History will judge harshly if a company hedges against the environment. Business and political leaders may not agree on the cause of climate change, but they grasp that rising greenhouse gas emissions are not healthy for the planet.

Reducing emissions through government policy and corporate action – as well as personal deeds – has become a cost of daily life for all. Chief executive officers must do much more. Federal and provincial climate change legislation allows companies to stake environmental claims on future practices by cleaning up the present.

In the spring of 2007, the Alberta government scored a Canadian environmental first. It established a climate change strategy that ordered companies with annual emissions exceeding 100,000 tonnes to reduce intensity – the amount of greenhouse gas vented into the atmosphere per unit of production – by 12 per cent. Companies could make physical improvements to their operations, buy Alberta-based credits or pay into the Climate Change and Emissions Management Fund at $15 per tonne of carbon emissions. The province has also committed $2 billion in non-refundable subsidies to companies with viable projects to sequester carbon.

Before the fall federal election, the Harper government followed suit with a different strategy scheduled to go into effect in 2010, but one that is still based on reducing carbon emission intensity by 2012. Emitters can contribute to a technology fund, starting at $15 per tonne in 2010, rising to $20 in 2013 and then increasing with growth in gross domestic product.

The strategy irritated advocates of aggressive environmental regulation by focusing on intensity-based regulations without an absolute cap on emissions. But the effect is still real. Greenhouse gas exhaust per unit of output must drop, either physically or by spending money to buy credits earned by others for reductions.

Enter a budding new market. Companies can purchase emissions reduction credits or create them through offset projects. The credits can be banked and sold. A global market is emerging, but Alberta to date only accepts credits created inside its borders.

There is still a massive challenge. A Canadian market for trading carbon dioxide emissions is in its infancy even though global carbon-credit trade topped US$64 billion in 2007, doubling what it was in 2006. The Montreal Climate Exchange made a debut this year on May 30 as a child of the Montreal Exchange and the Chicago Climate Exchange. The joint venture trades futures contracts on units of Canadian carbon dioxide equivalents. In the U.S. the New York Mercantile Exchange (NYMEX) introduced environmental commodities trading for late August. These “green” exchanges join carbon traders European Climate Exchange, Nord Pool and Powernext Carbon.

The whole system “is still evolving in Canada,” notes Michael Tims, chairman of Peters & Co. Ltd. To have a cap-and-trade system, or some other green market, requires environmental policies to be more firmly established than they are so far in Canada. “Once that happens and we see, for example, what the penalties will be for emissions and what the rules for calculations are, we’re much better off in trying to assess how those markets will evolve.”

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