June 22, 2005

Mr. Mark Friedrichs

PI-40 Office of Policy and International Affairs

U.S. Department of Energy; 1000 Independence Ave., S.W.,

Washington, D.C. 20585.

RE: Comments by Chicago Climate Exchange (CCX) on Revision of 1605b
Guidelines

Dear Mr. Friedrichs,

Attached please find the comments of Chicago Climate Exchange provided
in relation to the proposed revisions to the US Department of Energy
Voluntary Reporting of Greenhouse Gases Program.

We applaud the efforts of your team and look forward to working with you
to incorporate the unparalleled efforts of the members of Chicago
Climate Chicago Exchange into the reporting program.

Sincerely,

Michael J. Walsh

Senior Vice President

**1. OVERVIEW**

**1.1 Background on CCX**

Chicago Climate Exchange ("CCX") is North America's only, and the
world's first, legally binding multi-sectoral, rule-based and integrated
greenhouse gas emission registry, reduction and trading system. CCX
employs independent verification, includes all six greenhouse gases, and
has been trading greenhouse gas emission allowances since 2003. CCX was
launched prior to the commencement of trading in the European Union
through the ETS system. CCX Members range from large US corporations
like Ford and Motorola, to universities such as Tufts and University of
Minnesota, to cities such as Portland, Oregon and Chicago, Illinois, to
farmers in Iowa and Nebraska and the Iowa Farm Bureau (See Appendix 1).
CCX held its Second Annual Membership meeting in June 2005, where it was
announced that membership had now reached 100; that the US Conference of
Mayors had unanimously voted to recommend that all cities in the
Conference consider becoming CCX Members (See Appendix 2); and that CCX
plans an extension of its operations through the year 2010.  Baseline
emissions of CCX members (250 million metric tons) currently account for
roughly 8% of US stationary source emissions and are three times those
of the sovereign nation of New Zealand. 

We believe it is likely that CCX will remain the nation's only
greenhouse gas emissions trading system for the next 3-5 years. CCX
principals have been active in the development of the SO~2~ emissions
trading system and Chairman and CEO Richard L. Sandor is a global leader
in the field of financial innovation, including environmental finance.  

CCX and its Members have invested millions of dollars in managing and
reducing their greenhouse gas emissions, and millions on independent
verification of emission baselines, annual emission reports, and
mitigation projects.  The work of CCX and its members has been publicly
lauded by a broad, bi-partisan range of leaders, including former Energy
Secretary Abraham, and leaders from both parties of the U.S. Congress. 
 Given this extensive experience of CCX and its members, we can fully
appreciate the challenge involved in the 1605b revision and applaud the
efforts of DOE and its sister agencies in this regard.  

**1.2 Entity-wide Absolute Emission Reductions Should be both Reported
and Registered in 1605b**

The major mobilization of effort and funds catalyzed by CCX has focused
on legally-binding commitments to reduce entity-wide absolute
emissions.  Absolute emissions are the only metric that truly relates to
the environmental risk associated with rising greenhouse gas
concentrations.  Absolute emissions is the metric used to quantify
atmospheric loadings by the National Academy of Sciences, to define
required progress in the U.S. Clean Air Act and its Amendments, and by
the United Nations Framework Convention on Climate Change, signed in
1992 by President George Herbert Walker Bush and ratified by the U.S.
Senate.

We feel strongly, as do our members, that 1605b Registration should
include reductions in absolute emissions realized by CCX Members, as
this would properly reflect environmental reality and legal and
regulatory precedent.  The Reporting and Registration of absolute
emissions poses no additional work burden on the organization submitting
data or DOE, does not undermine emissions intensity goals, and
strengthens and expands the options of major contributors to the US
economy, and furthers the options of all concerned with mitigating
climate change risk.  

The remainder of this document reviews the significance of the
leadership action taken by members of Chicago Climate Exchange and
highlights the methods used to define and quantify environmental
progress taken in this voluntary and legally binding program.

