Wednesday, November 10, 2010

The Chicago Climate Exchange has Died, Richard Sandor Pockets $98 Million and the Intercontinental Exchange Gets Bagged Big Time (ICE; GS)

We have some prior posts on Mr. Sandor, the CCX, Climate Exchange PLC and carbon trading in general, see links below.
The purchase of CLE by ICE stinks to high heaven. I'm sure a bright young para-legal could figure it out in a couple hours. Here are a couple parts to the story, first up Fox News:
Collapse of Chicago Climate Exchange Means a Strategy Shift on Global Warming Curbs
The closing this week of the Chicago Climate Exchange, which was envisioned to be the key player in the trillion-dollar "cap and trade" market, was the final nail in the coffin of the Obama administration's effort to pass the controversial program meant to combat global warming.

"It is dead for the foreseeable future," said Myron Ebell, director of the Center for Energy and the Environment with the Competitive Energy Institute, which had fought the measure. 
That assessment was echoed by environmentalists as well. 

"Economy-wide cap and trade died of what amounts to natural causes in Washington," said Fred Krupp, president of the Environmental Defense Fund, which had supported the plan.

The CCX was set up in 2000 in anticipation of the United States joining Europe and other countries around the world to create a market that would reduce the emission of greenhouse gases. Under the system, factories, utilities and other businesses would be given an emissions target. Those that emitted less fewer regulated gases than their target could sell the "excess" to someone who was above target. Each year, the target figures would be reset lower.

The Exchange was the brainchild of Richard Sandor, an economist and professor at Northwestern University, and it was modeled after a successful program that was launched in 1990 and helped control acid rain in the Midwest. It was initially funded by a $1.1 million grant from the Joyce Foundation of Chicago, and President Obama was a board member at the time.

After the Democrats won the White House, the House and the Senate in 2008, businesses and investors flocked to the exchange, believing Congress would quickly approve the program. And it almost happened. 
The House of Representatives passed a bill proposed by Democratic Reps. Henry Waxman of California and Ed Markey of Massachusetts, which would have made cap and trade law. But the Senate couldn't muster the votes, and everything went downhill from there.

"When those that voted for the measure in 2009 went home on July 4th after the vote, they met widespread outrage among their constituents," said Nick Loris, an analyst with Heritage Foundation. Conservatives renamed the idea "cap and tax," and they began an assault on the program. 

In the last week, following the Nov. 2 Republican takeover of the House of Representatives, the slide became an avalanche. Investors in CCX, including Sandor and former Vice President Al Gore, sold the exchange to a company involved in commodities trading. 

Sale records show that Sandor cleared more than $90 million for his 16 percent stake in the company....MORE
Crains ChicagoBusiness had the story last week: 
Chicago Climate Exchange pares more job
As for Mr. Sandor? 
He's trading volatility:

Industry Icon Richard Sandor Joins Board of The Volatility Exchange (VolX®)
CHICAGO, Nov. 3, 2010 /PRNewswire/ -- The Volatility Exchange (VolX(®)), originator of VolContracts(TM) -- the world's first listed instruments on realized volatility -- announced at the annual Futures and Options Expo today that Richard L. Sandor, Ph.D., has joined the company's Board of Directors.

Sandor, Chairman and Chief Executive Officer of Environmental Financial Products and founder of the Chicago Climate Exchange, is widely credited as the principal architect of the interest-rate futures market in the 1970s. Sandor was honored by the City of Chicago in 1992 for his contribution to the creation of financial futures and his recognition as the "father of financial futures."
The news followed Monday's announcement by VolX and CME Group that CME will begin offering FX VolContracts on its major currency pairs in the first quarter of 2011 under a license agreement with VolX.
Sandor said: "The Volatility Exchange is part of a tradition of invention and creativity in the futures industry. It brings innovative and transparent products that can appeal to a vast section of market participants and their risk-management needs. I look forward to serving on their board and working with its management."

