Environmental Financial Products LLC

ENVIRONMENTAL FINANCIAL Products, LLC (EFP) is a company that offers legal and financial services to businesses interested in the environmental management sector. EFP is based in Chicago, Illinois. A chief role of the company is to assist in designing and mediating arrangements between parties looking to develop business relations in environmental commodities trading, as well as other environmental or financial markets.

Richard Sandor, chair and chief executive officer, founded the principles driving EFP. Sandor earned his Ph.D. in economics from the University of Minnesota in 1967. He went on to play a large role in developing the idea of emissions credit trading after the Congressional Clean Air Act of 1990. Emissions credit trading began in an effort to reduce acid rain-causing emissions, by trading allowances for sulfur dioxide emissions at the Chicago Board of Trade, where Sandor served as nonresident director 1991-94. He later acted as second vice chairman of strategy 1997-98.

The concept of emissions credit trading is as follows: company that exceeds sulfur dioxide emissions allowances can sell its extra allowance credits to another company that cannot meet the standards. These extra credits will be at a lower cost to the purchasing company than the restructuring needed to meet the standards. The principle behind this trade is that the selling company is rewarded for exceed ing standards, and the purchasing company is given extra time to meet those standards without being penalized. Overall, the same net amount of emissions is effectively released as if both companies had met standard allowances. In 2001, Sandor formed the Chicago Carbon Exchange, modeled after the original emission allowances trading for sulfur dioxide. This trading would be for emissions credits for carbon-based greenhouse gases (GHG).

EFP representatives have played a number of roles in assisting various institutions in meeting global GHG emissions standards. For example, they have consulted, advised, or acted as board members for various sectors, such as government, corporate, and nongovernmental organizations. Some examples include the Brazilian states of Amapá, Amazonas, and Paraná; the New York Mercantile Exchange; the U.S. Agency for International Development; the Toronto Stock Exchange; Lloyd's of London; the Hong Kong Futures Exchange; the Chicago Board of Trade; the United Nations; the Australian Greenhouse Challenge Office; and the Stock Exchange of Singapore.

EFP has given seminars and risk management programs at the University of Notre Dame in South Bend, Indiana; the Berkeley Program in finance at the University of California at Berkeley (where Sandor was once a faculty member); the Kellogg Graduate School of Management at Northwestern University in Chicago, Illinois (where Sandor works as a research professor); and the INCAE (Instituto Centro Americano de Administración de Empresas) business schools throughout Central and Latin America.

SEE ALSO: Cantor Fitzgerald EBS; Economics, Cost of Affecting Climate Change; Economics, Impact From Climate Change; Greenhouse Gases; Kyoto Protocol.

BIBLIOGRAPHY. Ricardo Bayon, et al., Voluntary Carbon Markets: An International Business Guide to What They Are and How They Work (Earthscan Publications Ltd., 2007); Bernd Hansjürgens, ed., Emissions Trading for Climate Policy: U.S. and European Perspectives (Cambridge University Press, 2005); R.L. Sandor and M.J. Walsh, "Kyoto or Not: Opportunities in Carbon Trading are Here," Environmental Quality Management (April 2001).

Claudia Winograd University of Illinois at Urbana-Champaign

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