**2. ADDITIONAL COMMENTS**

1.  **CCX And Existing Calculation Tools**

CCX draws on our professional staff's decades of experience in creating
new environmental and financial markets. Our principals' focused efforts
in greenhouse gas management have been underway for ten years, involving
preparation of a proposed GHG market architecture (1995), general
research and publications, congressional testimony, advisory services
provided to national governments and corporations, and execution of
international carbon offset transactions. The CCX feasibility and design
phases, which lasted two years, relied on input from a wide range of
economic sectors as well as technical experts in the engineering,
forestry, agricultural, academic, NGO and public sectors. In total, more
than 50 corporate entities and hundreds of experts contributed to the
design phase, which, through an extensive process of consensus building
involving thousands of hours of professional time, resulted in the
blueprint that has been followed in implementing CCX.

CCX's members include American and Canadian-based companies, a Brazilian
company, the North American subsidiaries of several leading European
companies, academic institutions, financial institutions and non-profit
organizations. Annual revenue of CCX members is in excess of \$500
billion. CCX's overall program emission baseline is approximately 250
million metric tons carbon dioxide equivalent, (equal to approximately
4% of total annual U.S. GHG emissions). CCX concluded its design phase
in August 2002 by compiling a document called the Chicago Accord, which
contained the main principles, the broad market architecture and the
high-level rules by which CCX would operate.

Entities were then invited to take a legally binding commitment to the
provisions contained in the Accord. Fourteen CCX founding members were
announced on January 17, 2003. CCX members with significant direct
emissions have made a legally binding agreement to reduce their GHG
emissions by 1% per year, over the years 2003-2006, with the 2006
commitment at 4% below baseline.

CCX published its detailed rulebook in July 2003 and activated the
market on September 30, 2003 with an auction of emission allowances
corresponding to 136,000 metric tons CO2 equivalent. Continuous trading
began on December 12, 2003 and, to date, allowances equivalent to almost
3 million metric tons of GHG emission allowances and offsets have been
traded. Transactions have been executed for all four vintages 2003,
2004, 2005, and 2006.

Emission offsets from mitigation projects for agricultural and landfill
methane capture/combustion and agricultural soil sequestration (via
conservation tillage) have been registered with CCX, inspected, issued
and sold on the CCX trading platform. Approximately 350,000 acres of
conservation tillage farmland in Iowa, Nebraska, Kansas, Missouri and
Minnesota have been enrolled.

CCX currently employs approximately thirty full-time equivalent
professionals (excluding vendors). Importantly, CCX members are
dedicating a significant amount of professional talent in carrying out
their commitments to measure, report and manage greenhouse gases. At
least one hundred individuals employed by CCX members are regularly
working on CCX issues. Hundreds of other executives, board members and
legal, financial and regulatory professionals have been engaged in
decision-making related to CCX.

CCX Associate Members pledge to offset their indirect emission through
purchases made on CCX's trading platform. Other CCX participants include
offset providers, who provide project-based GHG emission reductions and
mitigation, and liquidity providers, who assist in the efficient
functioning of the market.

CCX has contracted with the NASD to assure the integrity of the program
by acting as an outside regulator. NASD was authorized by an act of
Congress in 1938. NASD audits CCX reports on emission baselines and
annual emissions of emitters. Offset projects are verified by
professionals with technical expertise in the project category, and
their reports are inspected by NASD. NASD also ensures that members meet
CCX's financial criteria for membership. NASD also provides market
surveillance to prevent manipulation of the market.

**2.2 Reductions Eligible for Registration**

CCX believes the revised 1605(b) program should accept absolute emission
reductions for Registration. CCX members have committed to absolute
emission reductions. Such commitments are consistent with those being
implemented internationally, and with the nature of reporting and
reduction requirements established in U.S. federal and state laws,
notably the Clean Air Act and its amendments. CCX members have
undertaken these commitments voluntarily, and have invested major and
significant human, technical and financial resources in both their
design and implementation. CCX members are utilizing widely accepted
emission quantification tools and are subject to an extensive audit
process administered by a globally-respected market regulator. The CCX
rules structure was finalized, and many CCX members executed their
legally binding commitment letters to CCX, before DOE began developing
the revised 1605b reporting guidelines.

