credits by the end of this year. This purchase will cost the New Mexico Environment Department roughly $40,000 — about two thirds of their yearly budget, according to Sandra Ely, environment and energy policy coordinator for the New Mexico Environment Department.

Still, Ely said the department was optimistic about the overall benefits of the exchange. And even as New Mexico struggles to meet its Chicago Climate Exchange emissions reduction level, the state is simultaneously working on its own mandatory programs.

“We believe that we can walk and chew gum at the same time,” said Ron Curry, secretary of the New Mexico Environment Department. “We feel that it’s better to do something than to wait for the perfect piece of legislation to come out of Washington.”

But New Mexico’s example doesn’t have environmental groups convinced that Chicago Climate Exchange is the solution to the nation’s carbon woes — and the fact that the program is voluntary, they say, isn’t the only problem.

Among the other complaints listed in the letter (which the Natural Resources Defense Council is distributing only when its opinion on the topic is solicited) are concerns about the exchange’s low target levels — just 1 percent reduction per year from baseline levels — and loopholes for businesses. (for example, if a company joins the exchange, then opens a new plant, the emissions from the new unit won’t figure in to their total output.)

As alternatives to the Chicago Climate Exchange, the groups point to publicly created emissions monitoring programs such as the Eastern Climate Registry and the California Climate Action Registry, open to all states, and for Northeastern states, the recently created Regional Greenhouse Gas Initiative, which will eventually make emissions reduction mandatory in participating states.

But despite their misgivings about the exchange, the authors of the letter say they’re not on a crusade to shut it down.

“We’ve been in communication with the Chicago Climate Exchange and we have some shared goals; we just disagree about cities and states,” says Bryk. “It’s not a big battle – we’re doing our thing, they’re doing their thing.”

Story by Alice Shyy. This article originally appeared in Plenty in August 2006.

Copyright Environ Press 2006

Offset upset
The Chicago Climate Exchange is one way for companies to participate in voluntary carbon trading. Is it falling short of the goal?