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The next U.S. president is going to bring in a cap-and-trade system that will impose legislated limits on carbon dioxide emission, Charest said at the formal opening of the exchange.
"It is in our interest in Canada to be ahead of this curve and to prepare for what is going to be one of the most important markets or commodities in the next few years," said Charest, a former federal environment minister in the Progressive Conservative government of Brian Mulroney. "We must move now and not wait until that happens and rather be in front of this important movement."
Leading the way
He likened the challenges with the tackling greenhouse gases with U.S. reluctance in the 1980s to address acid rain.
Climate exchange markets allow companies to trade the "credits" they gain by producing environmentally friendly products or services to other companies, who produce greenhouse gases or other carbon-intensive byproducts, for cash. The system is intended to provide incentives that generally promote the greening of industry.
Charest and federal Environment Minister John Baird were among those in attendance at the opening, which witnessed the negotiation of just three trades on the inaugural day.
Business steps in
Jean Nolet, president of climate change consultants Ecoressources, said the level of activity wasn't surprising. "It would have been more surprising if there would have been a lot of contracts given the uncertainty that remains over the markets," he said in an interview.
Richard Sandor, chairman and founder of the Chicago Climate Exchange, said the Canadian carbon market promises to be substantial. "Carbon is Canada's largest crop, surpassing canola, and why shouldn't Canadian air be as important as the food that's grown?" said the man named by Time magazine as Hero of the Planet.
Sandor said there has been a dramatic shift in wealth creation over the last 50 years from manufacturing to the commoditization of financial instruments and data.
"The biggest part of wealth creation in the 21st Century will be in the commoditization of public goods such as air."
Federal to follow
Although Charest noted the importance of the exchange for Quebec, he said it marked the minimum step possible without firm federal regulations.
Baird said Ottawa plans to introduce such regulations this fall, ahead of the introduction of mandatory targets placed on industry in 2010. "They will be clear, they will be detailed and they'll provide a degree of certainty," he told reporters.
Baird acknowledged that Canada doesn't produce enough carbon offsets today to make the trading system work efficiently and agreed the exchange should move more aggressively to develop the details and regulation that will fuel its growth.
The minister brushed aside criticism from Charest that the Conservative plan includes a baseline for emission reductions that isn't fair to Quebec, which has met its Kyoto target by reducing greenhouse emissions by nine per cent since 1990.
The Conservatives' climate plan aims to cut emissions by 20 per cent below 2006 levels by 2020. The plan includes carbon trading, offsets, a technology fund, and a credit for early reductions.
Merging of companies
The premier also challenged the federal focus on intensity-based targets, saying the global approach is geared towards absolute reductions.
The Montreal Climate Exchange is a joint venture of the Chicago Climate Exchange and the Montreal Exchange, which is being merged with the company (TSX:X) that operates the Toronto Stock Exchange. Among the business partners lined up so far are Rio Tinto Alcan, SNC-Lavalin (TSX:SNC), TD Securities Inc., Ecoressources Consultants and Orbeo.
The Canadian exchange promises to be small in the outset, but global interest in emissions trading suggests it could grow substantially, depending on the federal regulation.
Trading on similar public carbon markets has grown in recent years. Its global value more than doubled in 2007 to US$64 billion and is expected to reach $92 billion by the end of 2008, according to the World Bank.
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