In today's world, global warming affects every corner of the earth. According to the Nobel Peace Prize winning Intergovernmental Panel on Climate Change (IPCC), global warming is a definitive circumstance. Governments, corporations and investors around the world are mobilizing to address the serious risks to mankind and the environment.
Emissions trading provides economic incentives for companies to achieve reductions in the emissions of pollutants. The practice is based on a "cap and trade" system whereby governments cap the permissible level of greenhouse-gas emissions for companies in certain industries. The companies are issued permits that correspond with this allowable level. Companies that exceed their allowable emissions must purchase additional permits from companies who were allotted more permits than were needed.
Last year, the total value of carbon permits changing hands nearly doubled to 40 billion euros, or about $60 billion. Most such trades take place through off-market, private transactions. But increasingly these trades are exchange-based.
The Dow Jones CCX Emissions IndexesSM are an innovative series of indexes created in conjunction with the Chicago Climate Exchange. The indexes measure the price of futures contracts for European Union Allowances (EUAs) and U.N.-issued Certified Emissions Reductions (CERs).
Currently, the following indexes are available:
About Emissions Trading Systems
The European Union is home to the largest multinational emissions trading scheme in the world. Created in
response to emissions reductions mandated by the Kyoto Protocol, the EU Emissions Trading Scheme (EU ETS) covers
more than 10,000 installations in the energy and industrial sectors that are collectively responsible for almost
half of the EU's emissions of carbon dioxide and 40% of its total greenhouse-gas emissions. Under the EU ETS,
the governments of the EU agree on national emission limits. The EU commission determines and approves emission
allowance unit allocations for large emitters of carbon dioxide in EU countries.
In the U.S., the emissions trading system is a legally binding yet voluntary program. The U.S. government is currently considering legislation requiring companies to participate in a cap and trade system in the near future.
What is a European Union Allowance (EUA)?
European Union Allowances (EUAs) are issued under the EU ETS, where one EUA represents the right to emit one metric
ton of carbon dioxide (CO2).
What is a Certified Emission Reduction (CER)?
Certified Emission Reductions (CERs) are issued under the Clean Development Mechanism of the Kyoto Protocol. One CER
represents the right to emit one ton of carbon dioxide (CO2). The Clean Development Mechanism (CDM) is an arrangement
under the Kyoto Protocol allowing industrialized countries, with a greenhouse gas reduction commitment, to invest in
emission reducing projects in developing countries as an alternative to what is generally considered more costly emission
reductions in their own countries.
About the Chicago Climate Exchange
The Chicago Climate Exchange (CCX), launched in 2003, administers the world's first and North America's only active voluntary,
legally binding integrated trading system to reduce emissions of all six major greenhouse gases (GHGs), with offset projects
worldwide.
The Chicago Climate Futures Exchange (CCFE) is a wholly owned subsidiary of CCX and is a CFTC designated contract market which offers standardized and cleared futures and options contracts on emission allowances and other environmental products, including futures and options on the U.S. EPA's cap and trade programs for SO2 and NO2.
The European Climate Exchange (ECX) was launched by CCX in 2005, and is now the leading exchange operating in the European Union Emissions Trading Scheme. Since 2006, CCX and ECX have been owned by Climate Exchange PLC, a publicly traded company listed on the AIM division of the London Stock Exchange. ECX manages the product development and marketing for ECX Carbon Financial Instruments (ECX CFIs) futures and options contracts, listed and admitted to trading on the ICE Futures electronic platform. ECX/ICE Futures is the most liquid, pan-European platform for carbon emissions trading, attracting over 80% of the exchange-traded volume in the market. ECX emissions futures contracts are standardized and all trades are cleared by LCH.Clearnet.
In 2005, CCX's parent company launched the European Climate Exchange (ECX) in anticipation of the European Union's implementation of its Kyoto Protocol mandated ETS. Today, the European Climate Exchange conducts about 90% of the EU's carbon-trading volume.
To learn more about the CCX, CCFE and ECX go to: www.chicagoclimateexchange.com