This will place heavy financial penalties on European companies in some industry sectors, if they fail to meet emission reductions targets, but will allow those that can reduce their internal emissions to trade allowances, possibly generating a significant new revenue stream.
There is also the possibility of wider international trading on the horizon.
Russia decided last month to ratify the Kyoto protocol, which will require industrialised countries to reduce emissions of GHG. The protocol had been languishing for some time, since it needed the backing of nations accounting for at least 55% of all industrialised countries' 1990 emissions, a goal that looked hard to achieve following the Bush administration's rejection of the protocol. However, now that the world's third largest polluter Russia is signing up, Kyoto can go ahead without the support of the world's largest polluter, the US.
The protocol will allow countries or individual companies - the scheme has yet to be clarified - to trade GHG emission allowances. By then European companies should have some experience under their belt.
