Reaping a profit from the air

When Doug Gronau looks out the window of his Iowa farmhouse, he sees a profitable investment in the effort to stop global warming.

Most people see cornfields.

His cropland, which he is prohibited from tilling, is a greenhouse gas credit, packaged and sold on the Chicago Climate Exchange. An anonymous trader snapped up the field's ability to absorb carbon dioxide to offset -- on paper -- a tiny portion of the carbon dioxide emitted by some distant factory.

Gronau, 57, expects a check for $2,800.

"That may not sound like a lot," he said, "but farming is hard and it adds to your margin."

The Chicago Climate Exchange is the first and only legally binding carbon emissions market in North America. In the absence of federal controls on greenhouse gas emissions, it applies an axiom of economic theory to the problem of global warming: People in search of profit can be expected to do just about anything for a buck -- even save the planet.

That concept of the market forms the cornerstone of regulatory efforts to fight global warming.

Interest in carbon trading as an arcane but powerful tool to fight global warming has intensified after the release last week of a landmark United Nations report that found rising temperatures would continue to increase even if greenhouse gas emissions could be held to current levels.

The theory of the market is straightforward. For the right price, a farmer like Gronau will agree to cultivate his fields without plowing, so the soil retains carbon dioxide that would otherwise seep into the air. That "carbon credit" can then be purchased by exchange members and applied against their own emissions. Should the price of carbon credits climb high enough, the theory goes, company executives one day will find it cheaper to reduce their own industrial emissions.

It's a new form of environmental bookkeeping that theoretically reduces emissions of carbon dioxide and other gases responsible for gradually rising global temperatures.

Since the exchange opened in 2003, almost 200 companies -- including Ford Motor Co., DuPont Co., IBM Corp. and Amtrak -- have volunteered to buy and sell the right to emit tons of carbon dioxide and five other key greenhouse gases.

California officials are beginning to frame market-based trading schemes, inspired in part by the Chicago Climate Exchange, to curb industrial carbon dioxide emissions by 25% over the next 14 years. State and federal regulators already use market trading to control the sulfur emissions responsible for acid rain.