The Montreal Climate Exchange (MCex) says that it is encouraged by recent reports that the federal government may be moving towards a cap-and-trade system of emissions regulation.

Under such a system, companies and organizations that produce greenhouse gases would be ‘capped’ – essentially, they would have to meet a series of emissions reduction targets over time. Companies exceeding their targets would earn credits, while those falling below their targets would be required to purchase credits in order to make up the shortfall. This creates a demand for and supply of emissions credits, and the MCeX would like to be the market for
trading in these credits.

“We’re very encouraged by federal Environment Minister Rona Ambrose’s recent comments to the media concerning the regulation of greenhouse gases in Canada,” said Luc Bertrand, chair of the Montreal Climate Exchange and president and CEO of the Montréal Exchange.

The exchange argues that this sort of market-based approach offers many benefits. It sets clear targets for large ‘final emitters’, it gives industry the flexibility to invest in green technologies at the right time, it minimizes both compliance costs and public expenditures, and it creates strong economic incentives to reduce emissions.

“A market-based approach offers the most cost-effective way to regulate and ensure compliance. As important, the price discovery mechanism at the very base of a market will help firms manage their long term investments more effectively and spur the development of new, innovative clean technologies,” added Bertrand.

The MCeX reports that it is ready to launch Canada’s first climate exchange, and is eagerly waiting for the federal government to announce the regulatory framework for greenhouse gas reduction. “If we see mandatory caps and clear regulations on certification and registration of emissions reductions, we can have a made-in-Canada environmental market up and running very quickly,” said Bertrand.

The Montreal Exchange and the Chicago Climate Exchange are partners in the MCeX. The CCX already operates such an emissions trading exchange in the U.S. and, through its subsidiary, operates the European Climate Exchange which handles about 80% of emissions trading in Europe.