When Doug Gronau looks out the window of his Iowa farmhouse, he sees a profitable investment in the effort to stop global warming. Most people see cornfields...

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When Doug Gronau looks out the window of his Iowa farmhouse, he sees a profitable investment in the effort to stop global warming.

Most people see cornfields.

His cropland, which he is banned from tilling, is a greenhouse-gas credit, packaged and sold on the Chicago Climate Exchange. An anonymous trader snapped up the field’s ability to absorb carbon dioxide to offset — on paper — a tiny portion of the carbon dioxide emitted by some distant factory.

Gronau, 57, expects a check for $2,800.

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“That may not sound like a lot, but farming is hard and it adds to your margin,” he said.

The Chicago Climate Exchange is the first and only legally binding carbon-emissions market in North America.

In the absence of federal controls on greenhouse-gas emissions, it applies an axiom of economic theory to the problem of global warming: People in search of profit can be expected to do just about anything for a buck, even save the planet.

Carbon dioxide

Carbon dioxide is a colorless, odorless gas formed during respiration, combustion and organic decomposition.

That concept of the market forms the cornerstone of regulatory efforts to fight global warming.

Interest in carbon trading as an arcane but powerful tool to fight global warming has intensified after the recent release of a landmark United Nations report that found rising temperatures will continue to increase even if greenhouse-gas emissions can be held to current levels.

The theory of the market is straightforward. For the right price, a farmer such as Gronau will agree to cultivate his fields without plowing, so the soil retains carbon dioxide that would otherwise seep into the air.

That “carbon credit” can then be purchased by exchange members and applied against their own emissions. Should the price of carbon credits climb high enough, the theory goes, company executives one day will find it cheaper to reduce their own industrial emissions.

It’s a new form of environmental bookkeeping that theoretically could reduce emissions of carbon dioxide and the other trace gases responsible for gradually rising global temperatures.

Since the exchange opened in 2003, almost 200 companies — including Ford Motor, DuPont, IBM, Amtrak and American Electric Power Co. — have volunteered to buy and sell the right to emit tons of carbon dioxide and five other key greenhouse gases.

King County last year became the first jurisdiction to sign on to the exchange.

California officials are beginning to frame market-based trading schemes, inspired in part by the exchange, to curb industrial carbon-dioxide emissions by 25 percent over the next 14 years. State and federal regulators use market trading to control the sulfur emissions responsible for acid rain.

Critics, however, question whether new carbon-emissions markets have done anything more than generate profits for market traders, while delaying genuine industrial changes that could forestall global warming.

In Europe, where mandatory greenhouse-gas controls were recently imposed, the carbon-emissions trading system has been marred by foot-dragging, chicanery and profiteering, even as its sales reached $22 billion.

All that buying and selling did almost nothing to reduce the risk of global warming, records show. Indeed, global levels of carbon dioxide in 2005 were the highest ever registered.

“Have they achieved any real reductions in greenhouse gases?” asked Veronique Bugnion, U.S. research director at Point Carbon, a European firm that analyzes carbon-trading markets. “There is not much evidence of a reduction.”

As a signatory to the Kyoto Protocol, the European Union has taken the lead in imposing caps on levels of carbon dioxide and other greenhouse gases. Many climate experts expect the U.S., which accounts for about one-quarter of all greenhouse-gas emissions, will eventually have to follow suit.

After the release of the U.N. report, the Bush administration maintained its opposition to mandatory controls on U.S. greenhouse-gas emissions.

In the cost-accounting of global warming, the undisturbed soil between Gronau’s cornrows retains enough carbon to offset a few of the 2 billion tons spewing from U.S. smokestacks and exhaust pipes every year.

His no-till fields were bundled for sale through the exchange with other farmland in Iowa, Nebraska, Kansas and Missouri in a program managed by the Iowa Farm Bureau, one of 23 carbon “aggregators” registered on the exchange.

So far, the farm bureau has packaged and sold 500,000 tons of carbon-emission credits, equal to a month’s output from a 1,000-megawatt coal plant.

Carbon credits can also be gained by burying carbon dioxide under the oceans or sequestering it underground, reducing emissions through new technology and alternative fuels, or reforestation.

Worldwide, there are more than 3,000 projects to offset greenhouse gases, generating billions of dollars.

“When I was taught economics, I was taught that air and water were free goods,” said Richard Sandor, the founder of the Chicago Climate Exchange.

But he added: “It was intuitively obvious to me that on a planet of 6 billion or 7 billion people, that was no longer the case.”

Through a European subsidiary, his exchange handles a lion’s share of the annual carbon-emissions trade with the 25 countries in the European Emissions Trading System.

Time magazine knighted him as a Hero of the Planet in 2002.

But he has also come to embody the concerns of environmentalists over the business of global warming, in which the planet’s natural capacity to absorb carbon dioxide is turned into private property that can be sold to the highest bidder.

Last year, 19 major environmental groups urged local governments to boycott the Chicago exchange.

Their complaints are based, in part, on the track record in Europe.

All told, the European Union’s Emissions Trading Scheme handled $22 billion worth of carbon transactions in the first nine months of last year, the World Bank reported. Investors bought and sold 842 million tons of carbon-dioxide emissions, trading recently at about $9.80 a ton.

But instead of combating global warming, the European trade so far has only meant higher prices for many utility customers, market analysts and environmental finance experts said.

Material from the Seattle Times archive is included in this report.

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