600 W. St. Joseph StSuite 10

Lansing, MI 49833www.delta-institute.org

May 23, 2007

West Michigan Chapter US Green Building CouncilGrand Rapids

The US Carbon Market

A Brief Look at the Chicago Climate Exchange and the Role of Carbon Offsets

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about us

Programs:•Pollution Prevention & Energy Efficiency

•Policy development, technical assistance, green design, implementation financing

•Brownfield Redevelopment•Financing, land assembly, site control, remediation

•Sustainability & Community Development•Sustainable purchasing, organic food systems, environmental training

•Emissions Trading Markets•Creating community benefits through aggregation and trading of carbon offset credits on the Chicago Climate Exchange

Mission: Improve Environmental Quality and Promote Community Economic Development in the Great Lakes Region

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what is global warming•Gases form a blanket around the earth, trapping heat from the sun within the earth’s atmosphere

•Six primary greenhouse gases•Carbon dioxide•Methane•Nitrous Oxide•Sulfur Hexafluoride•Perfluorocarbons•Hydroflurocarbons

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global carbon dioxide cycle

Illustration courtesy of NASA Earth Science Enterprise

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emissions trading marketsOrigin – 1990 Amendments to Clear Air ActEnvironmental Problem - Acid RainSolution – Cap-and-Trade mechanism to regular sulfur dioxide emissions from power plantsCap-and-Trade Basics:•Government caps the level of SO2 emissions and distributes permits in one-ton increments for its release•Each power plant must have enough permits to cover annual emissions•Power plants that cannot cover annual emissions must either reduce emissions or buy surplus permits from other sources•The government reduces the cap frequently, increasing the value of a permit•Over time, becomes more economical to reduce emissions than to continue buying permits

Results:•1980 – emissions at 17.5 million tons•2010 – cap set at 8.95 millions tons•Market price for permit - $616

Data Courtesy of EvolutionMarkets.com

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Chicago Climate Exchange (CCX®)•Voluntary, private, member-based, cap-and-trade market for the reduction of greenhouse gases•Self-regulated market with legally binding emission reduction targets•Cap is the member’s average annual emissions from 1998-2001•Phase 1 Members – 4% reduction by 2006; 6% by 2010•Phase 2 Members – 6% by 2010

The Delta Institute is an Associate Member and Registered Aggregator on the Chicago Climate Exchange

•Over 200 Members•Ford, Dow, DuPont, AEP, Eastman Kodak, Motorola, Sony, Waste Management, Cargill, International Paper, IBM, Bayer, Baxter Healthcare, Michigan State University, City of Chicago, State of New Mexico

•Emission Reduction Results•2003 – 19,369,100 mT (7.8%)•2004 – 31,823,800 mT (13.5%)•2005 – 23,575,900 mT (10.7%)

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Chicago Climate ExchangeMember Requirements:•Full members, i.e. entities with direct emissions

•Pay initial enrollment fee, plus annual membership fee. Fees based on member’s baseline emissions•Calculate the carbon baseline from direct emissions•Make permanent reductions or purchase offset credits to meet annual reduction targets•Annual ‘true-up’ period to show progress toward target•Bank or sell surplus reductions

•Associate members, i.e. entities with little to no direct emissions•Pay initial enrollment fee, plus annual membership fee•Calculate the annual carbon emissions (usually indirect)•Commit to offset those emissions by purchasing credits off the Exchange

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Chicago Climate ExchangeReasons for joining:

Positive public relations

Learn to operate business in a carbon constrained economy

Gain a competitive advantage

Earn ‘early action credits’ for previous reductions

Develop small revenue streams through surplus credit sales

Reflection of corporate culture

Future developments:

Market scheduled to end in 2010, although may be extended to 2015

Exchange is positioning itself to be the trading platform in a mandatory system

Possible future scenario:Government administers the carbon marketCCX serves as trading platforms

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the role of carbon offsetsCarbon offsets are a new commodity that has developed as a result of the carbon market

Basic concept – past emissions can be reduced or future emissions prevented through various activities

Prevention of future emissionsConservation tillage – limits the release of carbon through low impact agricultural practicesAnaerobic manure digesters – capture methane (a powerful greenhouse gas), allowing it to be used for energy or flared into CO2, a less potent greenhouse gasGrass planting – prevents soil disturbance, while storing some CO2

Reduction of past emissionsTree planting – CO2 removed from atmosphere via photosynthesis and sequestered within the tree

Members can “offset” a ton of emissions by purchasing a ton of credits•Members can use offset credits to meet 3% of their 6% target

•CCX allows members to earn credits from renewable energy projects, CDM, certain projects in Brazil

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accessing the emerging carbon marketMichigan Conservation & Climate InitiativeJoint program between the Delta Institute, Michigan Association of Conservation Districts and Michigan Department of Agriculture

Landowners enroll lands with eligible conservation practices, earn offset creditsDelta Institute aggregates credits from multiple landowners and sells the credits on behalf of the landownerwww.michiganclimate.org

Michigan Forest Carbon ProgramJoint, pilot project between the Delta Institute and the Michigan Department of Natural Resources

Landowners earn offset credits by sustainably managing existing forestlands

Benefits of Emerging Carbon MarketsAdditional revenue streams for farmers & landownersFinancial incentive that could preserve small family farms, develop rural economies, limit urban sprawlEnvironmental co-benefits

Creation of wildlife habitat, improved drought resistance of soils

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MCCI program eligibility

1. Conservation Tillage (no-till) Credited at 0.6 tons per acre per year

2. Permanent Grass Plantings Credited at 0.75 tons per acre per year, if established after 1/1/99

3. Tree Plantings Credited between 2 – 5 tons per acre per year, depending on

species, if established after 1/1/904. Methane Collection (manure digesters, landfill gas)

Credited at 18.25 tons per every ton of methane destroyed

Contractual commitment through 2010 Only Southern Lower Peninsula eligible for tillage and grass

credits – Entire state eligible for tree and methane credits No enrollment costs; enrollment assistance available through

local conservation district offices Annual payments to landowners

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carbon trading potentialMichigan Conservation & Climate Initiative 1.3 million acres in conservation tillage 263,000 acres in grasslands 13,000 acres of trees planted annually Potential gross revenue returned to landowners

Annually - $2.9 million Over contract period - $11.6 million

Michigan Forest Carbon Program 10.6 million acres of non-industrial, private lands Potential gross revenue returned to landowners

Annually - $31.5 million Over contract period - $126 million

Illinois Conservation & Climate Initiative 1st enrollment pool – 48,736 acres, returned $119,838 2nd enrollment pool – 61,692 acres – to be sold soon!

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delta institute & west michigan chapterProject Objectives: Develop & implement a methodology for measuring the

chapter’s carbon footprint Offset the chapter’s footprint by buying and permanently

retiring an offset credit generated through MCCI Developing long-term strategies for reducing the chapter’s

carbon footprint

Project Benefits: Supports Michigan farms and farmland preservation efforts Raises awareness of the carbon impact of chapter events Further demonstrates the chapter’s commitment to

developing sustainable communities Elevates chapter to a leadership role on carbon emissions Positive public relations

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contact us

delta-institute.orgmichiganclimate.org

Todd Parker600 W. St. Joseph Ste. 10Lansing, MI 48933517.482.8810tparker@delta-institute.org

Win a 2007 Toyota PriusTickets $100 – no more than 1000 to be sold

Partners in Change 2007June 13, 2007 4-7 pm NeoCon - Chicago