Robert Krause, Chairman and Chief Executive Officer of The Volatility Exchange, called Sandor "one of the foremost innovators in the derivatives market." "He brings to the board a wealth of knowledge, not only as an educator and futures expert, but also as an entrepreneur who has had great success starting financial exchanges and launching creative products," Krause said.

Sandor was honored in 2007 as one of Time Magazine's Heroes of the Environment for his work as the "Father of Carbon Trading." In 1997, Sandor founded the Chicago Climate Exchange (CCX), the world's first legally binding greenhouse gas cap-and-trade system. CCX was recently acquired by IntercontinentalExchange (ICE), and Sandor now serves as an adviser to ICE. Over the years, he has served on the boards of directors of the Chicago Board of Trade (CBOT), Chicago Mercantile Exchange, the London International Financial Futures Exchange (LIFFE) and ICE.

Sandor is a research professor at the Kellogg Graduate School of Management at Northwestern University and a Distinguished Adjunct Professor at the Guanghua School of Management at Peking University, where he also serves on its international advisory committee. He is also on the advisory committee of the TERI School of Management in India and has taught at the University of California Berkeley, Stanford University, and Columbia University....
...Yahoo Finance (Canada)

Some of our posts:
Sept. 13, 2010 
European Union's emissions trading scheme set to deliver carbon savings of less than a third of 1% of total emissions as ArcelorMittal scores £1.5bn. (MT)
Apr. 30, 2010
April 28, 2010 
"Fannie Mae owns patent on residential 'cap and trade' exchange" (FNM)
April 23, 2010 
"Derivatives bill calls for US carbon market study" (GS)
Nov. 5, 2009 
Senators Call for Financial Reform Before Cap and Trade (BRK.A)
Sept. 15, 2009 
Carbon Trading: JPMorgan to buy EcoSecurities for $204 million (JPM; ECO.L)
Sept 9, 2009 
Chicago Climate Exchange Seeks D.C. Muscle on Climate Bill (CLE.L*)
Aug. 13, 2009 
Goldman Faces Carbon Market Curbs in Senate Proposals (GS; JPM)
Aug. 13, 2009 
Scrap Cap-and-Trade: Emissions-Trading Inventors Now Leery
July 28, 2009 
Trading: "Was Enron Right?"
July 8, 2009 
Goldman, Morgan Stanley Threatened by CFTC Review (GS; MS)
June 28, 2009 
June 16, 2009 
June 16, 2009 
Climateer Investing on Carbon Trading and Traders
May 21, 2009 
Meet The Energy and Environmental Markets Advisory Committee (EEMAC)
May 7, 2009 
The Bored Whore of Kyoto
Jan. 19, 2009 
Carbon Trading: How to (Maybe) Make Money Out of Thin Air: And One of my Favorite Carbon Cowboy Quotes
May 16, 2008 
March 18, 2008  
US Presidential Election & Carbon Markets: Is The Climate Exchange Story Overdone? (CLE.L)
March 13, 2008 
Dec. 4, 2007 
Claussen: US cap-and-trade system 'by mid 2009' and Enron makes a Cameo Appearance
Sept. 22, 2007 
Climate Exchange, Deutsche Bank to launch trading in catastrophe futures
August 25, 2007
Modest start to Kyoto trade on Chicago exchange
One contract representing Kyoto Treaty greenhouse gas reductions traded on the Chicago Climate Futures Exchange on Friday, the first such trade to take place in the United States, a trade source said.
The CCFE launched trade on the certified emissions reductions contract on Friday. December 2008 CER futures settled 25 cents weaker at $21.60....
From Reuters
July 20, 2007 
Enron on Cap-and-Trade

June 29, 2007 
Pollution Credits Stoke Trader Hiring Wave at Banks

The Greening of Wall Street

June 1, 2007 
Emission Permits Rise; Bush Calls for Climate-Change Targets

And many, many more.