Canada Emissions Trading Plan Awaits Ottawa Policy
Date: 03-Oct-06
Country: CANADA
Author: Lynne Olver
The exchange runs Canada's market for equity, currency and interest-rate derivatives and has said it intends to launch trading in a carbon dioxide emissions contract.
Its joint-venture partner, the Chicago Climate Exchange, operates a voluntary US emissions trading market.
But the proposed Montreal Climate Exchange project, first announced in July, is in a holding pattern until the federal Conservative government indicates where it is headed on greenhouse gas policies.
"We need regulatory certainty and that requires a (carbon emission) registry, it requires certification, and ideally it should be a mandatory program," Bertrand told Reuters in an interview.
"We have argued at length that this is a good, solid business solution."
In 2002, Canada's then-Liberal government ratified the Kyoto Protocol on climate change, which committed 35 rich countries to cut greenhouse gas emissions between 2008-2012. But Canada's emissions have soared, and the Conservative government says the country will not meet its Kyoto targets. It plans to release a new air-quality plan in October.
This week, Environment Commissioner Johanne Gelinas said the federal government "urgently needs a believable, clear and realistic plan to significantly reduce greenhouse gases."
Bertrand said the proposed exchange could go ahead with trading a carbon dioxide contract even if reductions are voluntary. But a government-mandated cap on emissions would be more effective, spurring companies to sell excess credits or buy those they need to meet their limits, he said.
In Chicago, where trading is voluntary, "there is nowhere near the level of activity you see in Europe," where the European Union set out an emissions trading scheme, he said.
The European Climate Exchange traded rights to emit 257 million tonnes of carbon in the first eight months of 2006, while the Chicago Climate Exchange, or CCX, and a subsidiary traded about 8 million tonnes, according to the exchanges' parent company, Climate Exchange Plc.
Richard Sandor, the Chicago-based chairman of Climate Exchange Plc, said he hopes the Montreal operation can be running within a year, even if Ottawa does not mandate emission-reduction targets.
"If the government encourages a voluntary market within Canadian borders, it could go forward," Sandor said.
The Montreal Exchange has not yet identified or met with potential participants or explained to companies how the proposed CO2 contract could be a useful risk-management tool.
"The most important hurdle or element here is the federal government's policy on clean air," Bertrand said.
At the CCX, members enter agreements to cut emissions by a specific amount over a certain period. If they beat those targets, they generate credits they can sell or keep. If they fall behind, they must buy credits on the exchange.
Canadian electricity utility Manitoba Hydro has been a member since the CCX's inception, said Bill Hanlin, who manages the utility's energy policy and emissions trading group.
It has also been a net seller of about US$500,000 worth of credits, he said.
Voluntary efforts are important in building momentum, "but ultimately, if we as a society want to manage these emissions, there has to be some form of mandatory rules in place that require everyone to play by the same rules," Hanlin said.
(US$1=$1.11 Canadian)