Montreal Climate Exchange starts trading
Activity on Canada's first carbon-trading market kicked off Friday with the launch of the Montreal Climate Exchange.
A joint venture between the Montreal Exchange and the Chicago Climate Exchange, the new exchange will allow the trading of futures contracts on greenhouse gases.
Each contract is equal to 100 Canada carbon dioxide equivalent units. Each unit, as defined by the Canadian government, is an entitlement to emit one metric ton of carbon dioxide equivalent.
Companies that earn greenhouse gas credits through environmental programs can use the new market to sell them to carbon-emitting firms.
"Essentially, the market will be fed by what we call the [carbon emissions] offsets," said Luc Bertrand, the CEO of the Montreal Exchange and the vice-chairman of the board of the Montreal Climate Exchange.
Bertrand said the users of the credits will be companies who need to manage, or hedge, "the risk associated to their obligation in reducing emissions." He also said he expects speculators or hedge funds will take long or short positions in the carbon-trading market.
Policing the carbon credits will be the responsibility of the government of Canada, through a registry to keep track of the credits, and a body that will have the authority to audit the credits, Bertrand said.
While trading activity on the Montreal climate exchange is expected to be small initially, Bertrand pointed out that carbon trading in Europe has grown into the billions of dollars.
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