The Montreal Exchange and the Chicago Climate Exchange today announced the signing of a letter of intent to develop the Montreal Climate Exchange, a carbon trading market for Canada.

Under the letter of intent, the MX and the CCX will develop trading, clearing and registry services for Canadian environmental products, starting with a carbon market. The new market will allow for the creation of a cap and trade system in Canada, which will enable government and industry to reduce greenhouse gas emissions and combat climate change. The government had already singled out market-based systems as one way of reducing carbon emissions.

“The creation of the Montreal Climate Exchange is a concrete initiative that will accelerate the development of a structured environmental market in Canada, “ said Luc Bertrand, president and CEO of the MX. “Combining MX’s unique position in Canada’s financial markets and CCX’s global leadership in environmental markets will result in innovation for the benefit of all Canadians and the environment.”

Richard Sandor, chairman and CEO of the CCX, said that the deal is “another historic step” toward the expansion of environmental markets worldwide. Europe has already developed carbon trading markets as it tried to meet carbon reduction targets. “It brings together the environmental and financial expertise of Chicago and Montreal to offer a suite of environmental financial products and services to the Canadian market. We believe the standardization and transparency of exchange-based markets will be of great interest to the Canadian corporate and financial sectors and will help Canada cost-effectively realize its global commitment to environmental leadership.”

The announcement was made in Montreal during the 11th Conference of Parties to the United Nations Framework Convention on Climate Change.