The failure of the Chicago Climate Futures Exchange highlights the fact that companies hoping to cash in on higher U.S. energy prices do not always make a killing (LINK TO WSJ). The Chicago Climate Exchange started in 2004 when it looked like the U.S. might enact a cap and trade proposal to raise energy prices and force cutbacks in the use of fossil fuels. U.S. policymakers, concerned about the impact of rationing energy and raising energy prices on U.S. economic and job growth refused to pass either the Waxman-Markey Climate bIll or the Kerry-Lieberman bill in 2010. See my November 2009 congressional testimony on the economic impact of the Waxman-Markey bill as well as our macro-economic study in 2010 on the Kerry-Lieberman bill, which also included a state by state analysis on the impact on jobs and gross state product.
U.S. policymakers rejected cap-and-trade on carbon emissions legislation after realizing the futility of imposing higher energy costs on fossil fuels when emission in developing countries like China and India are growing very rapidly.
Renewables, where they are cost effective, have a place in our energy portfolio. The failure of the Chicago climate exchange should be a lesson to would be purveyors of expensive renewable energy like solar and wind power. The solar industry is currently undergoing consolidation and most solar equipment today is produced in China rather than in the U.S. Similarly, the wind power industry is also facing headwinds and not expanding capacity.
Moral of the story: People who invest in futures like renewable energy that require heavy government subsidization will likely face the same bleak future as the Chicago ICE did.