Given this massive, voluntary effort to quantify and reduce emissions,
we are concerned by the proposed requirement that absolute reductions in
emissions can only be registered for the 1605b program "as long as the
\[reporting\] entity demonstrates that these measured reductions were
not caused by declines in its U.S. output." This requirement could
unfairly stigmatize reductions expressed in absolute tonnage terms, and
unfairly preclude participation in 1605b by entities that have made a
major effort to measure and reduce absolute emissions, consistent with
both previous and existing U.S. international commitments. The approach
to limit registration proposed by DOE in the current revision of 1605b
will reduce future participation in the 1605b program, and, in
particular, may dissuade from participation entities that have
undertaken what may well be the most rigorous and systematic greenhouse
gas emissions quantification process in the world. This would have the
effect of reducing both the usefulness and credibility of the 1605(b)
program. It would also undermine the program's goal of working with and
taking into account emerging international and domestic approaches. It
will also needlessly restrict the options available to participants as
policies and technologies evolve.

Finally, it would be entirely counterproductive to not allow
registration by those entities who have taken the lead to verifiably
reduce absolute emissions in the context of CCX, while allowing
registration of "intensity reductions" that accompany absolute increases
in emissions. This perverse outcome is entirely possible. For example,
entities that use revenues as the denominator of an emission intensity
metric can realize registerable "emission reductions" that result not
from declining emissions, but from rising product prices, even though
their absolute emissions increase.

**2.3 Baseline Period**

An entity's CCX emission baseline should be accepted under 1605b. The
CCX baseline system represents an intensive effort to fairly define a
multi-year entity-wide baseline. Baseline emissions for CCX members are
determined by calculating entity-wide mean annual GHG emissions from all
included emission sources over the course of the baseline period, 1998
through 2001. In addition to having undertaken the laborious process of
calculating their baselines, our members have undergone stringent audits
of their baselines conducted by NASD, as described above. These audits
have been conducted using publicly available and transparent standards
and underscore the integrity of Member reductions. CCX members have made
a major investment of time, effort and resources in preparing and
validating a baseline over the period 1998 through 2001, through the
only program---CCX---that requires an independent review of data---and
accordingly, we believe 1605(b) should accept for registration absolute
emission reductions realized relative to that four- year baseline
period.

