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Assessing the feasibility of the State becoming a participant in the Chicago Climate Exchange CCX, s

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Additional CCX facts. Current CO2 equivalent price: $4.05 ... California Global Warming Solutions Act of 2006 - September 27, 2006, California ... – PowerPoint PPT presentation

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Title: Assessing the feasibility of the State becoming a participant in the Chicago Climate Exchange CCX, s


1
Assessing the feasibility of the State becoming a
participant in the Chicago Climate Exchange
(CCX), specifically examining the advantages and
risks in terms of advancing Hawaiis development
and use of renewable energy.
  • PRELIMINARY REPORT
  • Lorenz Magaard and Craig Coleman
  • October 25, 2006

2
Recent History of Hawaiis Energy and Climate
Goals
  • The State performed an emissions inventory for
    the year 1990. Estimated emissions were 16
    million tons of carbon dioxide, 75 thousand tons
    of methane and 700 tons of nitrous oxide.
  • This is 0.3 of the United States total emissions
    for the year 1990
  • Energy use dominated Hawaiis emissions
    production at 89 with transportation energy and
    electricity generation making up the majority.
  • Though no specific emissions reduction targets
    have been set, the State is focusing on the
    development and use of renewable energy as the
    central component to managing the risks of both
    fuel price fluctuations and climate change.

3
Renewable Portfolio Standards
  • Renewable Portfolio Standards (RPS) are state
    policies mandating a state to generate a
    percentage of its electricity from renewable
    sources.
  • In 2004, Hawaii adopted the RPS of 20 by 2020.
  • Some states allow trading of renewable energy
    certificates (RECs or Green Tags) to meet their
    RPS target. For example, renewable energy
    produced in Massachusetts can be certified and
    registered and then sold to Connecticut to allow
    CT to apply it to its RPS target. The renewable
    energy is not delivered to CT, but the ownership
    of the attributes of its production are owned by
    CT.
  • At present, Hawaii does not allow the buying of
    Green Tags to meet its RPS target.

4
About The Chicago Climate Exchange
  • The CCX is a for-profit, self-regulatory exchange
    enabling a cap and trade system for reducing
    greenhouse gases
  • The cap and trade system works by requiring all
    members to meet an emissions reduction target
    the cap.
  • All members establish an emissions inventory for
    a given time period this value is in metric
    tons of CO2 equivalent. Emissions of all non-CO2
    GHGs are converted to metric tons CO2 equivalent
    using the one- hundred- year Global Warming
    Potential values established by the
    Intergovernmental Panel on Climate Change.
  • The cap is a percentage reduction from that
    baseline.
  • Members can either reduce their own emissions to
    meet that target or buy reduction credits from a
    member that has exceeded their target. This is
    the flexibility mechanism that allows the most
    cost effective means of reducing emissions.
  • The aggregate result is that the reduction cap is
    met emissions are reduced.
  • The exchange makes its money through transaction
    costs, one-time membership fees which range from
    10,000-50,000 and annual dues.

5
About The Chicago Climate Exchange
  • The goals of CCX are
  • To facilitate the transaction of greenhouse gas
    emissions allowance trading with price
    transparency, design excellence and environmental
    integrity
  • To build the skills and institutions needed to
    cost-effectively manage greenhouse gas emissions
  • To facilitate capacity-building in both public
    and private sector to facilitate greenhouse
    mitigation
  • To strengthen the intellectual framework required
    for cost effective and valid greenhouse gas
    reduction
  • To help inform the public debate on managing the
    risk of global climate change

6
Membership Categories
  • CCX Members - include corporations,
    municipalities and other entities that emit
    greenhouse gases from facilities in the United
    States, Canada or Mexico.
  • CCX Associate Members - are entities that have
    small or no direct emissions, and commit to
    comply with CCX rules by offsetting the
    greenhouse gases associated with a selection of
    business-related activities.
  • CCX Participant Members - include Offset
    Providers and Liquidity Providers. Offset
    Providers are entities such as Project Owners,
    Project Implementers, registered Aggregators and
    entities selling Exchange Offsets produced by
    qualifying CCX-registered Offset Projects.
    Liquidity Providers are entities or individuals
    who trade on the Exchange for purposes other that
    complying with the CCX emissions reduction
    schedule, such as Market Makers and proprietary
    trading groups.
  • CCX Exchange Participants - an entity or natural
    person that does not adopt Greenhouse Gas
    emission reduction commitments but does establish
    a CCX Registry Account for the purpose of
    acquiring and retiring CCX Carbon Financial
    Instruments (CFIs).

7
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8
CCX Offset Projects
  • Beyond facilitating the transaction of GHG
    emissions, CCX rules allow qualified offsets to
    be used to enable meeting the reduction targets.
    CCX has developed standardized rules for issuing
    carbon credits for the following types of offset
    projects
  • Methane destruction
  • Agricultural practices
  • Forestry practices
  • Other GHG emission mitigation in Brazil
  • Renewable energy
  • Clean Development Mechanism Eligible Projects
  • If a member uses renewable energy as an offset
    this energy cannot be applied to the States RPS
    target.

9
Additional CCX facts
  • Current CO2 equivalent price 4.05
  • Price range since inception 0.71 (Feb. 04) -
    5.30 (June 06)
  • Oct 23, 2006 trading volume 203,000
  • 2005 trading volume 1,446,800
  • 2006 (through Sept.) trading volume 8,248,700

10
Are The States Objectives Aligned With The
Chicago Climate Exchange?
  • The State of Hawaii emphasizes the development
    and use of renewable energy both as a energy
    issue and as a climate change issue.
  • Though the Chicago Climate Exchange incorporates
    renewable energy use in its rules, they do not
    allow application of that energy towards State
    goals.
  • At present there appears to be a Renewable Energy
    Mismatch
  • There are potential alternatives

11
Alternatives to CCX
  • The Climate Trust - an Oregon based non-profit
    organization that invests funding from power
    plants, businesses, and individuals into high
    quality project-based emissions reductions. The
    Climate Trust expects to fund projects at a
    carbon price of approximately 5/metric ton
    carbon dioxide. A recent project of theirs
    purchased 24,000 metric tons of carbon dioxide by
    partially funding a wind farm.
  • The Regional Greenhouse Gas Initiative (RGGI) - a
    cooperative effort by 9 Northeast and
    Mid-Atlantic states to design a regional
    cap-and-trade program initially covering carbon
    dioxide emissions from power plants in the
    region. Provisions exist in their rules to
    purchase offsets from outside states under
    certain conditions.
  • California Global Warming Solutions Act of 2006 -
    September 27, 2006, California adopted the
    Nations most comprehensive greenhouse gas
    control program. The Act requires a 25 (perhaps
    up to 30) reduction in greenhouse gas emissions
    by the year 2020.  This may amount to 145 - 200
    million metric tons per year CO2 equivalent.
    Provisions of the Act are expected to result in
    the creation of a California-based multi-sector
    cap and trade program. Doing so in a fashion that
    is determined by California to be complementary
    and equivalent may pave the way for inter-state,
    inter-region, and international trades. The
    legislation's focus on guarding against "leakage"
    (a concept which refers to emission increases
    outside the state caused by emission decreases
    inside the state), and insistence on coordination
    with other states, regions, and nations suggests
    to some that efforts will be made to build
    linkages with other cap and trade greenhouse gas
    reduction programs.
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