Archive for October, 2012


Monday, October 1st, 2012

Since I live about half way between New York City & Washington DC, I frequently get the opportunity to visit these cities – but a couple of visits in September were particularly memorable.

Chinese delegation in DC

An 18 member delegation from my GEF/World Bank SO2 trading project came to visit Washington in mid-September as part of a two-week U.S. tour (which also included a couple of West Coast stops as well). I thus had a chance to bring them up to speed about the CSAPR SO2 trading regulations, which had also been the topic of my earlier March lecture in Beijing. The court ruling in mid-August surprised many of us, since we thought that EPA might lose on the timing issue – but not on the technical merits themselves (which had been crafted to address a previous court loss). The two Republican-appointed judges on the Appeals Court thought otherwise, however, and the blistering (as these things go) dissent by the Democratic-appointed judge on the panel provided our Chinese visitors with a hint about problems in regulatory market development when the government itself is polarized.

It was great to be able to catch up with my DC friend & colleague John Palmisano once again as well. He had a six hour lecture/discussion session with the Chinese delegation, and thus this group had access to one of the most knowledgeable people on the planet concerning emissions trading! (You might remember John from an October 2010 posting which mentioned our 30+ years of working together, including the HK Stock Exchange project & many others).

9/11 Memorial in NYC

And on a trip to New York City to get my China visa renewed, I also arranged to visit the 9/11 Memorial. I was in Manhattan on the morning of 9/11, at the U.N. — and I was scheduled to fly that afternoon from NYC to DC. My family knew about my travel, but not the specific flight arrangements – and so, of course, when they heard about plane crashes in both cities, they were very, very concerned. It took a few hours to get through to them on my cell phone to assure them that, in my case, everything was fine. That day was certainly a memorable one for everyone in the city – and one of the things that made it so was the spirit of cooperation and even camaraderie that bound everyone there (a most unexpected development for city folks with a reputation for being jaded & non-caring). I was eventually able to leave Manhattan late that afternoon on a U.S. Army Corp. of Engineers’ tugboat, watching as medical personnel were streaming in on those same docks to deal with a still-expected triage situation. I found the new 9/11 Memorial to be very nicely done – a suitable setting for reflecting on how precious but unpredictable life can be, with a diverse crowd and visitors from everywhere around the world paying respect to those who gave everything that day.

100th Posting!

Monday, October 1st, 2012

Photo credit: David Levene, UK’s The Guardian

This is the 100th posting on ‘Raufer Updates,’ and it certainly has been an interesting experience over the past seven years. I started it after I left the U.N., because I didn’t want my website to become completely stale – and I viewed it as essentially part of an extended c.v. You’ll note that in the first posting, I mentioned that I didn’t really consider it a blog, but rather a place to list ‘new and interesting projects’ that I’ve been working on.

The rest of the world seems to think it’s a blog, however – albeit one of the slowest moving and lethargic ones on the internet! I tend to post in clusters, rather than individually; often several weeks after an event, rather than in real-time; and I don’t allow comments or feedback. My three daughters – each with her own active blog and continuous stream of Facebook commentaries, instant messaging, phone texting, etc., etc. – consider it a somewhat Luddite venture, indicative perhaps of the efforts of someone from my generation. And despite such minimalist activities, I’m constantly besieged by internet companies who assure me that I can increase my rankings, or increase my ad revenue, if only I sign up for their two-for-one linkage swaps, special SEO deals, or similar packages designed especially for me.

I do enjoy writing these postings, however, and you’ve probably noticed an evolution over time, away from a strict listing of project work towards something that looks more and more ‘blog-like.’ I’m definitely not there yet (& still can’t afford that amount of time!), but I do very much look forward to the next 100 postings — whatever the subject matter & wherever they might take me. And a major, major thanks to Ms. Krissie Gatti, my web master/posting guru extraordinaire, who takes care of such things for me, and has been there since the very beginning!

Good Derivatives

Monday, October 1st, 2012

Several years ago, I was at a dinner in Hong Kong (arranged by Christine Loh, formerly CEO of Civic Exchange, but now Undersecretary for the Environment in the HK government) with Dr. Richard Sandor, the founder of the Chicago Climate Exchange (CCX). Long before he worked on environmental matters, Dr. Sandor was Chief Economist at the Chicago Board of Trade, and played a key role in establishing financial derivatives in the 1970s and 1980s. He’s now written a book entitled Good Derivatives: A Story of Financial and Environmental Innovation, and of course I was very interested in reading it – especially since I was working in Chicago during much of that time, and had helped establish an early emissions brokerage there in 1981 (in conjunction with the Illinois State Chamber of Commerce). Our brokerage only lasted about six months — until the funding ran out! — because hardly anyone even knew what we were talking about in those very, very early years of emissions trading. But that early experience as an emissions broker was formative and it ultimately led me to U. Penn to work on applying such market mechanisms to deal with the problem of acid rain.

Perhaps not surprisingly, Dr. Sandor was completely unaware of our early Chicago emissions brokerage efforts. His own efforts were considerably more successful – although truthfully much of that was due to his work in Europe (and the establishment of a sister European Climate Exchange) rather than any U.S. regulatory actions. In fact, most of the CCX activities have now been shut down, because of a lack of environmental regulatory support within the U.S.

I found the book itself quite interesting, primarily because it presented emissions trading from a completely different perspective than my own — i.e., from a financial viewpoint, rather than a technical/engineering one. Thus, for example, there was almost no discussion about marginal pollution control costs of FGD scrubbers or about ambient air quality standards, but lots and lots of info about market liquidity, open interest, and the structure of futures contracts. One reviewer on commented about the author’s ‘deliberately self-centered’ approach, calling it a form of ‘radical realism’ and ‘vérité’ that attempts to show events through his own eyes rather than in a truly objective fashion. I’d tend to agree — but given his success, I’d also allow that Dr. Sandor has earned that right, and the book is interesting on its own terms. I’m closely watching what happens with one of the Chinese exchanges his company helped set up. The Tianjin Climate Exchange has been selected as one of the seven pilot schemes for emissions trading in China’s 12th Five Year Plan, and recently obtained $750,000 from the Asian Development Bank to help make that happen.