For those interested in cap-and-trade policy, the Wall Street Journal's Jeffrey Ball published a must-read report earlier this week. Taking the lead from the Washington Post, Ball digs into the Chicago Climate Exchange's carbon offset market, which environmentalists have blasted for its lax regulations. According to Ball, the criticism is warranted.

He writes that the CCX, in search of partners willing to sell carbon credits to their market's big polluters, has contracted with several landfills which eliminate the methane emitted by rotting trash. Sounds good, right? Here's the catch: many of the landfills were already making profits by selling the captured methane as fuel.

Charles Norkis, the executive director of the Cape May (New Jersey) County Municipal Utilities Authority, told the Journal his company had raised $427,475 alone since February selling credit to the CCX. The Lancaster (Pennsylvania) County Solid Waste Management Authority, the first landfill to join, has made about $320,727 as well. While it's good business for the dumps, it defeats the entire premise of the offsets:

The credit system was designed to encourage pollution cuts that wouldn't have happened without a financial incentive. But the credits aren't helping the environment if they're merely providing extra profit for cleanups already made. And dumps already have an incentive to capture methane because selling it can be profitable.

In defense of the CCX, credits from landfills represent only about one percent of the total emission cuts. That being said, the use of landfills delegitimizes the exchange's reputation at a crucial time for proponents of cap-and-trade, who will likely enter a big fight over climate change legislation next year.

Of course, there are more comprehensive global models from which legislators can draw.  Ball notes that the market instituted following the Kyoto Protocol is monitored quite stringently by the U.N. But the CCX bills itself as the domnant American model, one the federal government could use as a reference if legislation was enacted nationally. While Richard Sandor says the CCX is just a "for-profit company," he knows better. For the rest of us, it could be the future.