Chicago climate profiteer Sandor seeks stock market to gamble on water prices in New Mexico, Great Lakes and Canadian province

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7/18/11, "A Carbon Pioneer Dips Toe In Water," Wall St. Journal, J. Bunge, Chicago

"The principal architect of trading in greenhouse gases and other emissions is turning his attention to another commodity that needs some liquidity: water.

Richard Sandor has revived the Chicago-based firm that spawned the world's dominant emissions-trading franchise, turning its focus to using financial markets to tackle allocating scarce water supplies in parts of the U.S. and Canada.

"Water is going to be the commodity of the 21st century," said Mr. Sandor, who last year sold Climate Exchange PLC, the London-listed operator of the European Climate Exchange and the Chicago Climate Exchange, to IntercontinentalExchange Inc. for $597 million.

Demographic changes such as population growth and urbanization have long made water use a target for the more advanced use of derivatives and other risk and pricing mechanisms, but technical limitations have seen none gain traction.

Mr. Sandor is using the Environmental Financial Products LLC venture he founded in 1998 to explore alternatives, with a staff of five examining the feasibility of water markets in New Mexico, the Great Lakes region, and the Canadian province of Alberta.

"Generally there are areas that are short of water, and they need to price it properly in order to conserve it," Mr. Sandor said in an interview.

He envisages a range of smaller regional markets rather than a single global enterprise, though work is ongoing on the concept and infrastructure....

Water rights in the U.S. theoretically are able to be bought and sold, but building a comprehensive platform for open dealing is seen complicated by a byzantine legal system and potential disputes that could arise in drought years.

Any potential development of derivatives is still distant, Mr. Sandor said, but the sector "looks like interest rates before we started," referring to the market for fixed-income futures he helped develop at the Chicago Board of Trade in the 1970s.

"I'm glad somebody like Richard is looking at this because good economics and efficient markets are the way resources ought to be allocated," said William Bumpers, head of global-climate-change practice for law firm Baker Botts LLP. "The existing structure of first rights and riparian rights certainly doesn't ensure the most efficient allocation or usage of water."

Australia has had a system of trading water entitlements for a decade. U.K. water provider Severn Trent PLC last month proposed a nationwide water-trading system aimed at balancing domestic supplies, ahead of a government review expected later this year.

The carbon markets founded by Mr. Sandor in 2003 claimed a large lead over rival exchanges in the European Union, with contract volumes rising 42% to 83,000 last month.

But the concept has struggled to find broad adoption in the U.S., where a federal cap-and-trade scheme to limit emissions foundered.

Mr. Sandor said he remains bullish on the fortunes of global trade in carbon credits and related derivatives products,

• despite missteps in Europe and slow progress in the U.S.

"I think we're in a time and space because of the great recession where you find that people are more prone to look at markets skeptically," said Mr. Sandor. "This is not dead.""

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Nov. 4, 2010, Of water and air, Richard Sandor said: ""Seven billion people cannot live without somehow rationing these scarce resources.""...(para. 5)

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6/16/09, "(Richard) Sandor got Obama's nod for Chicago-style climate law," Bloomberg, by Jim Efstathiou, Jr.

(parag. 8): "The original bill, the cornerstone of Obama’s environmental agenda, began “way, way to the left,” Sandor said in an interview, with

• provisions he said would push U.S. utilities
  
• into bankruptcy.

“The Waxman bill, to those of us who are students, was a joke from the inception,” said Sandor, who at the Chicago Board of Trade helped develop interest-rate futures such as the Treasury-bond contract, which began trading in 1977....

Sandor launched the Chicago Climate Exchange, or CCX, in 2003 after getting two research grants from the Chicago-based Joyce Foundation. The money went to the Kellogg School of Management at Northwestern University, in Evanston, Illinois, for Sandor’s pilot program to trade carbon credits.

“Obama was on the foundation that gave us the grant,” Sandor said. “We know him well.”...

In 1989, he (Sandor) wrote a paper promoting the use of financial markets to turn air pollution into a commodity to reduce sulfur- dioxide emissions from power plants. His early concepts helped shape the landmark 1990 Clean Air Act, which mandated acid-rain reductions and built a market where companies trade rights to pollute."...
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The 1990 Clean Air Act amendments signed by George Bush the first.

via Tom Nelson