MONTREAL EXCHANGE READY FOR CANADA CO2 MARKET
11.12.08 - Leído 29 veces. Enviar esta notaMichael Szabo
The Montreal Climate Exchange aims to become the central Canadian marketplace for carbon emissions trading, even before the government finalises the climate change legislation required to kick-start the market
LONDON, UK: November 12, 2008.- Canada’s conservative government re-elected in October, introduced climate change proposals last year that would see a nationwide emissions trading scheme start in 2010.
The federal plan, entitled “Turning the Corner”, is still a work in progress, but the Montreal Climate Exchange’s (MCeX) carbon trading expert is certain that legislation will be passed by 2010, creating a Canadian carbon market.
“Canada has finally entered a carbon-constrained era and we’re confident we’ll see regulations published by government very shortly,” said Leon Bitton, vice president of research and development at the MCeX.
Carbon dioxide trading, a market tipped to be worth $100 billion globally this year, helps reduce greenhouse gases by allowing industry to buy and sell emissions cuts.
Companies can sell pollution permits to other companies that are unable to cut emissions as cheaply.
The MCeX, Canada’s first emissions exchange, is a joint venture between the Montreal Exchange and the Chicago Climate Exchange. The Montreal Exchange, acquired by Canadian market operators TMX Group in May, holds a 51 percent stake.
The exchange began trading on May 30, 19 months before the Canadian scheme’s scheduled start.
The MCeX used generic language in developing its emissions contracts with the view that, regardless of which government was in power, Canada would have a carbon market by 2010 and Montreal’s tradable credits would cater to the scheme. “We wanted to allow industry to gain practical experience in carbon trading, and we wanted to generate a price signal that was needed by industry to execute their emissions reduction strategies,” Bitton told Reuters.
In October’s election, the challenging Liberal party proposed introducing a carbon tax, seen as alternate way of controlling emissions by attaching a price on carbon dioxide, but were also considering a market-based scheme.
“If you read between the lines, the Liberals provided the tax as a compliance option…but the market-based mechanism was also part of their proposals,” Bitton said.
“We tried to develop (contracts) that optimise the programs put forward by policymakers, regardless of party.”
Following Barack Obama’s victory in last week’s US election, Canada has said it is interested in working together to form a North American climate change agreement, which could eventually make a domestic Canadian trading scheme redundant.
EUROPE
The 27-nation European Union introduced carbon emissions trading in 2005. Although an over-allocation of permits between 2005-2007 led to a collapse in prices, the market was still worth some $50 billion last year, according to the World Bank.
Interest in the Canadian market has been sparse.
Compared to the EU market, which sees over 10 million tonnes of carbon traded daily, volumes on Montreal have been extremely light. Only 1,040 lots have traded since May, representing 104,000 tonnes of carbon dioxide.
Prices closed at C$10.50 ($12.71) a tonne on Monday while open interest on the benchmark futures, which settle in 2011, is 305 lots. This means only 30,500 tonnes of carbon dioxide reductions are due to change hands in 2010, or the equivalent of taking around 7,000 cars off the road for a year.
Another major difference between the Canadian and European schemes is the punishment for missing emissions targets.
In Canada, regulations limiting the emission of greenhouse gases are enforced through the Canadian Environmental Protection Act, meaning pollution is considered a criminal offence under federal law.
“That means if (your) company doesn’t meet its targets and you don’t utilise the different compliance tools available, the consequences can be more than a simple financial penalty,” Bitton said.
“In that sense, the proposed Canadian scheme is even more stringent than the EU scheme.”
*To read the interview, or for more news and analysis on the carbon markets, go to www.communities.thomsonreuters.com
(Reuters)
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