(The following was originally composed in June-July 2009. Some information on shareholders has since changed and will be updated and re-posted. That update with also include extensive information on Al Gore and Generation Investment Management, PLC.)
Prepare for a super long post. This is some crazy stuff. Recently on Bloomberg's "Taking Stock," Pimm Fox interviewed a fellow by the name of Richard Sandor. Ever heard of him? Me neither, but Dr Sandor is chairman and CEO of the Chicago Climate Exchange, and chairman of Climate Exchange PLC (CLE), and we should all get to know him because, he's a major pusher for the new "carbon" legislation and the American Clean Energy and Security Act of 2009, aka the Waxman-Markey bill. I would condense the interview, but it is so telling, that I think you'd better check it out in full context. This Dr Sandor fellow is making the news lately, especially with the cap-and-trade debate, and I'll elaborate on that later. Here's the interview:
Interview on Bloomberg's "Taking Stock" with Pimm Fox:
Pimm Fox: Richard Sandor, give us a little insight into the size of the worldwide emissions market right now?
Dr Richard Sandor: The size of the market worldwide is pretty much dominated by the European market. We [the ECX European market] trade 1000 ton contracts roughly $15-20,000 per contract. We went from 4000 contracts in ’07 a day, to 11,000 in ’08. We’re 21,000 in ’09, we’re running at 300% over year by year, and, call a volume, depending on price, $8-10 billion a month.
Fox: And what about the actual dollar volume—I mean, how much could this worldwide market be worth, let's say, 5-10 years down the road?
Sandor: I think this will unambiguously be the largest non-financial commodity in the world. If you consider worldwide emissions, the Europeans are 2 billion (tons), the proposed Waxman-Markey bill will be 3 times Europe at 6 billion tons of coverage. Canada, Australia, ultimately China and India, we’re talking about a worldwide crop of call it 30-35 billion tons, at $20 a ton, which would make it $700 billion, and commodities markets trade 10 to 20 times the crop, so I believe it’s a market that would be $10 Trillion a year.
Fox: A ten trillion dollar market, for emissions trading?
Sandor: “We are also trading in the United States—its very important for the listener to understand that this is not a market of tomorrow: it’s a market of yesterday and today. In August, we began trading the Regional Greenhouse Gas Initiative, which is a mandatory carbon market that stretches from Maine to Maryland. And since January, we’ve been trading 440,000 tons a day, 743, 16 a day--
Fox: Explain, how does this market get created in the first place? Is this government created in terms of credits, or is this an association where the actual amount of carbon emissions is traded in contracts?
Sandor: No. The way it works is, the government sets a cap. Let’s say you’re a utility, and the cap is 1 million tons. And each year, you have to reduce by a certain amount, to 900,000 to 800,000 to 700,000. If you’re particularly good at it, and you have a 1 million base, and a requirement to go to 900,000, but you go to 500,000, you can sell those. Suppose I’m not so good because I can’t switch easily from coal to natural gas. It takes me three years to build a new technology, then I can buy your emissions, and the systemic emissions will be lower, but you as the low-cost driver, can allow me to buy your credits temporarily to hedge myself. So its mandated by the government. The emissions are capped. The cap goes down every year. And then those people who get below their cap are incentivized to do so, because they can sell them to people who can’t put the technology in very quickly.
Fox: Now, doesn’t this penalize companies that can’t get the technology in place as quickly as those that can, and what about the companies that don’t emit very much in the way of greenhouse gases?
Sandor: Well, let me take the second question first: for those that don’t, they’re not going to be covered under the program—its meant for larger scale emitters. Two, while it penalizes those that can’t quickly make it, it provides them flexibility and a lower cost way to be in compliance than if you simply mandated one size fitting all, a 10% cut. So emissions trading is meant to reduce the quantity of greenhouse gases in the atmosphere at the lowest cost to society, therefore sustaining jobs and driving innovation with alternative energy like wind and solar and things like that because people who can generate power with zero emissions are incentivized to do it. So it has got a job creation and a job sustenance part to it.
Fox: Do you favor what Congress is doing to reward those companies that invested in the greenhouse gas cutting projects ahead of the federal cap-and-trade program?
Sandor: Yes, I very much favor it. I think the House Committee by Waxman and Markey is doing some very heavy lifting, and I think they are working through a very difficult process, and we applaud their efforts and look forward to implementing whatever program the US government does. We are a publicly traded company. We have arrangements and ventures in Australia, in Canada, and we just opened up an exchange in China, in partnership with the biggest company there. So I think emissions trading will be something that will be recognized by the fact that you can provide financial incentives to achieve social objectives.
Fox: Is there a way for individual or small investors to take advantage of this change? Is trading actual emissions contracts?
Sandor: We will have a futures exchange that trades the regional greenhouse gas carbon. We have a futures exchange that trades SO2, which is acid rain, NOX, which is smog, all of which are Federal programs. The contracts are in the thousands of dollars, but they are leveraged. And we think one has to be a professional investor, and someone who hasn’t studied the field or know something about it should proceed with caution.
Fox: Let me ask you about the "voluntary greenhouse gas credits." According to one report, the market for these voluntary credits—now this is people, if they’re taking a plane and they’re feeling green, they can buy a credit that would offset their own personal carbon footprint—it’s a small market now, $700 million worth. Is that a market that you think is going to expand even more?
Sandor: Yes I do. The Chicago Climate Exchange is an organized voluntary market, but it contains 17% of the Dow Jones, IBM, Intel, DuPont, United Technologies, 11% of the Forbes 100 companies: Abbot Labs, Ford Motor Company, Safeway, International Paper; 22% all the big power companies: American Electric Power, DTE…There are people how want to reach out, who want to learn. There are people who aren’t covered. We have 8 cities, including Chicago and Portland, we have 2 states, New Mexico and Illinois. We have universities like Michigan State, Oklahoma University, University of Idaho.
Fox: People are participating in this?
Sandor: Yes, they are, and they’re learning, and they’re measuring their carbon footprint, and as a result of that, they’re learning how to manage their use of energy more efficiently.
Fox: So the whole idea of actual conservation might be part of the strategy?
Sandor: Yes, and that really is the idea. Once you price CO2 and put a price on it, you find, as you would with any other product, it tends to be rationed. We as a people on this planet have lived under the false concept that air and water were free. And we’ve learned with a planet of 7 billion people, that we have to ration these precious goods. And the good old price system is the best way to do it. And in fact, in these troubled times, the organized exchanges, which are regulated and transparent, have not needed government bailout, have all functioned with no counter-party risks or failures, and they have been the jewel in the capital markets in the US and worldwide, and we’re seeing a very, very big push to get this trading done under a regulatory framework that is transparent and doesn’t pose systemic risk.
Fox: Is it possible that environmental groups that are interested in spurring carbon emissions cuts, that they would participate in the market and in a sense buy and then retire the emissions credits? That could drive up the price for polluters?
Sandor: Very much so. As a matter of fact, in the SO2 program, the American Lung Association has participated. We’ve had participation by the World Resources Institute, the Rocky Mountain Group. We find--we even found in the SO2 program, a 6th grade class in upstate New York bought SO2 permits—acid rain—because they were affected and retired them. So I think the market is extensive, and we think that the consciousness is constantly being raised.
(end of interview)
So, there's a quick overview of both the current voluntary US emissions market on the CCX, the 10-state mandatory market of the Regional Greenhouse Gas Initiative, and the required, EU-mandated, Kyoto Protocol-created emissions market in Europe on the ECX--and one person who stands to make millions from it, to add the millions already made. But this is only an overview. I did some investigatin’ to get more of the story. Here’s what I found. Get comfortable.
Dr Richard Sandor and Climate Exchange PLC
The interview, again, was with Dr Richard Sandor. Dr Sandor is an economist and "financial innovator" who is chairman and CEO of the Chicago Climate Exchange and chairman of Climate Exchange PLC. Originally from Brooklyn, NY, he was named "Hero the Planet" by Time Magazine in 2002 and again in 2007, when he was also declared "the father of carbon trading," and the "father of financial futures." His company, Climate Exchange PLC, according to itself is:
"the world’s first and North America’s only voluntary, legally binding integrated greenhouse gas emissions reduction, registry and trading system."
And Climate Exchange PLC is:
"principally engaged in owning, operating and developing exchanges to facilitate trading in environmental financial instruments, including emissions reduction credits, designed to support and lower the economic costs of achieving environmental objectives." "Its (Climate Exchange PLC’s) main businesses include the Chicago Climate Exchange (CCX) which operate a voluntary but legally binding cap and trade system including an exchange for CO2 emissions as well as SOx and NOx contracts in the US and internationally, the Chicago Climate Futures Exchange (CCFE) and the European Climate Exchange (ECX) which operates an exchange focussed on compliance certificates for the mandatory European Emissions Trading Scheme." (link to quote)
Sandor holds the majority interest as an individual in Climate Exchange PLC, as you'll see below. According to the site, 63% of company shares are not in public hands. Here's the top 10 holders of shares in-issue from Climate Exchange PLC's site, dated May 29, 2009:
Total Shares in Issue: 47,412,000 shares
Invesco Asset Management Limited
Directors and Related
Harbert Management Corporation (Institutional Group)
BlackRock Investment Management (UK) Ltd
JP Morgan (Broker Group)
Moore Capital Management Inc
Goldman Sachs (Broker Group)
Fortis (Institutional Group)
Ontario Teachers' Pension Plan Board
Banc of America Securities
You'll notice this adds up to 80.29% shares in the hands of the top-10, meaning under 19.71% of shares are outside these top-10 holders. If you exclude "Directors and Related" and Ontario Teachers' Pension, you'll discover that 59.81% of Climate Exchange PLC is owned by either investerment broker groups or fund managers, hedge funds, or banks (Fortis is part of the huge French bank BNP Paribas).