**Appendix 1**

CCX Membership as of June 20, 2005

+-----------+-----------+-----------+-----------+-----------+-----------+
| **CCX     |           | **CCX     |           | **CCX     |           |
| Members** |           | Pa        |           | Associate |           |
|           |           | rticipant |           | Members** |           |
|           |           | Members** |           |           |           |
+-----------+-----------+-----------+-----------+-----------+-----------+
| **        | **In      | **Offset  | **        | **Archi   | **Non-Gov |
| Aerospace | formation | Agg       | Liquidity | tecture** | ernmental |
| and       | Tec       | regator** | Pr        |           | Organi    |
| Eq        | hnology** |           | oviders** | Mithun,   | zations** |
| uipment** |           | Iowa Farm |           | Inc.      |           |
|           | IBM       | Bureau    | The       |           | American  |
| Ro        |           |           | League    | **        | Coal Ash  |
| lls-Royce | **Municip | **Offset  | Co        | Brokerage | As        |
|           | alities** | P         | rporation | S         | sociation |
| **Aut     |           | rovider** |           | ervices** |           |
| omotive** | City of   |           | Marquette |           | American  |
|           | Boulder   | Klabin    | Partners, | Amerex    | Council   |
| Ford      |           | S.A.      | LP        | Power     | on        |
| Motor     | City of   |           |           |           | Renewable |
| Company   | Chicago   | Resource  | Glenn M.  | **Con     | Energy    |
|           |           | T         | Miller    | sulting** |           |
| **Cement  | City of   | echnology |           |           | The Delta |
| Manufa    | Oakland   | Corp.     | Douglas   | Domani    | Institute |
| cturing** |           |           | M.        | LLC       |           |
|           | City of   | Re        | Monieson  |           | Houston   |
| Ozinga    | Portland  | storation |           | Global    | Advanced  |
| Brothers  |           | Soil &    | Natsource | Change    | Research  |
|           | *         | Research, | LLC       | A         | Center    |
| **Ch      | *Pharmace | Ltd.      |           | ssociates |           |
| emicals** | uticals** |           | Peregrine |           | World     |
|           |           | Su        | Financial | Natural   | Resources |
| Dow       | Baxter    | stainable | Group     | Ca        | Institute |
| Corning   | Inte      | Forestry  |           | pitalism, |           |
|           | rnational | Ma        | Rand      | Inc.      | **Private |
| Dupont    |           | nagement, | Financial |           | College** |
|           | **Private | Ltd.      | Services, | Rocky     |           |
| **Di      | Uni       |           | Inc.      | Mountain  | Presidio  |
| versified | versity** | **        |           | Institute | World     |
| Manufa    |           | Liquidity | REFCO LLC |           | College   |
| cturing** | Tufts     | Pr        |           | **Energy  |           |
|           | U         | oviders** | Serrino   | M         | **Risk    |
| Bayer     | niversity |           | Trading   | anagement | Man       |
| Co        |           | AGS       | Company   | S         | agement** |
| rporation | **Public  | Sp        |           | ervices** |           |
|           | Unive     | ecialists | Shatkin   |           | The       |
| I         | rsities** | LLC       | Arbor,    | Orion     | Pro       |
| nterface, |           |           | Inc.      | Energy    | fessional |
| Inc.      | The       | Michael   |           | Systems   | Risk      |
|           | U         | R.        | Brian     | Ltd       | Managers' |
| *         | niversity | Anderson  | Rice      |           | Inte      |
| *Electric | of Iowa   |           |           | Sieben    | rnational |
| Power     |           | B         | C.        | Energy    | As        |
| Gen       | The       | reakwater | Richard   | A         | sociation |
| eration** | U         | Trading   | Stark,    | ssociates |           |
|           | niversity | LLC       | Jr.       |           | **        |
| American  | of        |           |           | Thermal   | Religious |
| Electric  | Minnesota | Raymond   | Jeffrey   | Energy    | Organ     |
| Power     |           | S.        | B. Stern  | As        | ization** |
|           | The       | Cahnman   |           | sociation |           |
| Central   | U         |           | Lee B.    |           | Jesuit    |
| Vermont   | niversity | Calyon    | Stern     | Thermal   | Community |
| Public    | of        | Financial |           | Energy    | of Santa  |
| Service   | Oklahoma  | Inc.      | Tradelink | Inte      | Clara     |
|           |           |           | LLC       | rnational | U         |
| Green     | **Rec     | Thomas H. |           |           | niversity |
| Mountain  | reation** | Dittmer   | Tradition | **Engi    |           |
| Power     |           |           | Financial | neering** | **        |
|           | Aspen     | Eagle     | Services  |           | Retiring/ |
| Manitoba  | Skiing    | Market    |           | Vanasse   | Offsets** |
| Hydro     | Company   | Makers,   | Tr        | Hangen    |           |
|           |           | Inc.      | ansMarket | Brustlin, | Carbo     |
| TECO      | **Semicon |           | Group LLC | Inc.      | nfund.org |
| Energy    | ductors** | FCT       |           |           |           |
|           |           | Europe    |           | **        | **SRI     |
| **Elec    | ST        | Ltd.      |           | Financial | Fund**    |
| tronics** | Microel   |           |           | S         |           |
|           | ectronics | First New |           | ervices** | Pax World |
| Motorola, |           | York      |           |           |           |
| Inc.      | **Steel** | S         |           | Access    | **Tec     |
|           |           | ecurities |           | In        | hnology** |
| **Envi    | Roanoke   | LLC       |           | dustries, |           |
| ronmental | Electric  |           |           | Inc.      | M         |
| S         | Steel     | Go        |           |           | illennium |
| ervices** | Corp.     | ldenberg, |           | **In      | Cell      |
|           |           | Hehmeyer  |           | formation |           |
| Waste     | **Transpo | & Co.     |           | Tec       | Polar     |
| Ma        | rtation** |           |           | hnology** | T         |
| nagement, |           | ICAP      |           |           | echnology |
| Inc.      | Amtrak    | Energy    |           | Open      |           |
|           |           | LLC       |           | Finance   | TerraPass |
| **Food    | San       |           |           | LLC\      |           |
| Pro       | Joaquin   | Ch        |           | The       |           |
| cessing** | Regional  | ristopher |           | Interco   |           |
|           | Rail      | J.        |           | ntinental |           |
| Premium   | C         | Johnson   |           | Exchange  |           |
| Standard  | ommission |           |           |           |           |
| Farms     |           | Kottke    |           | **Legal   |           |
|           |           | As        |           | S         |           |
| **Forest  |           | sociates, |           | ervices** |           |
| Products  |           | LLC       |           |           |           |
| Co        |           |           |           | Foley &   |           |
| mpanies** |           |           |           | Lardner   |           |
|           |           |           |           |           |           |
| Abitibi   |           |           |           |           |           |
| Con       |           |           |           |           |           |
| solidated |           |           |           |           |           |
|           |           |           |           |           |           |
| Aracruz   |           |           |           |           |           |
| Celulose  |           |           |           |           |           |
|           |           |           |           |           |           |
| Inte      |           |           |           |           |           |
| rnational |           |           |           |           |           |
| Paper     |           |           |           |           |           |
|           |           |           |           |           |           |
| Mea       |           |           |           |           |           |
| dWestvaco |           |           |           |           |           |
|           |           |           |           |           |           |
| Stora     |           |           |           |           |           |
| Enso      |           |           |           |           |           |
| North     |           |           |           |           |           |
| America   |           |           |           |           |           |
|           |           |           |           |           |           |
| Temp      |           |           |           |           |           |
| le-Inland |           |           |           |           |           |
| Inc.      |           |           |           |           |           |
+-----------+-----------+-----------+-----------+-----------+-----------+

