Good Derivatives: A Story of Financial and Environmental Innovation

Chapter 20

The Fall of the Chicago Climate Exchange

The world ends, not with a bang but a whimper.

—T. S. Eliot

There was an old adage that traders used: “Buy the rumor and sell the news.” The price of a stock, bond, or commodity contained a lot of information, as did the price of emission allowances. In retrospect, the increase in emissions trading volumes could be attributed to the market expectations regarding U.S. climate change policy. Prospects seemed bright for CCX and the carbon markets as we approached 2008. Unfortunately, market expectations were capricious and could swing both ways. I brushed aside the storm warnings. We were at the top of the market, and I forgot the fundamental lesson that “it never looks better than when you're at the top.”

Engaging the U.S. Congress

Cap-and-trade legislation began building momentum in Congress, as we began a series of testimonies in 2006 before the House and Senate committees in an attempt to further educate policy makers.

In April, Jeff Bingaman (D-NM), then chairman of the U.S. Senate Energy and Natural Resources Committee, held hearings on climate change. Mike Walsh testified on behalf of CCX. We had a bullpen in our office at the time where most of the recruiting staff worked. The day of the hearing, the entire team crammed in around a monitor to watch Mike's testimony streamed on the web. Mike gave an articulate and engaging presentation on CCX, and answered all questions thoughtfully, like a teacher. His talk made such an impression ...