Within this general majority bank interest, the majority single ownership of Climate Exchange PLC shares is in the hands of Invesco Asset Management Limited. Invesco Asset Management is one of the business names for Invesco Perpetual, the UK fund for the global giant, Invesco Ltd (another name for IAM is Invesco Fund Managers Limited). Invesco Ltd has a US headquarters in Atlanta--but don't be fooled, the company actually Invesco PLC, and is registered in Hamilton, Bermuda (click here, pg 3). Invesco Asset Management holds shares on behalf of investors. Here's a release (late 2007) from Climate Exchange PLC on exactly what investors are represented by Invesco's 29%:
Invesco Asset Management shareholders:
Mellon Bank, Pittsburg
State Street Trust
Total INVESCO shares
Notice JPMorgan pops up on this list with 178,934 shares, as well as the top-10 shareholder list as "JP Morgan (Broker Group)" with a percentage holding equaling 93,401 shares. Some of these may be ADR's. But JP Morgan is nothing, because as shown above, the absolute major shareholder represented by Invesco is a group called Vidacos Nominees. Vidacos Nominess owns 11,549,992 shares of the 13,023,504 shares Invesco represents--in other words, Vidacos owns almost of 25% of Climate Exchange PLC (Invesco's total holdings are over 29%, most of which is in the hands of Vidacos). You've probably never heard of Vidacos Nominees, and indeed there is not a lot of information about this group on the internet as far as I could find. No website, not even a webpage on someone else's site. But of what I could find--from arcane legal documents, shareholder lists, etc--is that Vidacos Nominees is a settlement and clearance service, based in London, wholly owned by Citi. Or, as this very breif BusinessWeek/eTrade entry states:
"Vidacos Nominees Limited operates as a subsidiary of Citibank International PLC."
Vidacos Nominees has been in some hot water before, as this FT article details, which also calls Vidacos Nominees "a London-based company owned by Citigroup which settles share trades for institutional clients." (If you'd like to write, direct your letters to Vidacos, 336-337 Strand, Citibank House, London.) Vidacos is a "nominee service," meaning Citi holds shares on behalf of institutions or institutional investors who wish to remain anonymous or not directly hold the shares themselves. Because of UK laws, it is not possible to determine who Vidacos Nominees is holding shares for indirectly, or how many of the shares they are holding for Citibank itself, directly. However, after much searching, I did discover this very interesting document, a Citibank Investment Research Disclosure for Citibank, through SmithBarney (SmithBarney, aka Morgan Stanley Smith Barney, is part of Citigroup Global Markets, Inc). The document discloses Citi's investments in Climate Exchange PLC--and Vidacos Nominees is not mentioned in the text. There is no specific numerical information disclosed, simply the required legal disclosure indicating Citi's investment in Climate Exchange PLC, and the opening disclaimer statement that "investors should not consider this Product to be making an investment recommendation with respect to the company identified." (How many of Citi's "Vidacos Nominees'" 11,549,992 shares are actually Citi's directly?)
Second on the list as a majority shareholder in Climate Exchange PLC is Harbart Management Corporation, a US-based real-estate, private capital, and hedge fund manager. Harbart Management Corporation, or HMC, has several wholly-owned subsidiaries including the major NYC-based hedge fund, Harbinger Capital Partners. The manager of the Harbinger hedge fund, Philip Falcone, was the second highest paid trader on Wall Street in 2007, raking in personal compensation of at least $1,500,000,000 (not a typo, that $1.5 billion!) as his $20 billion plus fund saw 100% returns in 2007. According to Harbart's site, the "management and control" of Harbinger Capital Partners was transferred to Falcone as of May 4 2009, which might explain a change in Harbinger's holdings of Climate Exchange PLC. This March 6 disclosure from Climate Exchange PLC posted on Bloomberg indicates Harbinger crossed the 20% shareholder threshold, yet by May 29, the numbers from Climate Exchange PLC's site listed above show a decrease 14.78% holding.
Additionally, the May 29 list on Climate Exchange PLC's site does not include the most recent move on shares--4.8%, or 2.3 million share, purchase by the Intercontinental Exchange, or the ICE. The ICE is a US-based owner and operator of three futures exchanges and two global OTC derivative markets/clearinghouses, including the major ICE Futures Europe, a futures exchange for crude oil, and perhaps more known here in the US, the ICE operates the USDX, or the US Dollar Index, a futures exchange of the US dollar. The ICE has been a partner with the Chicago Climate Exchange since 2003 (Reminder: the CCX, of which Sandor is currently CEO and chairman, owns the mandatory carbon exchange in Europe, the ECX--and Climate Exchange PLC owns then both). Just this past week, on June 22, the ICE took a 4.8% stake in Climate Exchange PLC, or over 2.3 million shares, spurring an almost 17% jump in the share price on the London market. In an unrelated story (ha!) the US House of Representatives passed the Waxman-Markey bill day later, on Friday June 26.
Also apparently considering a stake in Climate Exchange PLC is the NYSE/Euronext, owner of the New York Stock Exchange. It would be appropriate considering that one of the NYSE's directors, Sir Brian Williamson, is also on the board of Climate Exchange PLC. For more on Climate Exchange PLC's ownership, here is the individual major shareholder list, indicated on the above chart as "Directors and Related," and holding approximated 19%:
Individual insider shareholders:
Dr. R L Sandor (Chairman)
N D Eckert (CEO)
As for the major individual shareholders listed above, these people are disclosed because they are also on the board of directors, either as executive or non-executive members. Dr Sandor, of course, is the majority holder, with his 8,410,614 shares representing a more than 17.7% stake of Climate Exchange PLC. Interestingly, Matthew Whittel, the chief financial officer and board member of Climate Exchange PLC is missing from the shareholder list. (Are we to infer then that the CFO of Climate Exchange PLC owns zero shares in his company? Guess so.)
So there's some tedious ownership background. Now lets get into the real story and history of Climate Exchange PLC--because if we don't stop this ridiculous emissions trading scheme, they and their bankster emissions-trader buddies will be remote control-setting our thermostats and running our lives.
Climate Exchange PLC and the Isle of Man
I have made a point of including "PLC" every time I write Climate Exchange PLC, and you might be wondering why its called "PLC," That form of corporation is not too common--at least not in this country. And you would be right to be curious, because Climate Exchange PLC is not an American company. No, indeed, the registered address of Climate Exchange PLC is the Isle of Man.
The Isle of Man? In case you are wondering about that too, the Isle of Man is a small island in the Irish Sea about equidistant from both Belfast, Ireland and Liverpool, England. It is a self-governing Crown Dependency that is not part of the United Kingdom, but whose head of state is the Queen, and which has its own Parliament, the Tynwald. The Manx (that's what you call something from the Isle of Man) legal system is "entirely separate from that of the UK," as is their economic structure and political structure. Its own promotional website calls itself "an international off-shore financial centre," and while not part of the European Union, there is full reciprocity between the EU and the Manx, and even a special section of the Treaty of Rome that exempts Manx goods from tariffs! The island's population is about 81,000, and to encourage that financial haven atmosphere, income tax is the only direct tax on the island, and that income tax is 10% for most individuals, with a cap at 18%, with "generous allowances." The corporate tax rate is ZERO, except for banking and income from land and property situated on the Isle of Man (rent), in which case the tax is 10%. There is no capital gains tax, no wealth tax, no stamp duty, no death duty and no inheritance tax. And this is were Climate Exchange PLC, the world's largest emission market management and exchange company, is registered--the Isle of Man. (I'd keep in mind that part about their legal system being "entirely separate"...)
Climate Exchange PLC owns the CCX and ECX
Climate Exchange PLC was originally incorporated on the Isle of Man in 2003 under the name Chicago Environmental PLC (more on this, with links, below). The name was changed in 2004. According to Climate Exchange PLC, in September of 2006, Climate Exchange PLC acquired 100% of the Chicago Climate Exchange (CCX) and the European Climate Exchange (ECX). Please note that Climate Exchange PLC had already owned 40% of the CCX, before the merger/acquisition, and of course, please note that the current chairman/CEO the CCX and current chairman of Climate Exchange PLC, Dr Sandor, was the founder of the CCX, and majority shareholder.
In September 2006, the total acquisition was complete, with Climate Exchange PLC becoming full owner of the CCX and ECX. Additionally, as part of this acquisition, Climate Exchange PLC announced the placement of £12.2 million (about $23 million) of new ordinary shares with Goldman Sachs, making the investment bank a more than 10% owner:
"Goldman Sachs has agreed to subscribe for 4,174,467 new Ordinary Shares at a price of 293 pence, (the "Placing") representing approximately 10.1 per cent of the enlarged issued share capital of Climate Exchange immediately following the Acquisition and the Placing."
(As of the latest report included in the details above, Goldman Sachs seems to have reduced this orginally $25 million holding to under 2%, however some of that might even have simply moved over to Vidacos or Invesco, as JP Morgan has equity holding in Climate Exchange PLC both under its own name and under Invesco's name. Either way, Goldman Sachs still lists the purchase as a "minority equity investment" on their climate page.)
To understand how Climate Exchange PLC got to the position that allowed it to aquire the CCX and ECX and become the world's major emissions market owner, it is necessary to look into the precursor groups that became the current company--primarily the Chicago Climate Exchange (CCX) and Chicago Environmental PLC. They are all linked by Dr Sandor.
History of the Chicago Climate Exchange (CCX)
When Climate Exchange PLC acquired the CCX, they also acquired the ECX, because the CCX created and owned the ECX. Climate Exchange PLC also acquired the CCFE (Chicago Climate Futures Exchange), because that too was a CCX creation. Sandor was stimultaneously the CEO and chairman of the CCX and the chairman/majority shareholder of Climate Exchange PLC when the acquisition occurred. The CCX and Climate Exchange PLC were interlinked even before becoming the same company, because they were both creations of Dr Sandor, starting with the CCX.
According to its own site, the company that is today the CCX began in 2000 as a result of two grants from the Chicago "philanthropic" group, the Joyce Foundation. The CCX site says that the Joyce Foundation delivered two grants to Dr Richard Sandor at the Kellogg Graduate School of Management at Northwestern University, but to be more specific, the grants were given to Environmental Financial Products, LLC. Environmental Financial Products LLC was a company founded by Dr Sandor, and Sandor was CEO and Chairman. EFP is no longer around, as its exploratory goals were completed with the launch of the CCX (note on that site that the information is dated, and the homepage doesn't even come up anymore).
The Joyce Foundation had given EFP the first generous grant of $347,000 to "examine whether a cap-and-trade market was feasible in the U.S. to facilitate significant greenhouse gas reductions, using a voluntary regional Midwest model from which national and international lessons might be drawn." It was indeed determined "feasible," and so a second grant of $760,000 from the Joyce Foundation came in 2001 to actually help start the setup the operation—bringing the total to $1,107,000. Meanwhile, it might be worth noting that on the board of directors of the Joyce Foundation during the time both these grants were distributed was a then-little-known Illinois state senator who now has the power to possibilsly implement Dr Sandor's "environmental financial products" scheme--Barack Obama (Obama was a board member until late 2002, and collected over $70,000 in compensation). The board would be proud: Sandor used the grants well.
