Greenhouse gases are being bought and sold on the open market by countries concerned about climate change. The Kyoto Protocol, an international treaty to curb global warming, created the market in greenhouse gases to reduce emissions of methane, carbon dioxide and other gasses heating up the planet. The trade has gained steam since the Kyoto treaty entered into effect this February.

Greenhouse gases -- prime culprits in global warming -- trap heat in the Earth's atmosphere. Since the middle of the 19th century, human agriculture and industrialization have poured a huge amount of them into the atmosphere, where they have captured enough heat to initiate climate change -- about 0.6 degrees Celsius during the past century, according to the United Nations. More warming is expected, but the exact amount is highly contentious.

The Kyoto Protocol, with more than 140 nations on board, aims to use market forces to rein in emissions by creating a market in greenhouse gasses. Under the pact, participating countries may emit a specific quantity of the gasses, and can sell off excess "credits" for profit.

That's attracting a lot of business, brokers say.

"I think that even conservatively we have the market doubling from 78 million to 150 million tons [of greenhouse gases] between 2003 and 2004," said Richard Rosenzweig, managing director at Natsource, a New York brokerage firm.

The World Bank estimates that funds offering mitigation investments are worth about $1.5 billion, according to The Wall Street Journal. Investors are funding projects that reduce greenhouse gas emissions, like hydroelectric dams and renewable energy plants, and earning investors credits to offset emissions from factories and power plants. The biggest buyers -- Japanese companies and the Dutch government -- are snapping up credits offered in regions such as Asia and Latin America.

The United States proposed the market plan for the Kyoto Protocol when it first signed the treaty in 1998. It withdrew in 2001 arguing that the treaty failed to appreciably slow global warming or include developing nations. Despite initial resistance, it has been embraced by Europe and Japan as an affordable way to slow climate change.

The world currently emits about 28 billion tons of carbon dioxide or its equivalent in other greenhouse gases, known as GHG, each year, according to the United Nations. Under the Kyoto Protocol, industrialized countries must cut emissions by 5.2 percent from 1990 levels between 2008 and 2012. The United States is responsible for 7 billion metric tons, about 25 percent of the world's greenhouse gases, but is not party to the Kyoto Protocol's restrictions.

Although trading volumes have doubled annually in recent years, Rosenzweig said, a global bazaar in GHG is still a long way off. The major markets are isolated to Canada, Japan and the European Union, accounting for about 3 billion tons of emissions reductions under Kyoto.

"What is really happening is every nation is going off and doing what they would have done anyway under the umbrella of Kyoto, but operating unilaterally," said David Victor, director of the Energy and Sustainable Development program at StanfordUniversity.

Still, these domestic markets could leave a significant mark on the international economy. According to Ilex Energy Consulting of Oxford, England, meeting greenhouse gas reductions is expected to cost European industry several billion dollars during the next three years, through updating technology or buying emissions credits.

The Kyoto Protocol also gave a wake-up call for companies unfettered by emission limits. Major companies are drawing up contingency plans for future regulations on carbon dioxide.

The Investor Network on Climate Risk, a shareholders organization, recently sent petitions to twenty-five corporations in the oil, automobile and energy industries, asking them to disclose global warming risks, according to The Nation magazine. Instead of silence, several companies, some of which once publicly lobbied against predictions of global warming, acknowledged the threat posed by climate change and made plans to deal with possible future regulations.

American Electric Power, a coal power utility, said U.S. controls on carbon dioxide would likely arrive within the decade, and it was already investing in emissions reductions.

Harnessing the market

Advocates of the Kyoto Protocol argue that market-based approaches are required to tamp down rising greenhouse gas emissions because every sector of the economy, from agriculture to aerospace, contributes to the problem.

Elliot Diringer, international strategies director with the PewCenter on Global Climate Change, said economic incentives -- backed up by government rules -- are indispensable.

"Whatever we do has to be done through the marketplace," Diringer said. "Only the market can mobilize the resources and expertise to get the job done, but the market needs direction from the government ... The government lays out the goal, and the market figures out the best ways to get there."

One of the most successful examples of market-driven pollution reduction is the U.S. trading program for nitrous oxides and sulfur dioxide set up in the 1990s. The Acid Rain Program had cut sulfur dioxide emissions by 38 percent in 2003 and was the inspiration behind Kyoto's trading approach.

However, some countries, such as Australia and the United States, say the costs of implementing the treaty and reducing carbon dioxide create a dangerous drag on their economies without substantially reducing global warming. The United States withdrew from the treaty in 2001, citing concerns over domestic economic growth and exemptions for rapidly developing countries like China and India.

The United States has one of the highest per capita rates of emissions of GHGs, at about 6.6 tons per person, according to the Environmental Protection Agency data from 1995. It also generates about a quarter of the world's economic activity.

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