**Appendix 2**

**U.S. Conference of Mayors Resolution on Chicago Climate Exchange**

***Passed Unanimously by the U.S. Conference of Mayors, 73^rd^ Annual
Meeting***

***June 13, 2005, Chicago***

Resolution No. 95

Submitted By: The Honorable Richard M. Daley, Mayor of Chicago

Supporting the Chicago Climate Exchange

**WHEREAS,** the Chicago Climate Exchange is North America's first and
only voluntary multi-sector market for reducing and trading greenhouse
gas emissions; and

**WHEREAS,** members of the Chicago Climate Exchange make voluntary,
legally binding commitments to reduce program-wide net emissions of
greenhouse gases by four percent below their 1998-2001 baseline average
by 2006; and

**WHEREAS,** current members of the Chicago Climate Exchange come from
the United States, Mexico and Canada, and include a cross-section of
major public and private sector entities, including but not limited to
major public companies, smaller public and privately-held companies,
governmental and non-governmental organizations, and non-profit
organizations; and

**WHEREAS,** the City of Chicago was a founding member of the Chicago
Climate Exchange with the City of Oakland (CA), the City of Boulder (CO)
and the City of Portland (OR) recently becoming members; and

**WHEREAS,** cities that have joined the Chicago Climate Exchange
recognize that there is environmental, economic or other value in
reducing greenhouse gas emissions; and

**WHEREAS,** by virtue of their membership in the Chicago Climate
Exchange, member cities are demonstrating a leadership role in the
reduction of greenhouse gas emissions; and

**WHEREAS,** cities that join the Chicago Climate Exchange are
strategically positioned as federal climate change policy develops; and

**WHEREAS,** encouraging additional cities to join the Chicago Climate
Exchange is consistent with policy previously adopted by the United
States Conference of Mayors that specifically recognizes the importance
of greenhouse gas reductions and calls upon cities to reduce greenhouse
gas emissions;

**NOW, THEREFORE, BE IT RESOLVED** that The United States Conference of
Mayors affirms it prior recognition of the importance of greenhouse gas
reductions and its call for cities to take steps to reduce greenhouse
gas emissions; and

**BE IT FURTHER RESOLVED** that the United States Conference of Mayors
recognizes the leadership of the cities that have joined the Chicago
Climate Exchange and recognizes the valuable role that the Chicago
Climate Exchange plays in helping cities to achieve greenhouse gas
reductions; and

**BE IT FURTHER RESOLVED** that the United State Conference of Mayors
encourages U.S. mayors to strongly consider membership for their cities
in the Chicago Climate Exchange.