Environmental Financial Products LLC utilized the grants to lay the foundation for a new carbon exchange. By 2003, the Chicago Climate Exchange (CCX) was launched as a voluntary, legally-binding trading scheme to reduce "greenhouse gases" (GHG), but significantly more funding was needed than the first $1.107 million (detailed later below). Thirteen groups agreed to be part of this operation: American Electric Power, Baxter International Inc., the City of Chicago, DuPont, Ford Motor Co., International Paper, Manitoba Hydro Corp., MeadWestvaco Corp., Motorola Inc., STMicroelectronics, Stora Enso North America, Temple-Inland Inc, and Waste Management Inc. There are now over 300 participants in one way or another, according to the CCX, but given that I found Lehman Brothers Commodity Services as a "liquidity provider" (I’ll explain what that is shortly) on this list, I'm pretty skeptical of how current it is. (Of course, it is documented that Lehman Brothers was very involved in carbon trading, which was one of the many things that got them into so much trouble, but that's a whole 'nother email. So was Enron--they were pioneers.) The current participant list includes such pillars of the corporate community as DuPont, Dow Company, Monsanto, Cargill, Bayer, IBM, and dozens of others. As additional information, one of the original 13 participants listed above is American Electric Power. Dr Sandor has been on the board of directors of American Electric Power since 2000.
Also listed as members of the CCX are a two groups called "Offset Aggregator" and "Offset Providers." The CCX explains that offset providers are "Owners of title to qualifying offset projects that sequester, destroy or reduce GHG emissions. Offset Providers register and sell offsets directly on the CCX," and offset aggregators are "Entities that serve as the administrative representative, on behalf of offset project owners, of multiple offset-generating projects. Offset projects involving less than 10,000 metric tons of CO2 equivalent per year should be registered and sold through an Offset Aggregator."
In other words, these are people who agree either to do or not to do things to "offset" the evil carbon--like agree to plant soybeans, or agree not to cut down trees on their property so the soybeans and trees can "offset" the carbon produced by some "emitter," who then can pay them to offset rather than by more carbon credits or reduce its own emissions. (I'm sorry--THIS IS SO RIDICULOUS!! But you cannot make this stuff up!) Offsets can also be created from "clean" energy projects, which create offset certificates called CER's, or carbon emission reductions credits (more on this later). Of course, you'd expect to see some mega-farms and mega-farm associations/corporation on this list, and there are some indeed: Kentucky Corn Growers Association, Ranchlands Management, and Cargill. These groups can "offset" carbon through photosynthesis. You'd also expect renewable energy prodividers, and they are there as well. But how about Trading Emission, PLC?
There goes that PLC again--I wonder where they were incorporated? You guessed it, the Isle of Man. Trading Emissions PLC has a more than £135 million "long position" in carbon, according to its company site, and is listed as an "offset provider" by the CCX. But they aren't exactly planting soybeans over on the Isle of Man, or erecting windmills. So how does a trading company become an offet provider? Here's how, according to their site:
"Trading Emissions PLC is an investment fund established to acquire tradable environmental instruments. Its initial investments will be in projects developed under the Clean Development Mechanism (CDM) and Joint Implementation (JI) of the Kyoto Protocol."
It doesn’t take a rocket scientist to figure out their strategy: they have no means of producing their own offset credits--like a farm would--but instead plan to invest in eligible UN-certified, "offset-producing" projects, claim the offsets, and hold them long. The "Clean Development Mechanism" mentioned above is referring to part of the Kyoto Protocol added by the UN that allows for carbon credits to be created by investing in allegedly carbon-reducing projects in developing nations, and this will be detailed at lenght later. As a final note on Trading Emissions PLC, the chairman, Neil Eckert, just so happens also to be the CEO and an executive board member of Climate Exchange, PLC.
Another name on the CCX's membership list, under "Offset Aggregator," is Lugar Stock Farm. That's interesting, because I believe Indiana has a Republican senator named Richard Lugar. And come to think of it, I believe he has a family farm--could this possibly be related? Here's the 2006 press release from his Senate office:
Lugar: “I am pleased to announce that the Lugar Stock Farm has enrolled as an offset provider in the Chicago Climate Exchange. The Lugar Stock Farm is an active corn, soybean, and hardwood tree farm in Marion County, Indiana. Our farm will be the first in Indiana to enroll in this important exchange. I am hopeful that farmers in Indiana and elsewhere will investigate the possibility of enrolling in the exchange. This not only will encourage the practice of sequestering carbon, it will provide an additional source of farm income to those who qualify.”
The 604-acre family-owned Lugar farm in Marion County, Indiana produces corn and soybeans. A third of the farm is a classified hardwood tree farm, including significant acreage in black walnut trees that were planted in recent years. Growth of these trees produces oxygen and removes carbon dioxide from the air. The rising concentration of carbon dioxide in the earth’s atmosphere is associated with the risk of global climate change, which could have profound effects on ecosystems, agriculture and human health.
Lugar: “The Lugar Stock Farm has entered into a binding contract with the Chicago Climate Exchange to provide offset carbon credits, or carbon that entities may want to use to mitigate or offset the amount of greenhouse gasses they may produce. Based on our management practices, tree age, tree density, and other factors, the Chicago Climate Exchange estimates that our farm will capture about 3,400 metric tons of carbon in these trees. Instead of selling these offset credits directly to specific generators of carbon, the Chicago Climate Exchange operates as a market discovery mechanism similar to corn and soybean markets where willing buyers and sellers transact business based on commodity prices. The Lugar Stock Farm maintains legal ownership of these offset credits until a market decision is made to sell them on the exchange. Yesterday, carbon credits were trading at $3.50 per metric ton. Additionally, our farm is responsible for reporting any loss of trees, or the addition of trees, to ensure that carbon is being stored. Similar situations now involve U.S. livestock operations and no-till farmers.”
Senator Lugar, as we speak, is Republican leader of the Senate Foreign Relations Committee, and an active participant in the shaping of cap-and-trade and other "carbon control" legislation and ideas happening right now in Congress. And from his press release, we can assume he holds to heart the position that “the rising concentration of carbon dioxide in the earth’s atmosphere is associated with the risk of global climate change, which could have profound effects on ecosystems, agriculture and human health.” At least he put an "associated" and "could" in there in 2006, which you can compare to his June 16 2009 comment on the subject:
"Clearly, this is one world," he said. "The atmosphere is filled, already, with CO2 from emissions from our two countries (referring to US and China)."
At least recently he acknowledged the current recession makes the bill "a tough sell to people who are in a recession and whose light bills are going up." But I bet he still feels the overwhelming need to save us all from the evil carbon—and perhaps make a little money while at it? He quoted the CFI (Carbon Financial Instrument) price of $3.50 pmt when he said this in 2006. The CFI is trading today at about $0.95. I wonder if he sold at the high of over $7 pmt in 2007, or he if he still holds the "offsets." I don't know, but given that he is still listed as an offset provider on the CCX, he still holds some interest. (Here's a historical on CFI prices.)
As he made clear in his 2006 comments, Lugar is in a "legally binding agreement." As such, the Lugar Stock Farm will have to report any downed trees or changes to the crops to the proper carbon authorities to "ensure that carbon is being stored." And they do really have inspectors, because according to the CCX, all offset providers are inspected by "an independent third-party" who reports back to the CCX, which then is responsible for determining the carbon-capturing capabilities of the various requesters. Oh no, this is not subjective. Noooo, I’m sure the CCX has some excellent scientific method for determining the exact carbon sequestering ability of each tree and blade of grass and landfill, so I’m sure its totally impossible for someone to, say, fraudulently assign an overoptimistic allotment of carbon credits? Besides, fraud never happens with derivatives! (Ha!)
Indeed, the market is fraud-ridden (and every single person who bought into it deserves to get defrauded, because they didn't do due diligence in an unregulated market). In 2007, the Financial Times exposed a number of so-called carbon offset programs and providers who were doing nothing of the sort while people bought "worthless carbon credits." From the article, one of the problems was, quite simply:
"Companies and individuals being charged over the odds for the private purchase of European Union carbon permits that have plummeted in value because they do not result in emissions cuts."
In fact, earlier this year, the Federal Trade Commission opened an investigation the $54 million-a-year US voluntary personal carbon offset world. Everyone from Delta Airlines to Dell is trying to sell carbon offsets, with some companies, like General Electric and BoA according to the article above, offering to convert your rewards points to carbon offsets. Perhaps the FTC noticed the total lack of consistency with "carbon calculators," or perhaps, as the FT article pointed out, they were tipped off by the shear abundance of "worthless carbon credits." Either way, now American taxpayers are paying for an investigation. But I'm sure the CCX's carbon offsetters, like Cargill, Trading Emissions PLC, and Senator Lugar, are totally legit.
One more thing--what Senator Lugar doesn’t mention above is what is he supposed to do if the farm loses some trees, or decides not to plant one year, in other words, if the value of his carbon offsets are reduced after being sold? The buyer surely cannot be responsible for that—this is a legally binding commitment! That buyer needs those trees to offset his emission! So what then? The answer is simple (if you like ridiculous): he’ll have to buy carbon credits of his own to offset his failure to offset. So if he sells all his 3400 CFI’s and then a tornado knocks over all his trees and crops, Lugar Stock Farm is no longer storing carbon (the offsets are based on the life cycles of the plants). Now, the only way they can store carbon (as they are legally required to do) is the same way as everyone else without a 604 acre farm—they have to buy the credits. It is a dance with the devil, this “voluntary” market.
Climate Exchange Timeline
So back to the big picture again, the owner of the voluntary CCX that Lugar is talking about, and the owner of the mandatory ECX in Europe, the group Climate Exchange PLC. Below are parts of a timeline, courtesy of the Climate Exchange PLC's website, that portrays the "significant events" in the company's history. Little detail is made of these "significant events," so I have taken the liberty of analyzing several of them to determine their "significance." Everything in italics is direct from the site, the rest are my words.
2002: Founder member group established in Chicago in order to launch the world’s first contractually binding cap and trade emissions system.
The Joyce Foundation’s $1.107 million in grants to Dr Sandor at Environmental Financial Products LLC was to determine the feasibility of an exchange and start the basic framework. Climate Exchange PLC itself does not yet exist, but will soon. The result of the "founder group" will soon come to fruition as the Chicago Climate Exchange, the CCX. The CCX is 'a voluntary but legally binding cap and trade system including an exchange for CO2 emissions as well as SOx (sulfur/rain acid) and NOx (smog) contracts in the US and internationally."
2003: Chicago Environmental plc established as a fund. £15 million raised in London on the AIM (Alternative Investment Market) market to back the trading launch of CCX (Chicago Climate Exchange).
