Montreal Climate Exchange begins trading

The Montreal Climate Exchange on Friday officially launched its new futures contract in Canada carbon dioxide equivalent (CO2e) units.

Co-owned by the Montreal Exchange and the Chicago Climate Exchange, the MCeX thus becomes the first regulated environmental market in Canada, chairman Luc Bertrand said in a release Friday.

Fully automated trading in the MCeX futures contract was launched at 9:30 a.m. on the Montreal Exchange’s SOLA platform, the company said.

“We aim to build a critical mass of trading activity in Canadian carbon futures,” Bertrand said.

“The MCeX market will help Canadian industry discover the true ‘price of a tonne of carbon’ under the new federal regulatory framework. Trading in the MCeX futures will generate vital price signals for industries that are investing in new ‘green’ infrastructure and capital equipment.”

The MCeX carbon futures contract is meant to help industrial participants to manage their emissions risks at the lowest cost while also creating continuous incentives for technological innovations that reduce greenhouse gas emissions.

The market is expected to bring together a variety of participants including large regulated emitters, investors in voluntary emissions reduction projects, financial institutions, institutional investors, hedge funds and insurance companies, MCeX officials said.

Canadian farmers have been expected to play a significant role in providing “carbon sinks” to help offset Canadian greenhouse gas (GHG) production. Emissions markets such as the MCeX are meant to allow polluting companies to offset their emissions by funding enterprises that remove GHGs from the air.

The concept is seen as a potential revenue source for farmers, whose individual credits would be purchased through “aggregators” or other intermediaries, to pay for farming practices that help sequester excess atmospheric carbon in farmland. A number of Canadian farmers have already signed contracts with aggregators trading on the Chicago Climate Exchange.

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