Progress Illinois

In my July feature on the Chicago Climate Exchange -- a locally-based market in which participating companies trade voluntary greenhouse gas emission credits -- I noted the recurring criticism that its regulations are often too industry-friendly:

These loose requirements affected the credits companies sold as well. The environmental publisher Environmental Data Services warned offset buyers in April to avoid purchasing the credits produced by CCX emitters because they do not adhere to the most vigorous offset criteria.

Environmental blogger Joseph Romm has some damning new evidence to prove the point.

On Monday, the Washington Post printed an A1 story on the growth of carbon offsets, the financial instruments vendors purchase from regular folks looking to neutralize their carbon emissions. Ostensibly, those emissions are retired through investments in conservation and air pollution protection projects. In Chicago, it's the only booming market in town:

At the Chicago Climate Exchange, where offsets are sold like pork bellies or stocks, Sept. 23 was the second-busiest trading day in the four-year history of the market. This year, the price of an offset on the exchange surged and then plummeted back to late 2007 levels. But analysts say the spike seemed attributable more to factors internal to the exchange than to any slackening in overall demand.

But are the offsets worth anything? Romm says the Post, which has explored CCX's offset program before, buried the lede this time around:

In the western Virginia town of Christiansburg, the operators of a landfill sell carbon offsets tied to a project that captures methane, a powerful greenhouse pollutant, and burn it in a tall orange flare. They've made $43,000 on the Chicago Climate Exchange in just a couple of months.

But that project was put in long before the offsets were sold and for a different reason: to keep dangerous gases from accumulating in a capped landfill. So if the offset market dried up completely?

Nothing would change.

As a private exchange, CCX sets its own regulations. In that sense, it's investors beware. But if a national cap-and-trade program is ever implemented, it'll be important that regulators make sure not to funnel money towards pre-existing projects. At least they'll have CCX as a key example.