Hmm, that's interesting, Chicago Environmental PLC? Are you thinking Isle of Man? Bingo--not only the same Isle, but this is actually the same company as Climate Exchange--it is the original name. Chicago Environmental PLC was incorporated on the Isle of Man on August 3 2003. A month later, Environmental Finance reported that "the Chicago Climate Exchange (CCX), a voluntary market for greenhouse gas reductions, has raised around £15 million ($24.9 million) via a London-listed investment company. Trading in the shares of Chicago Environmental Plc, a closed-end investment company incorporated in the Isle of Man, began on 18 September (2003) on the London Stock Exchange’s Alternative Investment Market (AIM)." According to Climate Exchange PLC's website, the "Articles of Association" and "Memorandum of Association" that they are required to post for investors, the founding date was September 3, 2003--and a founding name "Chicago Environmental PLC." Of course, no where in these documents is the name "Climate Exchange," which came over a year later, but Climate Exchange PLC is now the company that owns the group (the CCX) that established the investment company (Chicago Environmental) that made Climate Exchange PLC itself. In other words, Sandor's original Environmental Financial Products LLC receives the grants and funding and launches the CCX based out of the Isle of Man, and then Sandor's Manx CCX sets up another Manx "investment company," calls it Chicago Environmental PLC, and starts selling shares of it on the London market to the tune of nearly $25 million in 2003. This "investment company" plc then becomes Climate Exchange PLC a year later, and this "investment company" purchases the exchange (the CCX) that created it in the first place. Phew..Got it?
December 2003: CCX launches trading of the Carbon Financial Instrument (CFI), a CO2 spot contract.
Remember, although all of this is cited as part of Climate Exchange PLC's history, Climate Exchange PLC does not yet exist--we're still talking about the CCX and Chicago Environmental PLC (Environmental Financial Products LLC is by now part of the CCX). The "significant event" in December 2003 was the launch of the spot contract for the CFI--according to the CCX historical, it opened on December 12 2003 to be exact. Opening spot price was US$1 per metric ton CO2, with a volume less of less than 7000 contracts, each contract a minimum of 100 metric tons, with minimum ticks of $.05, or $5.00 per contract (in contrast to the ECX contracts, which are 1000 tons, as Sandor said in the interview). Check out that historical, as you'll see the price jump by seven fold (to over $7 pmt) and crash down to today's price, which is hovers under $1 as I write this. You might be wondering what the CCX charges in fees for these trades, so here's the fee schedule. They vary, but the "outright" fee is $5 per side, per CFI contract (100 tons)--which at $1, happens to be 10% right now.
2004: Further £15 million raised to back the launch of the Chicago Climate Futures Exchange (“CCFE”) in the U.S. and the European Climate Exchange (“ECX”) in Europe.
First off, the CCFE spoken of here was again funded by the Manx investment company, Chicago Environmental PLC, and so became part of the CCX, Chicago Climate Exchange, upon launch. The Chicago Climate Futures Exchange is just that--a derivative market that allows for futures options on the CCX financial instrument prices (CO2, NOx, Sulfur), and creates the dual price scheme of spot v. futures for everything traded on the CCX. It is a real futures market, regulated by the Commodities Futures Trading Commission, CFTC (and I'll keep my comments about the CFTC to myself...)
The other operation, and the more important operation, funded by this £15 million was the European Climate Exchange (ECX). The ECX is now the mothership emissions market, because it is where the mandatory EU emissions trading takes place. In the interview, Sandor discussed how to the ECX has totally outpaced and CCX, which was launched almost three years prior to the ECX. Perhaps the fact that the CCX is voluntary and the ECX is mandatory has something to do with that?
Today, Climate Exchange PLC's ECX is the "leading exchange operating under the European Union Emissions Trading Scheme." (That's a rare wikipedia link there, but it actually does a very good job of consolidating the scattered information about the EU Emission Trading Scheme). The short of the EU ETS is that since 2005, the EU has required a rapidly increasing number of "large-scale emitters"--its now over 11,500 companies and will gobble up the airlines as well by 2012--to monitor and report their emissions. It is a cap-and-trade system were the national governments, by permission and with oversight of the EU, give allotments of credits, called European Union Allowance credits, or EUA's, to emitters (currently free of charge) to determine a "cap" on their allowed carbon output. The cap is smaller than the emitters current "measured" output, and the cap is figured on a national basis that allows the EU member/Kyoto protocol signatory home nation to comply with the treaty, which requires overall yearly reductions in emissions. The EUA's are registered and numbered with serial numbers and exist as electronic entries. The cap of EUA's is reduced in "phases," therefore allowing fewer EUA's to be distributed each year, and requiring the emitters to reduce emissions more and more each year (or buy more EUA's to cover themselves). The emitters are required to return an equal amount of their allotment of EUA's at the end of the year when their emissions are tallied, which they can do either by reducing emissions and thus having enough "free" allotted credits to cover themselves, or by buying credits. Through this system, emitters are supposed to be encouraged to reduce emissions, as that would then allow them to sell their extra credits on the emissions market--the ECX--to those who cannot reduce their emissions and need to purchase more. While the national governments offer the credits, they are of course under the thumb of the European Commission, which itself decides when and by how much to lower the overall allowable credits during each "phase," and makes very clear that nations can't just give as many credits as they want. The European Commission, in fact, proposed changes in 2008 (which are still only drafts) to remove the allotment authority from national governments altogether, and to stop giving the credits out for free, but instead to auction them. In regards to this market, in the interview above Sandor said:
"The size of the market worldwide is pretty much dominated by the European market. We trade 1000 ton contracts roughly $15-20,000 per contract. We went from 4000 contracts in ’07 a day, to 11,000 in ’08. We’re 21,000 in ’09, we’re running at 300% over year by year, and call a volume, depending on price, $8-10 billion a month."
That's the European Climate Exchange (that Climate Exchange PLC also owns), created in response to the Kyoto Protocol/EU ETS and legally forced upon "emitters", and now its a $10 BILLION dollar-a-month scheme. On the ECX market, contracts are 1000 tons, and Sandor is ball-parking the US dollar figure from the average euro price of about 12-14 euros (a month ago when the interview happened). While the voluntary CCX trades CFI's (carbon financial instrument), the ECX trades the trades the official Kyoto Protocol unit of measure, the EUA's, the futures on which (yeah, they have a futures market too) are going for about 13.35 euros as I write. The ECX also trades the certified emission reduction credits, or CER's, which are not allotted by governments, but instead created by the UN as authorized offsets from the UN's Clean Development Mechanism (more detail on this later). Like at the CCX, the ECX has a central clearinghouse for transfer of the "credits" and other financial instruments from seller to buyer, and the buyer must wait for the clearinghouse to clear the transfers before accounting for any increased emission (if that's why the EUA, CER, NOx, SFI was purchased) in order to maintain compliance with the "legally binding" voluntary operation (the CCX) or totally mandatory, supranationally legally binding contract with the Kyoto Protocol (the ECX). And they call that "free market" solution. Again from the interview, Sandor said:
"I think this will unambiguously be the largest non-financial commodity in the world. If you consider worldwide emissions, the Europeans are 2 billion (tons), the proposed Waxman-Markey bill will be 3 times Europe at 6 billion tons of coverage. Canada, Australia, ultimately China and India, we’re talking about a worldwide crop of call it 30-35 billion tons, at $20 a ton, which would make it $700 billion, and commodities markets trade 10 to 20 times the crop, so I believe it’s a market that would be $10 Trillion a year."
Read that again with all the zeros--a $10,000,000,000,000 a year market on emissions credits. As for the ECX fees on EUA's and CER's, they are more reasonable than the CCX's fees on CFI's, which is to be expected considering the volume on the ECX. Like the CCX, there are some variables in calculating, but the basic fee is 2 euros per contract (1000 tons) per side, with more fees after that depending a various terms. The ECX May 2009 report indicated a total of 430,583 contracts traded in May, a 203% increase over May 2008 volume. And a n increase to $10 Trillion in trades a year would be a pretty sweet fee income for Climate Exchange PLC and its 60% shareholder banker/broker/hedger owners. Now, back to the timeline...
December 2004: CCFE launches the Sulfur Financial Instrument (SFI), a futures contract on the U.S. EPA SO2 emissions allowance.
The Chicago Climate Futures Exchange picked the oldest emissions financial instrument--the sulfur/acid rain credit originally federally regulated in by the Clean Air Act of 1990--as its first futures contract. Also this month and strangely not mentioned as a "significant event" is the December 2 2004 name change of Chicago Environmental PLC to Climate Exchange PLC. Now, we can start using the name Climate Exchange PLC officially.
December 2005: Montréal Exchange and Chicago Climate Exchange announce joint creation of a Canadian environmental products exchange, Montréal Climate Exchange.
Just as this says, the owners of Canada's oldest exchange, the Montreal Exchange (which incidentally specializes in options and derivatives!), and Dr Sandor and crew over at the CCX (not yet owned by Climate Exchange, but Sandor is CEO and/or chairman and majority shareholder of both) created a joint venture called the Montreal Climate Exchange (MCeX) The vice-chairman of the board of directors of MCeX is Dr Richard Sandor. Also on the board of the MCeX are two other executives of the CCX.
September 2006: Acquisition of 100% of CCX and ECX. Founder interests in the subsidiary companies are exchanged for shares in the publicly quoted holding company.
Finally, Climate Exchange PLC enters as a "significant event." In September 2006, Climate Exchange PLC acquires the CCX and the ECX. And there are lots of "founder interests" in the CCX/ECX in Climate Exchange PLC, namely of course Dr Sandor, who is CEO is both, and the majority shareholder. The deal was listed on the ECX cite with a date of March 31 2006 with the following explanation:
"The Board of Climate Exchange Plc is pleased to announce that it has entered into heads of agreement to acquire the outstanding shares in the Chicago Climate Exchange, Inc. (CCX). It should be noted that Richard L. Sandor, Chairman and Chief Executive Officer of CCX and Chairman of Climate Exchange Plc, is a majority shareholder, along with related parties, in CCX. This will result in Climate Exchange Plc owning 100% of the European Climate Exchange and the Chicago Climate Exchange."
Also at this time is when Goldman Sachs acquired a more than 10% stake in Climate Exchange PLC.
February 2007: CCFE launches the Nitrogen Financial Instrument (“NFI”), a futures contract on the U.S. EPA NOx emission allowance.
