"The creation of the exchange will accelerate the development of a structured environmental market in Canada," Luc Bertrand, president and CEO of the Montreal Exchange, told reporters.

His bourse and the Chicago Climate Exchange plan to form the joint venture Montreal Climate Exchange to trade carbon dioxide futures for credits that Canada will designate as part of the UN plan.

As one of the about 40 developed countries required to cut emissions under the first phase of the UN's Kyoto Protocol, Canada will have to cut emissions to below 1990 levels by 2008 to 2012.

The exchanges made the announcement on the sidelines of the UN conference in Montreal in which representatives from about 190 rich and poor countries hope to come to an agreement on Kyoto's post-2012 future.

The MCX will also trade offset credits in greenhouse gas reductions achieved by green programs such as burning methane from landfills and plowing carbon-containing agriculture waste back into the soil.

President George Bush pulled the United States, the world's biggest greenhouse producer, out of the Kyoto pact in 2001, preferring voluntary means to curb emissions.

In 2003, the Chicago Climate Exchange started trading greenhouse gases. Some of its more than 100 members have traded greenhouse gas credits, but it has been a small amount compared to volumes on the European Union's mandatory climate trading scheme set up by Kyoto pact.

Richard Sandor, CCX's president and CEO, said he expects the Canadian carbon dioxide market to be bigger than Canada's wheat and canola markets combined. And he hopes MCE will one day trade credits for more environmental futures.

"Wealth creation in the 21st century we believe is going to involve scarcity in clean air and water," said Sandor, who helped form the successful sulfur dioxide emissions market, the world's first environmental market.

CCX will provide clearing and settling on the MCX.