Climate change is a global issue that affects everyone. Many scientific studies have proven that there is a causal relationship between rising atmospheric greenhouse gas emissions and global warming. Global warming is believed to have adverse consequences on the earth’s sea levels, surface temperatures, and rainfall patterns. In Canada the result could be a detrimental affect on forestry, agriculture, lakes and rivers, fishing, coastal and northern communities. To deal with climate change, Canada was part of a group of 160 countries, which entered into the United Nations Framework Convention on Climate Change in 1992. The Canadian government subsequently ratified the Kyoto protocol on December 17, 2002.
In 2006, the Canadian Government introduced the new Clean Air Act. This Act regulates greenhouse gases, amongst other emissions, and provides for a framework that will enable emission trading. More information on the Clean Air Act can be found here.
In 2007, the Canadian Government announced a program of mandatory industrial emissions targets. More information can be found here.
The Kyoto Protocol, and the above-noted Canadian documents, both identify emissions trading as an important mechanism in the fight against climate change. In brief, emissions trading allows regulated entities which exceed their emission-reduction targets to sell their excess reductions to other entities who are unable to meet their obligations. Emissions trading:
- Encourages over-compliance
- Takes advantage of economies of scale
- Allows for efficient allocation of resources
- Provides a price signal
Emissions trading can occur bilaterally between counterparties, or on an exchange. As a proven market solution, an emissions exchange can provide an independent and transparent trading platform, with counterparty risk management through clearing. CCE was created to examine market-based solutions for emission reduction, and is able to provide a thorough market understanding of all the necessary facets of operating an exchange and clearinghouse. This model has facilitated cost effective and efficient trade in commodities for over 100 years. CCE brings proven expertise in the area of commodity market solutions.