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CCX prices down on climate uncertainty

(For other news from the Reuters Global Climate and Alternative Energy Summit, click

here

) (Adds background on RGGI)

NEW YORK, Sept 8 (Reuters) - Prices for spot carbon contracts on the Chicago Climate Exchange have fallen sharply in recent weeks because of uncertainty about whether Congress will pass cap and trade legislation this year, the head of the exchange said on Tuesday.

Carbon Financial Instrument contracts on the Chicago exchange have fallen from about $2.00 per tonne in April to about 25 cents per tonne at the end of last week.

The Chicago Climate Exchange is a voluntary market in which members, including companies and cities, agree to cut greenhouse gas emissions. If they fail to make the cuts, they must buy credits representing emissions cuts or face penalties. The credits can be generated by clean projects, such as destroying the potent greenhouse gas methane at farms and old coal mines, or by members that have successfully cut emissions.

"Basically people are frozen until the legislators decide what to do," Richard Sandor, chairman and chief executive of the Chicago Climate Exchange, told the Reuters Global Climate and Alternative Energy Summit

The U.S. House of Representatives passed carbon legislation in June that included a "cap and trade" program on greenhouse gas emissions. It would set a limit -- which gets gradually tougher-- on pollution and let companies that cut emissions sell credits to those that have not.

The U.S. Senate has delayed the release of its version of the bill, which is now expected late this month.

Sandor said he hoped the Senate would recognize companies for generating credits under the Chicago Climate Exchange. The House version of the bill recognized credits under a regional climate program of 10 states in the East known the Regional Greenhouse Gas Initiative, and a voluntary program known as the California Climate Action Registry.

As Congress delays action on climate, U.S. commodity regulators have signaled they may further regulate carbon contracts on the exchange.

The Commodity Futures Trading Commission has proposed to determine whether CCX's CFI contract, which currently operates as an exempt commercial market, would function as a price maker in the developing carbon market. A comment period on the proposal ended last Friday. The CFTC should make a decision "within the next 60 days," Sandor told the Reuters New York office.

Sandor added that even if the Senate does not act on climate change, carbon markets should continue to develop. "My expectations are there will be an effort by the Europeans to continue down this road because they are committed to it," he said. The European Union's carbon market launched in 2005.

Sandor said climate trade in the EU would eventually push the United States to form a market by 2013 to 2015 that would eventually push China and India to develop climate markets as well.

"The important thing is to get a transparent price put up on the board in a regulated framework and begin," he said. "If it doesn't work you can fix it later." (For summit blog:

blogs.reuters.com/summits/

) (Reporting by Timothy Gardner; Editing by Phil Berlowitz)

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