Dr Richard L Sandor's latest trip to China came at the
invitation of the International Advisory Council of Guanghua School
of Management at Peking University.
He is trying to spread his idea of trading pollutants in the
country's most influential management school. Most businesspeople
he has come across in China so far have found the idea fresh and
attractive.
Sandor, internationally regarded as the "father of financial
futures", was the principal architect of the development of the US
Treasury futures at the Chicago Board of Trade in the 1970s.
In the 1990s, he used his financial wizardry on something new,
writing on emissions trading as a solution to reducing
pollution.
This pioneering work led to the Chicago Climate Exchange (CCX)
in 2003, the world's first and North America's only voluntary and
legally binding integrated trading system to reduce emission of
greenhouse gases (GHGs), which is modeled on his work.
He was honored as one of Time Magazine's "Heroes of the
Environment" for his work as the "Father of Carbon Trading" in
2007.
The CCX, which started out with 14 founding members, now has
more than 200 members. There are five from China, providing offset
projects to the international carbon market. But Sandor said
offsets are a "very tiny" part of carbon trading.
"In China, we are at the beginning," Sandor said. "We think it
is very promising. It just takes time."
Sandor is in China to discuss the CCX model for other
environmental pollutants and plans to offer seminars and lectures
on environmental finance at Guanghua School of Management at Peking
University.
"My job is simply educating academics and young students, and
finding entrepreneurs who are interested," he said.
The cap-and-trade system used by CCX is flexible. If a
particular company cannot make the cuts as committed because it
runs the risk of turning too costly and lengthy, while another
company can make the reductions easily, the latter can sell the
extra credits to the former, he said.
Such a market-based system of this sort, according to Sandor,
allows companies flexibility while achieving the objective of
carbon reduction.
Using such market instruments, Sandor hopes, more Chinese
enterprises can join CCX to manage emissions and perhaps sell
carbon credits for specialized projects. China, he thinks, can also
set up a cap-and-trade system to reach the country's pollutant
reduction target of cutting down emissions of SO2 and COD by 10
percent from 2006 to 2010.
At the end of last year, CCX and Chinese National Petroleum
Corporation Assets Management Co Ltd signed a memorandum of
understanding to create a joint venture company to explore the
feasibility and implementation of an emissions trading platform in
China for various pollutants.
"I think the Chinese miracle (of development) is fantastic," he
said. "But I think that if the miracle is to continue, environment
problems must be addressed cost-effectively. My personal dream is
to play a part and help China learn how to do this."
But he admitted that setting up a trading system can be hard.
There have to be lots of different institutions to serve the
market. "It is not just a matter of know-how. Trading is a complex
system."
Sandor has been in China visiting key research, policy and
trading enterprises.
"The system has to include banking, trading, verifying,
monitoring and product designing," he said. "Also, it has to fit
China's special characteristics in economic development and
culture.
"Confucius had a famous proverb - a journey of a thousand mile
begins with one step. With our Chinese colleagues, we hope to make
that first step here in China."
(China Daily January 22, 2008)