The NOx is nitrogen oxides, a catch-all term for things that the EPA considers to cause smog (and acid rain, which is also SOx), so this is a smog futures contract. Some states, like Illinois, are under federal mandate to reduce emissions (due to the Clean Air Act), and there is an official NOx trading scheme, called the NOx SIP Trading Scheme. This futures contract, and the original spot NOx financial instrument, are big parts of the "price-finding" for NOx, the credits for which are NOT free from states under federal mandate to reduce NOx emission. In 2003, Illinois sold 2800 NOx ERC (Early Reduction Credits) to the major electrical companies for a price of $2000 per credit. The CCFE's NOx futures contract is a derivative financial instrument.
April 2007: CCFE launches an options contract on the SFI (Sulfur Financial Instrument) futures contract.
The futures contract for SFI was already established, so this is an options contract on the futures contract--ie puts, calls, etc on futures. This is CRAZY--it is a further derivative on a derivative.
May 2007: CCX announces formation of the California Climate Exchange to develop and trade financial instruments relevant to the California Global Warming Solutions Act, AB 32.
CCX launched the California Climate Exchange to take advantage of legislation in California requiring reductions in a cap-and-trade like fashion. The state created the California Climate Action Registry, and so it opened the market with 26,000 "Climate Reserve Tons" (CRT's) in 26 contracts of 1000 tons each. These were originally created by the California Action Reserve and distributed to companies. The CCX created the California Climate Exchange as a marketplace for selling these CRT's. It has been of limited success, but the CCX generates the normal fees from these trades, as well as any other.
September 2007: Climate Exchange plc and Deutsche Bank launch trading in catastrophe event-linked futures on CCFE (IFEX).
This is HUGE! The lack of info on this site when discussing these things is crazy, so let me elaborate. The IFEX is the Insurance Futures Exchange. You can watch the hurricane (literally, I'm NOT kidding, they have a hurricane spinning around) on their "catastrophe event-linked" IFEX home page. The IFEX is "a indirect wholly owned subsidiary of Climate Exchange plc," and trades futures contracts on catastrophic events in the form of "event linked futures," or ELF's. ELF's are a future's version of the Industry Loss Warranty (ILW), which is a derivate re-insurance contract. ILW's are agreements to pay out specified "limits" to the individual purchaser based on the industry loss in the case of a catastrophe (industry slang "cat"). For example, the purchaser of $200 million in coverage (the "limit") for a $30 billion catastrophe ("industry loss" trigger), with an ILW, will receive from the re-insurer who accepted the deal $200 million in cash if the total industry loss for the event reaches $30 billion. The thing is, like all derivates, these are OTC deals, and many of the writers of these ILW's are not re-insurers (as if that means anything--AIG?), but hedge funds and other leveraged groups who take the bets assuming they won't have to pay out. And they are usually right. BUT, and here's a big but, at least the ILW's have "ultimate net loss" clauses, which means the buyer has to prove they actually lost something due to the event to get paid, ie they are an insurance company who purchased the ILW as re-insurance, and they have suffered huge losses which they need their "limit" to cover. How about the IFEX ELF's, do they have the same "ultimate net loss" clause? I'll let IFEX answer:
"IFEX ELFs are contracts for difference and NOT reinsurance contracts. IFEX ELFs have similar economic characteristics to ILW reinsurance policies except that buyers of the contracts do not have to suffer losses to receive a payment once the industry loss strike amount has been reached. In other words ELFs do not have 'Ultimate Net Loss' clauses."
You might be wondering exactly what kinds of "cats" they are selling futures on over at the IFEX. Skip down the timeline to July 2008, and you'll see Climate Exchange PLC's addition of "Florida Wind and Gulf Coast Tropical Wind Futures", aka tropical storms and hurricanes IFEX contracts (I'll stay away from discussing HAARP at this point...).
Noteworthy also is the lack of detail about the Duetsche Bank deal. The deal is an undisclosed equity investment, the general terms of which are:
"Deutsche Bank will contribute certain IP (intellectual property) rights and provide assistance in connection with the launch of the IFEX Event Loss Future Contracts to be traded on the Chicago Climate Futures Exchange in return for the right to acquire a minority interest in IFEX and, depending on the future valuation of IFEX, the right to exchange that interest for shares in Climate Exchange with a maximum market value of up to $50 million."
Also joining the "cat" party is Swiss RE--yes, that Swiss RE that lost billions in the subprime meltdown. Indeed, the world's largest re-insurer, also joined the IFEX in 2008. General Electric own almost 9% of Swiss RE, as the result of Swiss RE's purchase of GE's insurance arm in 2006, and just this year, Warren Buffett's Berkshire Hathaway took a $2.6 billion, 3% stake in Swiss RE. Swiss RE has innovated "cat bonds" or catastrophe event-linked securities for last few years, as the OTC derivative market exploded. The chairman of the IFEX is Neil Eckert (who remember is also CEO of Climate Exchange PLC) and he said this of the IFEX, perhaps foreseeing Swiss RE's role in the future:
"This development is in response to numerous enquiries from market participants and is part of our strategy to roll out additional regional contracts and look to new perils such as winter storm, tornado and earthquake. We are also delighted with the increasing number of traders as we approach the wind season."
"Look to new perils?" While the IFEX may not have an Earthquake Futures just yet, this derivative, believe it or not, has already been created--by no other than Swiss RE. From Swiss RE's site:
"In June (2007), Swiss RE sponsors the first Mediterranean earthquake risk bond worth USD 100 million, for the protection against earthquake risk in Turkey, Greece, Israel, Portugal and Cyprus. This is the first time that earthquake risk in these countries has been securitized in the capital markets."
Swiss RE might have been the first, but it won't be the last, as the IFEX's goal is to create a whole market on "new perils" futures, and maybe even IFEX securitized products. So now, right under MBS (mortgage-back securities) on the list of ABS, we can add HBS (hurricane-backed securities), and EBS (earthquake-backed securities). Oh wait, I almost forgot BBS (blizzard-backed securities).
Also in September 2007: The year 2007 is when major bank interests flooded into Climate Exchange PLC. By September, as this press release indicates, INVESCO owned over 29% of Climate Exchange shares in issue on behalf of those several banks including State Street Trust (held 945,990 shares), Mellon Bank (348,588 shares), and JP Morgan Chase (178,934 shares), and that mysterious Citigroup-owned Vidacos Nominees (11,549,992 shares). Goldman Sachs still held their over 10% stake.
February 2008: CCFE launches CFI (Carbon Financial Instrument) options contract.
Real simple--now you can run options on the price of the CFI, or carbon credits. The options include puts and calls like any other market, where owners of carbon credits can "lend" them to the buyers of calls or puts, in exchange for a premium. This will be very interesting to watch as the cap-and-trade scheme moves along, as you might see some very short term short-selling if things look bad, or likewise short term run-ups if things look real good. Here's a site that monitors CFI Futures.
July 2008: CCX signs agreement with China national Petroleum Corporation Assets Management Co. Ltd and the City of Tianjin to jointly engage in emissions trading in China.
China National Petroleum Corporation is a state-owned energy company in China, the biggest in China, and while the CCX calls their agreement a joint effort, CNPC owns 53% of the Tianjin Exchange, and the CCX (thus Climate Exchange PLC) owns 25%. From the Tianjin Exchange site:
"At the request of the State Council, Tianjin Climate Exchange is established as China's first comprehensive platform for trading carbon credits under the Clean Development Mechanism, and will promote environmental protection and emission reduction by means of market and financial measures."
Listed on the CCX membership are the following Chinese companies, which have everything to do with the Clean Development Mechanism (CDM's) referred to above:
Xi'an Zhongyang Electric Corporation (makers of energy-efficient electrical equipment and reactors)
Hubei Sanhuan Development Corporation
China Energy Conservation and Environmental Protection Technology Investment LTD,
"a Chinese State-owned enterprise that is directly engaged in projects and businesses in the carbon development industry in China, including investments in wind farms, hydro power generation projects, etc." (link, this is 10-K from another company, so crtl-F "investment")
Guizhou Zhongshui Hengyuan Project Management Consulting CompanyLiaoning Negfa Weiye Pipe Network Construction Operation Co. Ltd.
On the CCX site, they are all listed as offset providers, and though the CCX doesn't explain it, they are providing offsets through the UN's Clean Development Mechanism "pipeline." (The UN's CDM is explained in detail below under my heading "UN and the Emissions Market"). The trades on the Tianjin Exchange are of these CDM offsets. The below section will get into this in detail.
July 2008: Climate Exchange plc invests in enVex in Australia. Climate Exchange plc establishes Level-1 American Depositary Receipt programme.
You read that correctly, a Level-1 American Depositary Receipt "programme"--because Climate Exchange PLC is not a US company! Again, the registered address of Climate Exchange PLC is the Isle of Man, UK, and they own the "climate exchanges" in London and in Chicago? Is anyone else pointing out the fact that this cap-and-trade scheme will be run by an off-shore haven, Isle of Man company?! Oh but that's not all, because consider how ADR's work. ADR's are used by foreign companies to gain exposure in on US markets, and were created by no other than JP Morgan, in 1927 (In fact, go to http://www.adr.com/ right now and you'll be at a JP Morgan Chase site!). Basically, ADRs are "receipts" of shares of a foreign company that are purchased by an American bank and "deposited" with that bank, which then repackages these shares into over-the-counter (OTC) products. A single ADR usually contains more than one share, as the bank will price the ADR's to make their value more relative (ie, a penny share from some company in India is repackaged to 1500 shares for a $15 ADR). Here's more about Level-1 ADR's
"Level 1 shares can only be traded on the OTC market and the company has minimal reporting requirements with the SEC. The company is not required to issue quarterly or annual reports in compliance with U.S. GAAP. However, the company must have a security listed on one or more stock exchange in a foreign jurisdiction and must publish in English on its website its annual report in the form required by the laws of the country of incorporation, organization or domicile."
As if that's not a convoluted enough investment product for you, there's yet another advantage to Climate Exchange PLC's choice to incorporate on the Isle of Man. From their own site, Climate Exchange says "The Company is incorporated in the Isle of Man and therefore the rights of shareholders may be different from the rights of shareholders in a UK incorporated company." Not to mention a US company? Dr Sandor said in the interview that Climate Exchange PLC was "look(ing) forward to implementing whatever program the US government does." Yeah, I bet.
July 2008: (cont) IFEX launches Florida Wind and Gulf Coast Tropical Wind Futures.
Again, the IFEX is the Deutsche Bank/Climate Exchange joint operation for trading in "catastrophe event-linked futures" on the CCFE (Chicago Climate Futures Exchange), and less than one year after its launch, it started trading futures on "Tropical Wind," aka storms and hurricanes. As mentioned above, Swiss RE's involvement in the IFEX should be noted.
