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Co-Founder of Chicago Climate Exchange Describes Cap-and-Trade Model as Functional and Effective


By: Jake Bonifield, USA

A core component of the pending Waxman-Markey legislation, “cap-and-trade” is the market-based carbon emission reduction system that is often described as the abandoned middle ground between staunch capitalists and environmental groups.  The system, which allows companies to buy pollution credits and trade unused carbon-emission permits with other companies in the market, has been put into place in the Midwest and Europe.

The architect of the Midwest version, known as the Chicago Climate Exchange, and a key player in the formation of the system employed by European nations, Gerard Pannekoek spoke last Thursday to students interested in the logistics and viability of a national cap-and-trade system, similar to that which has been developed by the CCE.  Mr. Pannekoek addressed many concerns and fielded questions on the specific mechanisms of a market-based carbon reduction system.  The CCE, which has some 4-500 members, was initially begun by just 12 companies who voluntarily joined the program and accepted the carbon reduction targets.  Mandates for 1 percent reductions for each of the first five years of membership were imposed on members and successfully resulted in significant reductions in the companies’ aggregate emissions.

The “catch”–and the question lawmakers must address–is how to replace the “benevolence incentive” (on which the CCE has been dependent in terms of luring members) with a more rigid, mandated requirement that all polluters contribute and commit to this system.  Mr. Pannekoek was largely hopeful that something similar would work on a larger scale than what currently exists, but acknowledged that the limitations are not simply economic in nature.  Political interests and lobbies in Washington pose serious threats to cap-and-trade initiatives, as they do to nearly all comprehensive efforts at reducing emissions.  A mandate to join the effort would undoubtedly be fought tooth and nail by conglomerated polluters, which see it as too onerous, as well as many environmental groups, which see it as an unjust and inadequate response to the climate change crisis.

One Comment leave one →
  1. Laura permalink
    10/19/09 7:16 pm

    From 2002 through 2005, Mr. Pannekoek was President and Chief Operating Officer of the Chicago Climate Exchange (CCX), a start-up company which became the world’s first multi-national and multi-sector market for reducing and trading greenhouse gas emissions. In that capacity he designed, implemented and managed the transition of a unique idea into an actual business and established the firm’s infrastructure and trading operations in less than 12 months

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