Richard Sandor

Richard Sandor

: Photo from Wikimedia Commons / Author of Photo: llabarbera, American Financial Exchange


* Is commonly referred to as the “father of carbon trading”
* Founder and Chairman of the Chicago Climate Exchange
* Chairman and CEO of the American Financial Exchange

Born in 1941, Richard Sandor grew up in Brooklyn. He received his Bachelor of Arts degree from Brooklyn College at the City University of New York. In 1967, he earned his doctorate in economics at the University of Minnesota. Sandor then worked as a professor at the University of California at Berkeley and as a lecturer at Stanford. In 1973 he gave up academic life to pursue a career in business, holding, in subsequent years, senior positions at Kidder Peabody, Drexel Burnham Lambert, and Banque Indosuez.

In the 1970s Sandor achieved particular prominence as a chief economist for the Chicago Board of Trade, where he helped to develop the financial futures market, which began trading futures in 1977. Ever since, he has been both praised and derided for this innovation.

In the late 1980s, Sandor began to link economics with environmentalism, publishing a 1989 paper that advocated turning air pollution into a commodity in order to reduce sulfur dioxide (SO2) emissions from power plants. Sandor would later explain this concept as follows:

“Emission allowance trading is a straightforward concept that is already operational on a national scale. The U.S. sulfur dioxide emissions market provides a good example. Congress placed an overall restriction on power plant emissions nationwide, effectively allowing power plants to comply by either 1) investing in cleaner fuels or pollution control technologies or 2) buying extra emissions rights from another power plant that made extraordinary emission cuts. Buying excess rights from a more efficient power plant allows the older and less efficient plant to meet its obligations at lower cost to consumers. In short, trading emissions permits allows industry to meet emissions goals in a least cost way.”

Sandor’s ideas had a substantial influence on the 1990 Clean Air Act, which reduced acid-rain and created a market wherein the right to pollute could be traded as a commodity. Working with Battery Ventures, a Boston-based venture-capital firm, Sandor then began to implement energy-trading strategies, especially in Canada.

Sandor’s chief goal during the 1990s was to create a market for carbon trading — on the theory that carbon dioxide is “the principal greenhouse gas that causes global warming.” To do this, Sandor indicated, environmentalism had to become a profitable business: “Air and water are no longer the free goods that economics once assumed,” he argued. “They must be redefined as property rights so that they can be efficiently allocated.”

From 1998 to 2003, Sandor served as Chairman and CEO of Environmental Financial Products LLC. He also returned to academia, accepting a research professorship at the J.L. Kellogg School of Management at Northwestern University in 1999. In 2000, he became a director of American Electric Power, the biggest coal burner in America and a soon-to-become promoter and user of carbon credits.

In 2003 Sandor created the the world’s first carbon-emissions trading company, the Chicago Climate Exchange (CCX). Startup grants for CCX (totaling $1.1 million) came from the Joyce Foundation in 2001-02, when Barack Obama sat on the foundation’s board. There are reports that Obama himself drew up the protocols for CCX. “Obama was on the foundation that gave us the grant,” Sandor has said. “We know him well.”

Appointing himself chairman, Sandor stocked his CCX board with a host of powerful figures, including his former friend and colleague, Leslie Rosenthal, who had also worked in derivatives and served as a chairman of the Chicago Board of Trade.Another CCX board member was James Thompson, former four-term governor of Illinois.

CCX would soon grow in national and international influence. Stuart Eizenstat, President Bill Clinton’s lead climate-treaty negotiator, became a director. Maurice Strong, the father of international environmentalism at the United Nations, also joined the board, bringing with him a host of top UN officials such as:

  • Rajenra Pachauri, head of the UN Intergovernmental Panel on Climate Change
  • Elizabeth Dowdeswell, former head of the UN Environmental Program
  • Michael Jammit Cutajar, former head of the UN Framework Convention for Climate Change
  • Thomas Lovejoy, former World Wildlife Fund Executive Vice President and a science adviser to the UN Environmental Program.

Al Gore’s Generation Investment Management and Goldman Sachs also invested in Sandor’s project, each buying 10% of CCX. Sandor and his financial partner Neil Eckert established CCX and its sister group, Chicago Climate Futures Exchange, as part of a larger carbon-trading organization, Climate Exchange plc, which is registered at the Isle of Man, where it pays no tax. This Climate Exchange network comprises a number of other climate exchanges throughout Europe and Asia, including the European Climate Exchange based in London’s Bishopsgate.

As of 2008, CCX’s affiliates controlled more than 80 percent of the European Union’s carbon-emissions trading, and the network handled 69 million of the 123 million credits traded worldwide in the voluntary emissions market.

In recent years, Sandor has won international acclaim for founding CCX. In 2002 he was lionized by Time magazine as one of its “Heroes for the Planet.” In 2004 he received the honorary degree of Doctor of Science from the Swiss Federal Institute of Technology. In 2007, Time again praised Sandor as one of the “Heroes of the Environment.” In 2009, he was inducted into the Ernst & Young “Entrepreneur of the Year” Hall of Fame, and was honored as an “Environmental Leader” by the Chicago Academy of Sciences and the Peggy Notebaert Nature Museum.

Sandor remains involved in shaping cap-and-trade legislation in the United States. In 2009 he worked alongside Democratic Representative Henry Waxman, who co-sponsored a cap-and-trade bill in the House of Representatives. Sandor admitted that the bill began “way, way to the left” with provisions that would have bankrupted U.S. utilities. “The Waxman bill, to those of us who are students, was a joke from the inception,” Sandor stated. He also warned that President Obama’s proposal to auction pollution permits (to raise over $600 billion) would “bankrupt the industry.”

In 2015, Sandor became chairman and CEO of the American Financial Exchange (AFX).

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