Using the command line, I can't change the client encoding, but I can change it using the "\encoding" command :
C:\>psql --variable=ENCODING=UTF8 could not find a "psql" to execute could not find a "psql" to execute psql (9.1.2) WARNING: Console code page (850) differs from Windows code page (1252) 8-bit characters might not work correctly. See psql reference page "Notes for Windows users" for details. Type "help" for help.
Yeah, "\set ENCODING UTF8" doesn't seem to work either. The "ENCODING" psql variable tracks changes to the server's client_encoding setting, but not vice versa. That probably should be fixed, or at least it should throw an error telling the user to use \encoding instead.
As a workaround, you can set the PGCLIENTENCODING environment variable before launching psql.