10/26/2008 05:12 am ET Updated May 25, 2011

Carbon Trading Catching On

While the financial markets flounder, one exchange in Chicago had a record day this week. The Chicago Climate Exchange hosted its biggest trading day for a particular commodity. It's not pork bellies or corn futures--it's a kind of carbon dioxide emission. Carbon trading is growing into what could be a trillion-dollar market--one that could define the future energy economy, and help head off global warming. Just as the industry seems poised for meteoric growth, the Chicago exchange is facing new competition from out of town.

Back in the '70s, Richard Sandor came to Chicago with an idea. Why not let traders take bets on changes in interest rates?

SANDOR: I previously had been thrown out of most places, saying it was a silly idea because interest rates weren't volatile. Then in '73 the oil embargo occurred, and interest rates went crazy.

That little experiment earned Sandor the moniker, "The Father of Financial Futures" - though he may have joint custody with a few other economists. Anyway, Sandor was working in banking when Congress took up the Clean Air Act. Why would a banker care about air quality?

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