UPDATE - Greenhouse trading takes off, US on sidelines

Emissions trading has been embraced by Britain, Denmark and the European Union as a reward for companies that curb emissions of greenhouse gases blamed for global warming. A trading scheme typically establishes a pollution limit, then allows companies that cut emissions to sell credits to firms unable to meet required reductions. The Pew Center on Global Climate Change said in a new report that regional and national emissions trading markets are rapidly evolving, but each has different rules that can increase the costs of trading. The United States, which emits about one-third of the developed world\'s man-made greenhouse gases, has so far rejected a national emissions trading scheme for carbon dioxide. Carbon dioxide, generated by power plants and automobiles, is widely considered the worst of the pollutants linked to heat-trapping gases. The Bush administration last year surprised the world by pulling out of the 1997 Kyoto pact, in which developed nations have until 2012 to cut emissions by about 5 percent from 1990 levels. Bush said the cuts would be too costly for the U.S. economy. The treaty also offers carbon dioxide emissions credits to energy companies that invest in renewable power projects. US SHORT-TERM ADVANTAGE The U.S. refusal to join Kyoto means American companies may have a short-term advantage if they compete against other firms that must add in the costs of carbon emissions. But the Pew report said U.S. firms face longer term uncertainty about climate change policy, which may be costly. U.S. innovators such as DuPont Co., which have begun cutting emissions, may not be able to sell their reductions in an international market, it said. \"Despite the United States\' inaction, it is abundantly clear that we are beginning to see the outlines of a genuine greenhouse gas market,\" said Eileen Claussen, president of the Pew Center. The Pew Center report said more than 65 trades of greenhouse gas emissions totaling 55 million to 77 million tons (50 million to 70 million tonnes) have occurred over the past five years, but that those figures probably underestimate the market activity. The emissions reductions traded for between 60 cents and $3.50 per tonne of carbon dioxide equivalent. The data did not include trades within BP Plc and Royal Dutch Shell, which launched their own internal cap-and-trade programs in 1998 to cut emissions. BUSH BACKS VOLUNTARY PLAN Bush has outlined a voluntary plan to slow the growth of some global warming gases, but not carbon dioxide. The plan would set goals for reductions tied to U.S. economic growth and give U.S. companies incentives to meet them. That decision was criticized by environmental groups, and by some in the electric industry who said mandatory regulations are inevitable and businesses need to start planning for them. Nearly three dozen U.S. Midwestern companies plan to launch the Chicago Climate Exchange by the third quarter of 2002 to cut regional emissions of six greenhouse gases. The Chicago exchange proposes to require firms to cut emissions by 2 percent below 1999 levels during 2002, and reduce them 1 percent annually. Credits would be given for U.S. and overseas emissions offset projects. Richard Morgenstern, a climate change expert with think tank Resources For the Future, said only a handful of U.S. companies have experimented with emissions trading for speculative reasons or to appear more environmentally conscious. Until the U.S. government sets a clear ceiling on greenhouse gases, an active market cannot emerge, he said. \"With the absence of a serious U.S. program or serious commitments, there is no value in trading. The only reason some one would trade - apart from public relations value - is if they were facing an obligation to make reductions, and felt they could buy someone else\'s emissions cuts at a lower cost.\" Story by Julie Vorman REUTERS NEWS SERVICE