AEP joins Chicago Climate Exchange

COLUMBUS, Ohio, Jan. 16, 2003 — American Electric Power (AEP) announced Thursday that it has joined the Chicago Climate Exchange (CCX), the first U.S. voluntary pilot program for trading of greenhouse gas emissions.

AEP is one of 14 founding members announced Thursday by the CCX at a news conference in Chicago. Others are Baxter International Inc., the City of Chicago, DuPont, Equity Office Properties Trust, Ford Motor Co., International Paper, Manitoba Hydro Corp., MeadWestvaco Corp., Motorola Inc., STMicroelectronics, Stora Enso North America, Temple-Inland Inc. and Waste Management Inc. The CCX expects to announce additional members within 90 days.

“Participation in the Chicago Climate Exchange allows AEP to meet a number of objectives,” said Dale Heydlauff, AEP’s senior vice president, governmental and environmental affairs. “AEP has considerable experience with existing sulfur dioxide and nitrogen oxide emissions credit markets. Our participation in the CCX is a natural next step, since it takes the market-based approaches that lowered the costs of emission reductions for the other gases and applies them to greenhouse gas emissions.

“Through the CCX, we hope to demonstrate the viability of a multi-sector greenhouse gas trading program,” Heydlauff said. “The CCX also serves as a mechanism for the company to participate in the Bush Administration’s voluntary climate change program.”

Participation in the CCX includes a voluntary commitment to reduce the company’s greenhouse gas emissions by 4 percent over the next four years, beginning in 2003 with a 1 percent reduction from the company’s baseline emissions (defined as average 1998-2001 emissions, or about 180 million tons for AEP) and an additional 1 percent reduction each year through 2006, the last year for the pilot program. Through its commitment, AEP expects to reduce or offset an estimated 18 million tons of CO2 emissions based on current emission levels.

AEP expects to meet its reduction commitment cost-effectively through a broad portfolio of actions, potentially including power plant efficiency improvements, renewable generation such as wind and biomass co-firing, off- system greenhouse gas reduction projects and reforestation projects. The company will also use direct purchase of emission credits from the CCX.

Creation of the CCX marks the first time major companies in multiple sectors have made a voluntary binding commitment to make use of market-based mechanisms for reducing their emissions of greenhouse gases. The CCX will enable the companies to receive credit for such reductions and to buy and sell credits in order to find the most cost-effective way of achieving reductions. Trading is targeted to begin in the spring of 2003.

While many scientific uncertainties remain, the potential impact of increased atmospheric greenhouse gas concentrations on the global climate is a source of concern to the government and private sector. President Bush has “challenged American industry to make specific commitments to reduce emissions” as part of a comprehensive plan, Heydlauff said, noting that AEP views the CCX as an appropriate vehicle to respond to the president’s call for voluntary actions and to prove the efficacy of applying market-based tools for achieving these goals as efficiently as possible.

“We view the CCX as essentially a policy experiment,” Heydlauff said. “Lessons learned by CCX can help inform the climate change debate. We are confident that policymakers will discover that flexibility in the methods, location and timing of emission reductions can achieve mitigation goals most cost-effectively.”

Bruce Braine, AEP’s vice president, strategic policy analysis, represented the company during the design phase and negotiations of the terms of the CCX commitment agreement. Braine also served as chair of the CCX Subcommittee on Targets and Timetables during the eight-month design phase.

“The agreement is unique in that it involves a totally voluntary commitment for the company with tangible and verifiable reductions in greenhouse gases,” Braine said. “We are pleased that the agreement includes all greenhouse gases as well as crediting for greenhouse gas offset projects, such as forestry and landfill methane recapture. We are optimistic that the early actions taken by ‘first movers’ such as AEP will be credited towards potential future goals and targets for greenhouse gas mitigation.”

American Electric Power, an energy company with a balanced portfolio of energy assets, owns and operates more than 42,000 megawatts of generating capacity in the United States and select international markets and is the largest electricity generator in the U.S. AEP is a wholesale marketer of energy commodities, utilizing its energy expertise and risk management skills to make optimal use of its generation, natural gas pipeline systems, natural gas storage, coal mines and inland barge fleet. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. The company is based in Columbus, Ohio.

For more information from the Chicago Climate Exchange, visit their website at .

For more information from AEP: .

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