August 2008: CCFE launches RGGI futures and options contract. CCX and Dow Jones Indexes launch the Dow Jones/CCX Emissions Index Series.
The RGGI is the Regional Greenhouse Gas Initiative, and is run by RGGI, Inc, a Delaware non-profit 501(c)(3) formed in September 2007 to implement the scheme. The RGGI is currently the only mandatory emission trading scheme in the US to "reduce carbon emissions," with ten states signed on: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont. The board of directors at RGGI includes two members for each of the ten states, and all the members are from various state energy/environmental agencies.
Climate Exchange PLC's CCFE had to launch a futures contract that on RGGI credits because they hadn't yet been distributed in August 2008 when the futures market started. The NYMEX launched the official exchange for the RGGI credits, the RGGI-COATS, or RGGI CO2 Allowance Trading System. The NYMEX also had created a futures/options exchange for the RGGI even before the auctions. The credits are auctioned off by RGGI Inc, and power plants in the 10 states must purchase them to satisfy their obligations for reduction, the first phase of which became mandatory on January 1 2009. The first auctions of the RGGI credits happened on September 25, with six states participating, and the results were $3.07 per "CO2 Allowance"---to the tune of $35,575,738.09. To date, three more auctions have occurred with all states in, for a total of more than a quarter billion dollars in sales of RGGI allowances, or to be exact $262,314,303.13--in nine months.
A quarter billion dollars in nine months? The RGGI Inc, by the way, promises to use "the proceeds of allowance auctions to support low-carbon-intensity solutions, including energy efficiency and clean renewable energy, such as solar and wind power" (or in other words, more centralized energy projects). You might be wondering if anyone can buy these credits, or if the market is restricted to those power plants, who, after all are, required to "offset their emissions" with the credits. Well, considering the NYMEX has an exchange for it, you guessed right if you guessed that, indeed, anyone can get in--click here to get "all of the information and forms you will need to apply to bid in the current RGGI auction"! Do you think some big players might have a hand in this mandatory market? Hmm...let's see, there's a mandatory market in which anyone with the money can buy the credits, and then there is a group of power plants who must purchase the credits from whoever's got them, and the power powers themselves can just pass the costs onto their customers...yeah, I think there might be some interest in that. Here's the Owner/Operator Report disclosed by RGGI, Inc to show the auction participants and allowance purchasers. Many the names you see in this participant report you'll also see on the CCX members lists. Open the PDF version, and just note that every account after page 25 is a "Compliance" account. The first 25 pages are of voluntary participants, many of which are actually energy trading firms from the very power companies that also have to buy the credits to comply. The energy companies are very much in favor of the whole cap-and-trade scheme because any expenses they incur will be passed onto the customer, and meanwhile they can aquire and trade these credits through thier trading arms, ala Enron. Remember, in the interview, Dr Sador said that 22% of the major power companies were participants in the CCX. The power companies have both "compliance" and "non-compliance" trading interests in the credits/allowance markets. I've taken a several from the Owner/Operators list to demonstrate the "non-compliance" interests in the RGGI auctions, and how they are betting and trading on allowances that driving up prices for the electricity customer in RGGI states:
Non-Profits and For-Profit "Environmental interests"
Brooklyn Navy Yard Cogeneration (of Brooklyn Navy Yard Development Corporation, a City of New York owned an industrial
park in Brooklyn established as a non-profit development group)
Clean Air Conservancy (a non-profit environmental group that retires CO2 credits by putting them in their "Emission Bank")
MLCI (Maine Lakes Conservancy Institute, a non-profit environmental group)
Axiom Methods (Axiom Methods, self-described "carbon offset developer and facilitator)
Climate Clean (a private LLC who recently partnered with EcoSecurites to create verified emissions reductions credits)
Sterling Planet (Sterling Planet, providing "carbon neutral solutions" for companies for a small fee..)
EnvironmentalXC (of Environmental XC, a Toronto-based "climate change consulting" firm)
Banks, Investment Firms, Brokers
JPMorgan Ventures Energy Corporation (needs no explanation, Climate Exchange PLC shareholder)
Morgan Stanley Capital Group, Inc
Barclay Bank PLC (the massive UK bank)
BNP Paribas (the massive French bank and FRS Primary Dealer, shareholder in Climate Exchange PLC through Fortis)
"RGGI General Account" (this is listed to Lehman Brothers Commodity Services, interestingly)
J. Aron & Company (you'd never know it by the name, but this is the speculative commodity trading arm of Goldman Sachs, Climate Exchange PLC shareholder)
RBC (RBC Capital Markets, or Royal Bank of Canada Capital Markets)
Evolution Markets (Evolution Markets, "environmental brokerage solution" including "weather derivatives markets")
C-Quest Capital (of C-Quest, C-Quest Capital is their "carbon finance business")
Private Capital Groups, Hedge Funds
Akeida 2008 (of Akeida Environmental Master Fund, an private investment fund run by NYC-based Akeida Capital)
UCF (of Universal Carbon Fund, a Phoenix-based hedge fund with a minimum $250,000 entry)
Green Fund (of Green Fund Partners LLC, a Chicago based fund that is active in all OTC carbon markets)
Five Rings Capital (NYC based hedge fund)
Michael Flett (an individual, former successful NYSE broker who runs the Flett Exchange)
Silas Proft (an individual who apparently knows Michael Flett, because he's selling his RGGI credits on the Flett Exchange)
RS Lynch (of RS Lynch & Company, a energy consultant firm)
Verso Paper (of Verso Paper, makers of paper products)
Element Markets (alternative clean energy consultants and owners of carbon credit portfolios)
Hess Carbon (of Hess Corporation, the oil refiner, oil explorer, and energy trader)
Tradax Energy (an ethanol and other chemical seller)
ICAP RGGI Allowance Account (of ICAP United, a marketer of energy who also works with ICE on energy trading markets)
LDES CO2 Account (of Louis Dreyfus Energy Services, energy trader and distributor of natural gas)
Vitol (of Vitol, who--to quote their site--is "thriving proof that a multi-billion dollar oil conglomerate does not have to be a
lumbering corporate giant," also an energy trader)
Cargill Power Markets LLC (of Cargill, the feed manufacturer, who also has a huge energy trading division)
Hess Carbon (of Hess Corporation, the oil refiner, oil explorer, and energy trader)
ConocoPhillips (the oil company's energy trading division)
AES (several accounts, all of AES, a global power provider with plants in 29 countries and some RGGI states)
Calpine Energy Services (Calpine Energy, electricity provider, 76 plants in US including RGGI states)
ANP Blackstone (of American National Power Blackstone Energy, electricity provider with plants in RGGI states)
RPL Holdings (of Renewable Power and Light PLC, a UK-based power company with plants in RGGI states)
Indeck (of Indeck Energy Service Inc, electricity provider with plants in RGGI states)
Equus Power 1 (of Equus Freeport Power, an electricity provider with plants in RGGI states)
RGGI-1 (of Connectiv Energy, an electricity provider and trader with plants in RGGI states)
Mirant Energy Trading (of Mirant Corporation, an electricity provider with plants in RGGI states)
Dynergy Holdings, Inc (of Dynergy, Texas-based electricity provider with plants in RGGI states)
Sempra Energy Trading, LLC (of Sempra Energy, San Diego-based electricity provider with no plants in RGGI states)
Dominion Energy Marketing, Inc (of Dominion Energy, electricity provider with no plants in RGGI states, big on SmartGrid)
National Grid (of National Grid PLC, a UK-based electricity provider with plants in RGGI states. More about them later)
You know, its just too bad that we don't have a historical example to work with to see what happens when energy companies create huge carbon-derivatives marketing sub-companies and unleash them. What did you say--Enron? what's that? Good thing we have the banks in there, they'll save us! (By the way, here's the banks and many of these same players at it again in the 2009 EPA acid rain auctions...)
Back to the Climate Exchange PLC timeline....
November 2008: CCFE lists futures contracts based on anticipated U.S. mandatory greenhouse gas cap and trade program.
Bingo--"based on anticipated U.S. mandatory greenhouse gas cap and trade program." The House has passed the American Clean Energy and Security Act of 2009, and the futures on it have been running for seven months.
February 2009: CCFE Announces the Successful Launch of Futures Contracts on California Climate Action Registry
The spot contracts initially started of California "Climate Reserve Tons" in May 2007 on the CCX's California Climate Exchange now have futures derivative to match. Next will be options on the futures--oh wait, they are already doing on that with the options contract on the SFI (sulfur) contract. Okay, then maybe futures on the options on the futures. I hope I'm being sarcastic...
March 2009: Launch of ECX EUA & CER Daily Futures Contracts
CER are the carbon emission reduction credits and EUA are European Union Allowances. This year saw the launch of futures contracts on these products on the ECX.
April 2009: CCFE launches Renewable Energy Certificate (REC) Futures.
The REC's are part of the EPA's program but have a global presences as well, as the offset idea behind REC's is almost part of the EU ETS. According to the EPA, a renewable energy certificate:
"represents the property rights to the environmental, social, and other nonpower qualities of renewable electricity generation. A REC, and its associated attributes and benefits, can be sold separately from the underlying physical electricity associated with a renewable-based generation source."
The "nonpower qualities of electrical productions?" Maybe this will clarify it:
"As renewable generators producer electricity, they create one REC for every 1000 kilowatt-hours (or 1 megawatt-hour) of electricity placed on the grid. If the physical electricity and the associated RECs are sold to separate buyers, the electricity is no longer considered “renewable” or “green.” The REC product is what conveys the attributes and benefits of the renewable electricity, not the electricity itself."
Are you still confused? That is directly from the EPA's site, right before this dusey:
"RECs embody these positive environmental impacts and convey these benefits to the REC owner."
Embody the environmental impacts and convey the benefits to the owner? This is seriously crazy, this is totally out of control, derivative carbon madness. That verbiage is straight off a government site--"embody"? To explain more clearly, the REC the scheme allows for compliance with the various mandatory programs that require power companies to have xx% of their energy production from renewable sources, depending on the state. Therefore, a power company that cannot produce its own REC by actually owning and operating a renewable generator (like a windmill farm) then has to purchase the REC from an REC provider, who is "creating" the REC's by creating renewable energy. The actual energy must be sold to another party who is not the purchaser of the REC, so the renewable generator effectively makes two tradable products with every 1000 kwh of electricity produced--one, the electricity, and two, the REC. The power company that then purchases that REC is not actually producing any renewable energy itself, but its purchase of the REC's means it is "laying claim to and accounting for the associated attributes of renewable-based generation" (EPA-speak). The renewable generator then sells the actual electricity, which has no offset value, to a customer. You read that right--the actual renewable energy has no offset value, only the REC certificate.
