By Jim Kharouf – John Lothian News
There are few who change the world in a profound way. Richard Sandor, who brought us the first interest rate futures contract, also created the Chicago Climate Exchange in 2003. CCX launched a new set of greenhouse gas contracts as an innovative step to solving the issue of global warming.
In his latest book, “How I Saw It,” Sandor republishes many of the columns he wrote from 1999 to 2005 during that pivotal time in the development of environmental markets. Despite what some may think about carbon markets today – as a politically unpopular solution in Washington – it’s a market that has grown dramatically around the world. The Regional Greenhouse Gas Initiative (RGGI) among a number of northeast states was the first multi-state carbon market, while California has had to lead the way out west. But the idea and the products Sandor and his team designed and developed are also traded in Europe, as part of the European carbon market, not to mention a budding system of regional and national markets in China. CCX was sold to the Intercontinental Exchange in 2010.
Those who have declared the idea of carbon markets dead in America have not been paying attention. Open interest on those carbon contracts on ICE have hit record highs lately and surpass other long-traded commodities.
“California and China are leading the way and that was relevant five years ago and it’s still relevant today,” Sandor said in an interview with JLN. “These are major market trends and they are not going away.”
This marketplace is personal for Sandor. He, like most of us, wants to do what he can to leave the world a better place for our children and grandchildren. He believes market-based solutions like carbon trading can reduce greenhouse gasses that cause global warming and usher in clean innovations.
“There’s a very efficient way to deal with environmental challenges and it’s called markets,” he said.
It’s worth heeding the suggestions of one of our most pioneering market innovators. As we watch these markets evolve over time, it will be interesting to see which of Sandor’s products will be his best and most lasting. He now focuses much, but not all of his attention, as chairman and CEO of the American Financial Exchange, on small and mid-sized banks in the US.
Despite his efforts in the carbon space in the US, a nation built on capitalism, it is Europe and now China that are leading the way. This year, China announced a national carbon market, beating the US to the punch. It leaves many to wonder, what is wrong with US capital market innovation?
Sandor is rarely deterred and never a pessimist. The rise of carbon markets and the fast advances in renewable energies gives him hope that this sector is on a trajectory that won’t be stopped.
“Scale is taking hold now and that’s because of technology,” he said. “This is a big story out there that no one is commenting on.”
**If you are interested in How I Saw It, you can find it here on the publisher’s site: http://www.worldscientific.com/worldscibooks/10.1142/10329. The discount code is WS1032940 for 40 percent off original pricing.
Jim Kharouf is president and editor-in-chief of John Lothian News (JLN). He edits the John Lothian Newsletter, MarketsWiki and MarketsReformWiki.