Solutions for the Forest, Wood Products and Bioenergy Industries
Carbon Connections
The story of the Chicago Climate Exchange, two lumber barons and the President of the United States.
From the April 2009 Forest2Mill newsletter.
As the United States begins to explore what a “uniquely American
cap-and-trade system” might look like, the forest and wood products industries ought to take
notice. A bill, currently being considered in Congress, would require carbon emissions to be
reduced 20 percent from 2005 levels by 2020. (To put this in context, the Obama administration has
called for a 14 percent reduction.) The bill also calls for the creation of a mandatory, national
system for trading carbon credits. If the bill makes it through the legislative process with this
provision, the organization most likely to fill the role as a trading exchange is the Chicago
Climate Exchange (CCX). Currently a voluntary system, the CCX could easily make the transition to a
mandatory scheme.
If the CCX becomes the national market system for carbon trading in the United States, the
forestry and wood products industries stand to benefit. The CCX model recognizes a broad range of
forestry projects for sequestering carbon. Unlike EU-Kyoto models, it considers both working
forests and long-lived wood products (end products that store carbon — lumber, for instance)
legitimate carbon sinks. These types of projects are critical to the long-term survival of the
forest products and timberland investment industries, as they provide additional revenue streams.
The CCX’s approach to forestry credits may arise from the organization’s history. In 2000,
the Kellogg Graduate School of Management at Northwestern University received a grant of $347,000
to examine whether a cap-and-trade market was feasible in the United States. Led by Dr. Richard
Sandor, who is the current Chairman of the CCX, this team began to explore the development of a
regional Midwest model. In 2001, a second grant of $760,000 was given to the school to design the
exchange. This grant was used to create a rules and protocols that would serve as the foundation of
the exchange. In 2003, the exchange was launched. Nearly one-third of the charter members were
forest products companies — International Paper, MeadWestvaco, Stora Enso N.A. and Temple-Inland.
The grant money that helped Sandor and Northwestern develop the CCX came from the Joyce
Foundation, which was founded by Beatrice Joyce Kean in 1948 using the money that her ancestors had
made while working in the forestry, wood products and railroad industries. The foundation's
mission, according to its website, is to "support efforts to protect the natural environment of the
Great Lakes, to reduce poverty and violence in the region, and to ensure that its people have
access to good schools, decent jobs, and a diverse and thriving culture."
The Joyce family fortune was amassed over four generations; Beatrice's great grandfather and
grandfather were featured in
American Lumberman as quintessential statesmen of the lumber industry. David Joyce, who
was born in 1826 and died in 1904, started the Joyce lumber empire when he purchased the Stumbaugh
mill in Lyons, Iowa in 1861. He went on to invest in 12 sawmills and supporting businesses in all
parts of the county, from Illinois and Wisconsin to Texas and Washington state. David’s son,
William, continued to expand the Joyce empire, investing in timberland, logging operations, lumber
mills and yards and the railroads needed to ship raw materials and products between the companies.
He also expanded the geographic reach of his investments, adding companies in both Minnesota and
Louisiana. William died in 1909, and his sons inherited his dynasty, which they retained until
their deaths.
In 1944, when the last of the Joyce men were gone, the Joyce fortune — estimated at
$5,000,000 — was left to Beatrice. When she died in December of 1972, Beatrice left over $100
million dollars to the foundation. In 2006, this amount had grown to $1 billion. Given the origin
of their original grant money — the money that made it possible for Sandor to raise the rest of the
money needed to start the exchange — it is not surprising that those at the CCX have an
understanding of the variety of ways that our forest resources can be leveraged to reduce emissions
and protect the environment.
Today, 17 forest products companies participate in the CCX. We expect this number will grow
dramatically in the next few years particularly if signs continue to support the CCX emerging as
the national carbon credit exchange. One of these signs appeared March 25. In an article that on
FOXNews.com, Ed Barnes points out that in 2000 and 2001, when the Joyce Foundation made the
decision to support the Northwestern University cap-and-trade research, President Obama was a
member of the board. As a board member, Obama was one of the 12 people who participated in the
decision making process for grants made by the foundation. (Obama served on the board from 1994 to
2002.)
Having been involved in these discussions, we think it is more likely that the President
will support the conversion of the CCX from a voluntary program to the national market system for
trading regulated carbon credits. Apparently, many people agree: the price of carbon credits on the
CCX doubled the day after the cap-and-trade bill was introduced into Congress.