It Can Pay to Be Green

Dennis Haubenschild's holsteins produce nearly 60,000 pounds of milk a day, providing the Minnesota farmer with annual revenue of about $2 million. The cows also produce 20,000 gallons of manure daily, which, believe it or not, makes him money as well. Several years ago, Haubenschild installed a "methane digester" that uses manure as fuel and generates enough electricity to power the 1,000-acre farm and 70 nearby houses. Since last October, for every ton of methane or carbon dioxide he uses to produce electricity (and keeps from being released into the atmosphere to contribute to global warming), he also gets to sell a credit on the fledgling Chicago Climate Exchange (CCX), a voluntary market designed to reduce greenhouse-gas emissions in the United States. Haubenschild's manure revenue to date: about $10,000.

It may seem like a drop in the farmer's bucket, but a booming global market is emerging for anyone who can take carbon out of the atmosphere, whether through innovative technologies, such as the methane digester (which extracts energy-rich biogas from manure), or through greater energy efficiency. Unlike the situation in Europe, however, where reducing greenhouse-gas emissions is now man-datory under the terms of the 1997 Kyoto Protocol, dealing in "emission credits" is strictly voluntary here. Even so, the carbon market has some major players. Since its launch in 2003, the CCX has attracted several Fortune 500 companies, including Ford and DuPont, eager to position themselves for a "carbon constrained" future. CCX trading volume is still minuscule--about $3.9 million last month (the European Climate Exchange, or ECX, handled roughly $60 billion in trades last year). But CCX founder Richard Sandor, a major shareholder in ECX, sees blue skies ahead. "This promises to be the single largest commodity in the world," he says. The European carbon market now exceeds the volume of all U.S. agricultural commodities.

The concept is simple. CCX members (among them the cities of Chicago and Oakland) agree to reduce their greenhouse-gas emissions by a certain percentage each year. If they beat the target, they can sell their credits to other members, and get paid for not polluting. If they don't, they buy credits, at a price of about $3.50 per ton of carbon dioxide. (In London, the price has ranged from $11 to $36 a ton.)

Dennis Haubenschild is sure the carbon market is the way to go. "I always wanted to leave this farm in better shape than I got it," he says. It smells nicer, too.