Eighteen months ago, the Chicago Climate Exchange (CCX) was riding high as the planets seemed to be aligning for the only national carbon-trading venue in the United States.

Barack Obama, an enthusiastic supporter of cap-and-trade, was closing in on the Democratic presidential nomination. John McCain, his Republican opponent, had introduced a series of cap-and-trade bills in the U.S. Senate. The price of the carbon-emission permits traded on the exchange was at an historic peak of $7.40 a ton.

This year, the prospects of a mandatory federal carbon regime look even better. President Obama heads to the U.N. Climate Change conference in Copenhagen vowing that the United States will cut emissions. And if Congress does not pass legislation, the Environmental Protection Agency has signaled that it will.

Yet volumes and prices on the CCX have collapsed, with emissions permits now trading at historic lows of between 10 to 15 cents per ton. That reflects the pervasive uncertainty over what kind of carbon regime the United States might have and the CCX role within it.

As the United States is not a signatory to the Kyoto Protocol, the CCX, which began in 2003, has always been a voluntary carbon-trading market. Its members — which include Ford, IBM and Monsanto — make a voluntary but legally binding commitment to meet greenhouse gas emission reduction targets. These are done either by cutting emissions or by buying emissions permits sold by members who have reduced emissions below target.

Prices have held up much better in the exchange group’s futures-trading division, where contracts are tied to mandatory compliance regimes, but the spot market for emissions permits has been hit by doubts over whether the United States will implement a cap-and-trade system and whether CCX credits would be accommodated within it.

One worry is that Congress will fail to pass any climate legislation at all. If the EPA were then to implement a carbon regime based on the Clean Air Act, it would set emissions limits but may not allow for carbon trading — raising the prospect of “cap, but not trade.”

If there is legislation, it's by no means clear that it will allow CCX credits into its trading framework. Critics have long accused the exchange of not being rigorous enough on what it counts toward emission-cutting, saying it rewards companies for shutting down factories and pays farmers for practices such as no-till, whose efficacy scientists have debated.

Richard Sandor, CCX’s founder and chief executive, says the first concern is more pertinent than the second.

“While there are questions of details of what projects to include, it appears to be more about whether there will be a cap-and-trade bill in the future,” he says.

If the government takes a more stringent regime as its blueprint, such as the Regional Greenhouse Gas Initiative, a mandatory regional cap-and-trade program that includes 10 U.S. states and does not currently include no-till farming — CCX’s permits could be left out of the federal mandate.

Sandor dismisses the debate about the quality of emissions permits as “much ado about nothing."

“The debate is more about U.S. public policy, how big a reduction target there will be, how to create inventive activity through renewable energy,” he says. “In the grand scheme of things, [the critics took] an awful lot of ammunition and put it on a very small part of this program. This is a detail and not at all core to what we’re doing.”

He also says the CCX detractors have misunderstood the nature of what was always intended as an experiment with relatively modest goals.

“We never claimed that we would be harbingers of change,” he says. “People were always asking the wrong questions. They thought our objective was to be a substitute for government.

“This is about building capacity and a demonstration project — you build accounting, legal, verification, monitoring capacity. We said at the very outset this was a demonstration project, to show cap-and-trade is viable, that you could have a voluntary market and that we would build up capacity, which is no different to what the EU did in its pilot program in 2005 to 2007.”

Sandor concedes that any legislation could exclude emission-reduction practices currently permitted by CCX.

“The government may define emissions permits differently,” he says. “You’re going to find legitimate differences of opinion. Our job was not to say what the government should or should not do… When there’s a law, we’ll implement it. When there’s not, we have a voluntary market.”