The exchange is being formed by the Chicago Climate Exchange (CCX), a voluntary US climate bourse, and the Montreal Exchange, a derivatives exchange.

Through its membership in the Kyoto pact, Canada is one of about 40 developed countries that are required to cut emissions of greenhouse gases, such as carbon dioxide that is released by cars and power plants. Canada agreed in 2002 to cut emissions by 6 percent of 1990 levels by 2008 to 2012.

However, the new government of Canadian Prime Minister Stephen Harper has said that's an impossible goal as emissions are now 35 percent above the 1990 levels. The country, a major energy producer, is beginning to exploit its vast molasses-like oilsands in Alberta, the biggest source of oil outside Saudi Arabia.

The government has said it will lay out its greenhouse gas reduction plan in the fall.

"We will have to wait until they really put forward their position on ... Kyoto," said Jean Charles Robillard, spokesman for the Montreal Exchange.

He said the climate exchange could trade carbon credits on a voluntary basis, as is done on the US CCX, if Canada withdrew from the pact.

"There's a few conditions. We would need a minimum regulatory framework on emissions to be able to create that market," he said.

The United States withdrew from the Kyoto pact in 2001. Voluntary CO2 trade works on CCX after members enter legally binding agreements to cut their emissions by a certain amount and time. If they beat those limits, they generate credits they can sell or bank. If they fall behind, they must purchase credits.