May 20, 2000

National Journal

Buying the Right to Warm the Globe

in "The Cutting Edge" Column by Burt Solomon

It may be some time before the Kyoto accord, or something like it, becomes the law of a steamy planet. In the meantime, experts are looking for innovative ways to start tamping down on greenhouse gases in the United States. The Joyce Foundation of Chicago has just awarded a $347,000 grant to Richard L. Sandor, a Northwestern University economist and creator of financial derivatives, to design a system for Midwestern companies to voluntarily buy and sell the right to emit carbon dioxide. Sandor intends to have what he described as a "real working program" relying on a market mechanism instead of governmental authority up and running - "let's say, by the end of next year."

Companies are interested in reducing their CO2 emissions even before they're forced to, he explained, either because their customers or stockholders insist or because another country is about to require it of one of their foreign subsidiaries. Great Britain and Australia, among other nations, are expected to impose a system for reducing greenhouse gases sometime next year. California and Oregon are discussing the idea; and BP Amoco, Royal Dutch/Shell Group, and Ontario Power have begun trading CO2 permits internally or are about to. "There's enough political energy both domestically and internationally [to] suggest it may happen," Sandor said.