In other words, it is subsidizing the producer of the renewable electricity because they can sell two "products," including a special product that only they, the renewable generator, can "create." So if it costs twice as much to produce electricity through a renewable method, the renewable energy producer will receive two incomes from the same effort, because it is allowed to "create" the REC's, which non-renewable power companies will then purchase. So getting back to the contract, as of April 2009, Climate Exchange PLC's CCFE now has a futures contract on the price of this new environmental financial product that is truly created up out of thin air.
The Global Emissions Market
Which basically brings us up to date on the history of Dr Sandor's Climate Exchange PLC, and its major exchanges, the CCX and ECX. A final piece of the puzzle for globalist derivative masters is bringing these markets together, which is only possible through a US mandatory carbon market. The US is now closer with the House's passage of the Waxman-Markey bill. A global carbon market with a single, global price of carbon is the next step.
Right now, there is a huge spread on carbon allowance prices between the mandatory ECX and the voluntary CCX, as should be expected. Below is a comparison of the "products" from each exchange, which are not interchangeable.
represents 1 ton CO2
1000 tonne contracts (thousand)
Price: 14.10 euros
represents 1 ton CO2
100 tonne contracts (hundred)
As you can see, there is no difference in the products, only the size of the contracts. But there is a huge difference in price. Even after the adjustment for contract size (multiply the CFI contract price by ten to calculate for 1000 tonnes instead of 100), you still have the EUA (at $19.90 per) at over double the CFI (which would adjust to $9.50 per) To see these numbers and this huge spread in any normal market would have arbitrage written all over it! But although these "products" are technically the same--both the CFI and EUA are for 1 metric ton of CO2--one is government distributed, and one is not. Again, they call this a "free-market solution?" Since the CFI is not acceptable as or convertible to a EUA for the mandatory market in Europe, there is no chance for arbitrage, because as far as the EU is concerned, the (US) CFI is not legit. Of course, Climate Exchange PLC owns both the ECX and CCX, and the right to the products therein, including the EUA futures product format which is the primary way the EUA's are sold. The EU serial number is apparently what makes the EUA so much more valuable. You can probably see why Climate Exchange PLC would be interested in a mandatory US market--what would a US government serial number do to the CFI price as far as bringing it in line with the EUA price, and how much closer to a uniform global carbon price would that bring the exchanges? Much closer.
The UN has made its desire for a global carbon market very clear--it is a major goal. In fact, it is goal of the Obama Adminstration to have a mandatory scheme for US emission in place before the UN climate change summit in Copenhagen coming in the fall. From the UN's document, Carbon Crunch: Meeting the Cost:
"To address the additional investments needed for mitigation in the short- to medium term (US$200-210bn by 2030) the scale of the carbon market would need to be increased considerably. Creating a global carbon market and using carbon finance to accelerate growth in developing countries are considered urgent priorities for international co-operation. A functioning international market first needs the various nationally evolving emissions trading schemes to be designed to facilitate interconnection. As the CCWG has noted previously, widening the scope of emissions trading systems by linking the EU ETS with national and regional schemes in the north-eastern states of the US (RGGI), on the US west coast, in New Zealand, the NSW GGAS23 and other schemes could provide an important impetus for further market development and reduce price volatilities while increasing liquidity."
Dr Sandor made it clear in the Bloomberg interview:
"Once you price CO2 and put a price on it, you find, as you would with any other product, it tends to be rationed. We as a people on this planet have lived under the false concept that air and water were free. And we’ve learned with a planet of 7 billion people, that we have to ration these precious goods. And the good old price system is the best way to do it."
Yes, indeed, the good old price system...and reforced by supranational governmental mandates. Limiting energy production and rationing energy use in the name of reducing carbon emissions is in the cards. The only reason CO2 in Europe is not free because the government says it is not free.
The Voluntary "Personal" Emissions Market
So what do you do if you're taking a flight across country, but you just can't stand to think of the huge carbon footprint that you are going to stain the earth with to do so? Some people would suggest you don't take the flight if its that big of a deal, but if you have some extra money laying around collecting dust, you can purchase your way out of your fix by buying your own personal carbon offsets! And even with your eyes closed, you will undoubtingly find a corrupt globalist bank or five willing to sell them to you!
It is the voluntary personal carbon credit market. Goldman Sachs, Lehman Brothers, and Citigroup and Duetsche Bank have already entered this email, so why not to jam a few more bank into the voluntary personal carbon emissions scheme? Okay, lets talk about ClimateCare, a voluntary carbon offset provider. Here's a short explanation of ClimateCare from their site:
"ClimateCare is a world leading carbon offset provider, founded in 1997, making reductions of greenhouse gases such as co2 on behalf of individuals and companies. These reductions are made through originating and investing in a global portfolio of renewable energy and energy efficiency projects, many of which are developed by ClimateCare's experts based around the world. The emissions reductions from all projects are independently verified and accredited under leading international standards such as GS VER, VCS and CDM and many bring huge benefits to people's health and welfare as well as helping to protect the climate."
In other words, you give Climate Care money to offset your carbon footprint, and they promise to do nice things for the environment. Except now, you give JPMorgan money for your carbon footprint and let them continue thier worldwide human exploitation banking scheme. That's right, JPMorgan Chase last year purchased ClimateCare, which makes sense considering their notable stake in Climate Exchange PLC, both in their own name and through Invesco. Check out the Climate Care website, and you'll see a carbon calculator. This is important, because according to JPMorgan--er, Climate Care,
"Each time we heat our homes, take a flight or drive the car, fossil fuels are burnt and CO2 is released into the atmosphere, causing climate change."
So there is the official carbon position of JPMorgan, made clear through their surrogate: "climate change" is caused by heating homes, taking flights, and driving cars. ClimateCare's carbon calculator is where you can enter in your daily activity and see what you own JPMorgan for carbon credits. You'll even get a certificate registering your carbon offset! As a truck driver, I decided to see what I owe JPMorgan for my emissions. They don't have a entry for "trucks," so I did "car, diesel, 6.25mpg, 140,000 miles per year." The result: 266 tons of carbon, and I apparently owe JPMorgan $3937.01 . Check out the Terms and Conditions for my carbon credits, here's the first one term from a whole page of terms:
"1.1. This website is provided by ClimateCare, which is a business unit of J.P. Morgan that funds projects with the specific aim of making reductions in CO2 and other greenhouse gas concentrations in order to reduce climate change. Your use of this web site and all calculators contained therein constitutes your agreement to the terms and conditions shown below, which may be subject to change from time to time. If you do not agree with these terms and conditions then you are not authorized to use this Web site, and specifically not the calculators provided within."
Anyone who continues their carbon purchase after reading that deserves a "certificate." JPMorgan takes this very seriously, and they were praised, along with Lehman Brothers, Bank of American, Morgan Stanley, Citigroup, BNP Paribas, Swiss RE, Barclay's, HBC, and lots of others, throughout this UN Working Group on Climate Change document, Carbon Crunch: Meeting the Cost for doing so (pg 6, 7). Also the UN believes that "various actions by financial institutions might influence the emissions behaviour of their clients," (pg 12) such as putting carbon footprints on thier statements and offering consultations to access the carbon footprint. Well, the UN should just send everyone to ClimateCare, that will fix everything...
How about the Carbon Bank, have you heard of that? Its an operation run by Morgan Stanley, which of course can bring it back to Citigroup, as Morgan Stanley Smith Barney is there new $1.7 trillion joint venture, and of course Citigroup has an apparently substantial stake in Climate Exchange PLC. Morgan Stanley’s Carbon Bank was launched in 2007 to help individuals and companies become voluntarily carbon-neutral. For a small fee. Also, Citigroup itself announced a $50 billion, ten-year goal aimed at unspecified anti-carbon investments. Also, Citi is a major player in the investment side of the UN's Clean Development Mechanism, as well as most of the other international banking interests. I should mention that the UN document cited above from the Working Group on Climate Change, Carbon Crunch: Meeting the Cost, is issued as a "CEO briefing" through the UN's UNEP Finance Initiative. It outlines the role of financial institutions--which is a good segue to the UN, which you knew has to be coming soon.
The UN and the Emissions Market
The UN is a huge part of this carbon trading scheme and the emission market. Without the UN, this market would not exist. (The more research I do, the more I come to think that Alex Jones is really not exaggerating when he says we are going into to the global new world order where we'll pay carbon taxes to the UN!) In the interview, Sandor said of the emission market that:
"So its mandated by the government. The emissions are capped. The cap goes down every year. And then those people who get below their cap are incentivized to do so, because they can sell them to people who can’t put the technology in very quickly."
However, he did not explain the role of the UN's Clean Development Mechanism in this operation, or else he would have started, "So its mandated by the UN...", but Dr Sandor certainly fully knows about the CDM.
According to his CCX website biography, Dr Sandor "was an expert advisor to the United Nations Conference on Trade and Development (UNCTAD) on tradable entitlements for the reduction of greenhouse gas emissions." Maybe that where he met Maurice Strong, who is currently on the board of the directors of Climate Exchange PLC's US-based carbon market exchance, the CCX. Sandor's involvement with the UNCTAD is more than interesting-- especially considering that one of the major ideas pushed by the UNCTAD was to develop a scheme whereby rich, first-world nation emitters could "earn" emissions credits by financing the development of "clean" projects in "emerging markets" instead of cleaning up their acts locally, where it is more expensive so to do. This idea is currently contained in the Waxman-Markey bill. According to Bloomberg,
"Democrats in the U.S. Congress are working on a climate-protection bill that would allow American emitters to use emerging-market and domestic offsets for potentially all of the carbon cuts required through 2025, according to New Carbon Finance. The bill, sponsored by Representatives Henry Waxman of California and Edward Markey of Massachusetts, reflects input from Richard L. Sandor, chairman and chief executive officer of Climate Exchange Plc, which owns the world’s biggest CO2 exchange in London."
As an "expert advisor" to the UNCTAD, Dr Sandor contributed to the current UN scheme that allows for exactly this international offset trading mechanism. From the same Bloomberg article above:
"The UN allows utilities and factories to exceed their EU limits by paying for low-pollution projects in emerging countries. Known as the Clean Development Mechanism, the program creates credits that are bought and sold by investors, mostly in the EU and Japan."
