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The Montreal Climate Exchange is encouraged by recent media reports that the federal government may be moving towards a cap-and-trade system of emissions regulation.
"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 (MCeX) and also President and CEO of the Montréal Exchange at an event in Toronto on October 4 that was hosted by the Conference Board of Canada.
A market-based approach to emissions regulation is also the policy model preferred by the Montreal Climate Exchange (MCeX) since it would support the creation of a market-based solution to reduce emission of greenhouse gases in Canada.
"We are heartened by these reports," said MCeX Chair Luc Bertrand. "The government would set mandatory caps on the emitters and then let the market allocate resources."
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 MCeX would provide the exchange for trading in these credits.
This 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 Montreal Exchange (MX) and the Chicago Climate Exchange (CCX) are partners in MCeX. CCX already operates such an emissions trading exchange in the U.S. and, through its subsidiary, operates the European Climate Exchange (ECX) which handles about 80 per cent of emissions trading in Europe.
The market model is proven. For example, the trading system in the U.S. has facilitated a reduction in SO2 emissions in that country from 18 million tonnes annually to about 10 million tonnes. This has resulted in less acid rain, drastic reductions in lung disease, and billions of dollars in health care savings.
MCeX is ready to launch Canada's first climate exchange, and is eagerly waiting for the federal 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.
MX operates Canada's national financial derivatives market, and brings its expertise in trading systems, clearing, market regulation and financial risk management. CCX is a world leader in building and operating environmental markets.