Again, the UN allows domestic utilities and factories to exceed their limits if they just fund "clean" projects elsewhere--and the get the credits. The Clean Development Mechanism is contained in Article 12 of the Kyoto Protocol, and is an offset trading mechanism. The CDM clause states that carbon emission reduction credits (CER's) can be created through the funding of carbon-reducing projects in developing countries. These CER's are, therefore, additional to the bucket of allowable EUA's created and "capped" by the original "cap-and-trade" goal of the European Union Emissions Trading Scheme--which is the only mandatory trading scheme that has resulted from the Kyoto Protocol, as the EU countries were signatories of the treaty. You can see the contracts for CER's on the ECX, and they usually got a a little less than the EUA's (European Union Allowances).
The current Waxman-Markey bill seeks to utilize these same CDM scheme, whereby domestic carbon emitters can compensate for these "horrible" carbon emissions by funding projects in other countries, and passing their costs onto their domestic American customers. But there's more--the CER's created from these CDM projects can then be sold to outside investors who place them in the emission market for profit, and for other foreign emitters to purchase to cover their reduction obligations. Also, if the project is funded directly by a foreign emitter, the foreign emitter and domestic administrators can develop a contract whereby the emitter’s funding of the project entitles it to own the created CER's, which can then be used by the emitter to compensate for its failure to meet emissions reductions obligations in its own country, or of course, sold. Therefore, an emitter in a developed country, where reducing its emissions can mean implementing expensive technologies, can simply create and acquire new emissions credits by funding an allegedly carbon emission-reducing project in another, undeveloped country. If the project is certified by the UN, the CER's are created, and viola, carbon money CER is made. And I just said the magic word--money--because where there's money, there's financial institutions. And there's lots of financial institutions in the CDM world. I've already outlined the significant interests in the exchange-owner, Climate Exchange PLC, but now consider the role of investors in the carbon market.
Seeing Goldman Sachs, JP Morgan, BNP Paribas, RBC, Morgan Stanley, and likes above in the RGGI auctions should be bad enough, and their mere participation in the market drives up the costs of electricity for all customers in those ten states, despite the quarter billion in revenues. But the financial institutions' involvement in the CDM scheme is even more disturbing, because these interests are globalizing and taking over domestic energy markets in developing countries, using totalitarian governments like China to displace millions of people to make way for their "clean" hydroelectric dams, wasting the resources of other countries, and claiming them and the CER's as their own in the name of the environment--and making lots of money off this "pipeline." The CDM "pipeline" is created when groups (usually banks or private capital funds) in rich nations fund "qualified" projects in poor nations that have an alleged carbon-reducing impact. In return, the investors are able to claim the carbon offsets as carbon emission reductions credits (those CER's) and sell them accordingly. And in this abuse-ridden UN program, poor countries are not getting "carbon clean," the are getting looted.
As I mentioned above, the Tianjin Exchange is based on this CDM idea, and China is a major participant in the UN's program. It has been extensively documented by various human rights groups that many of the CDM projects approved by the UN to create credits to sell to European countries result in the dislocation of thousands of Chinese people. The hydroelectric programs especially, of which China has at least 763 CDM hydroelectric projects planned right now, have resulted in the displacement of hundreds of thousands of Chinese people. The same has happened in Burma/Myanmar, where the soldiers run the people off their land at gunpoint. Many of these dam projects that began to see resistance from nascent indigenous movements that started to gain some traction finally around 2000-2001 were rebuffed by the UN's CDM program and the resistance quelled by the lucrative new carbon market that gave the uncompassionate national authorities serious financial motives simply to flood the forests and remove the people. Add funding by international interests and the World Bank, and there is no hope for the people trying to resist their "green" future. And of course, these same people who are actually being displaced and having their modest livelihoods ruined by the carbon market have a fraction of the evil "carbon footprint" of anyone in the developed world taking advantage of them.
One of the Chinese firms listed above under the comments on the Tianjin Exchange, the Guizhou Zhongshui Hengyuan Project Management Consulting Company, is an example of the specific, massive financial interests in the CDM market. Guizhou has a few projects being funded by a "Foreign Partner" called Gaisi Peony Capital. Gaisi Peony Capital is part of Peony Capital,
a carbon investment fund that uses CDM's garnered from projects in China to generate handsome returns. In fact, Bill Gates made a $136 million investment in the firm Peony Capital, because, as explained here:
"The company, which aims to achieve attractive returns by making equity investments in sustainable development projects and then trading the carbon credits on the global market, has plans to buy as much as 10 million tons worth of carbon emission reduction (CER) credits by 2012."
Peony Capital is just one of the many investors in the CDM's (more of their projects). The group, by the way, is registered in the Cayman Islands (bottom of their homepage), and, if you look up their many projects, you'll also see them as Peony Capital SARL, or Societe a Responsabilite Limitee--Luxembourg's version of an LLC. But Peony Capital is not alone. Check out this list from Reuters of the dozens of investment firms, banks, private capital, and energy traders looking to capture CRE's through the CDM program. You'll notice the World Bank is on that list, because the World Bank is a major funder of these projects as well. I don't need to elaborate on the horrendous history of the World Bank's "investments" in developing nations. They steal everything else, why not the natural resources for CRE's now?
There's a lot of money in this game. And that's just how the UN wants it, as it makes clear in its UN Working Group on Climate Change document, Carbon Crunch: Meeting the Cost:
"Financial institutions and the finance sector as a whole have important roles to play in helping policy decision makers create the right policy environment to mobilise investments and direct financial flows to address climate change. Financial institutions need to engage with government decision makers in all the relevant ministries on policies and incentives to combat climate change at the local, regional, national and international levels (p 14)."
And they are taking that advice--just look at the American Clean Energy and Security Act, with its ADM provisioning, and its overwhelming support by financial institutions.
The American Clean Energy and Security Act
Despite the efforts of the likes of Dr Sandor and the UN, the US has thankfully not rushed headlong into this carbon fraud, though many individual states have and hundreds of corporations and financial institutions as well. At least there isn't a mandatory federal cap-and-trade scheme...yet. But, of course, it is much closer now after the House's vote on Friday. The American Clean Energy and Security Act of 2009, aka the Waxman-Markey bill, was passed, and it has received overwhelming support from the corporate community--everyone from NIKE, Starbucks, American Electric Power, Duke Energy, HP, National Grid, and PG&E, as well as the UN and others. In fact, these corporations even funded a nationwide advertisement urging the President and Congress to pass legislation "putting a price on carbon," to quote Dr Sandor.
All major power companies support the plan, including National Grid, which serves electricity to over 5 million, and natural gas to over 3.4 million customers in NY and New England, and engages in energy trading and carbon credit trading (the are on the RGGI Owner/Operator disclosure under several names other than thier compliance account). I wonder how many of those American customers, and indeed our American congressmen, know that "National Grid" is just part of the company's name--that the rest is PLC. That's right, National Grid PLC is a London-based power (gas and electric) company that generates 40% of its profits from the US through the purchase of several formerly-US local power and gas companies. As a non-US company, all US shares are distributed as American Depository Shares, and are managed by the Bank of New York.
National Grid PLC is a good example to use to close up this report on the emissions market, because they demonstrate so well both the lack of knowledge on the real players in this scheme and the specific financial interests that many groups have in controlling the flow of energy through the artificial carbon market. Check out this internal powerpoint presentation from National Grid PLC, "US Regulation and Energy Policy." Its from their website, and it explains exactly how National Grid PLC plans to get some money from the Stimulus package (pg 15), how they've already submitted their "list of shovel-ready projects" (pg 17), how "Stimulus Funding directed largely via States continue to focus through existing National Grid programs" (pg 18), and about National Grid PLC's role in the "Smart Grid" (pg 2, 4, 11, 13, 14, 15, 18, 19, 20, 21). How about a whole page (pg 21) on "Potential stimulus funding sources"? Below is a direct copy:
Matching Fund Grants - Government funds up to 50% of projects associated with smart grid. Most attractive but needs certainty of suitable cost recovery mechanism for portion funded by customers
Bonus Depreciation – Extension of temporary provision until 31/12/09 allowing 50% tax depreciation in first year. Attractive within calendar constraints.
Investment/Production Tax Credits – Includes direct and indirect benefits to National Grid. ITC benefit with Solar effort and ITC/PTC benefit in pricing Long Term Contracts
Loan Guarantees – Federally guaranteed and thus lower cost debt. Not compatible with our practice of central funding and any benefit of less expensive debt not likely to be retained.
Additionally, National Grid PLC has examined how the "Stimulus incentives" help their company and customers because, to quote directly, "Customers benefit through direct & indirect subsidies from taxpayers" and "Company receives benefits, primarily in the form of cash flow up front" (pg 22). Their emphasis in bold, not mine--but if they wouldn't have, I would have.
Furthermore, what is explicit about National Grid PLC's energy policy is that is not simply about "cleaner" energy, it is about energy rationing. Remember the quote from Dr Sandor in the interview that sparked all this:
"We as a people on this planet have lived under the false concept that air and water were free. And we’ve learned with a planet of 7 billion people, that we have to ration these precious goods."
National Grid PLC agrees. To quote their own corporate policy brief on energy, NG PLC says "UK and US regulation needs to be aligned with public policy to incentivize energy savings and not energy use." Additionally, to quote, "National Grid also supports measures such as encouraging the development of smart metering, new tariffs and better billing that will help and encourage consumers to value the energy they use." To drill their point home even more, National Grid PLC "is also changing its customer bills in the US to show the carbon emitted from their own energy use." This is interesting to me, because the last time I checked, the total carbon footprint of using electricity is ZERO--its the making the electricity that is such a dangerous carbon-emitting operation. So, if National Grid PLC wanted to be honest, they could change their US customer bills to include the facts: one, the energy use of their customers, and two, the amount of evil carbon National Grid chooses, as a company, to emit to sell it to them at a profit. But facts and carbon-mongering are usually not compatible.
The energy rationing idea is central to the carbon market because centralization itself is what makes the globalized market possible. There are no UN CDM projects to put solar panels on everyone in Nigeria’s rooftop so they can be "carbon neutral" and be independent--no, there are only projects that result in the centralization of energy producing means in the hands of the few and keeping the rest of the people dependent on them. The idea of local independence on something as important as energy is anathema to the globalists because it destroys any reason why anyone would need to bow to them. National Grid PLC telling customers that their energy use is causing a carbon catastrophe and not National Grid's energy production is the Orwellian logic they apparently use to excuse the fact that they are indeed violating their own "carbon" morals, which is to be expected--because their carbon morals are illogical.
Illogical is a word that can sum up the whole carbon/emissions market. I could have saved you the trouble of reading perhaps 30 pages of information if I would have made a blank post with the headline "Emissions Market = Illogical." But now I have proof. Lots and lots and lots of proof. The only thing "green" about this scam are the dollar bills.