The United States is the world's largest emitter of greenhouse gases, mostly from utilities and factories, which scientists warn could lead to flooding and rising sea levels.

Last year, U.S. President George W. Bush refused to participate in the Kyoto pact, saying its goal of cutting U.S. emissions by about 7 percent of 1990 levels would be too costly.

That means U.S. firms could be locked out of the global market for emission trading, even though they will likely hold plentiful rights that could be sold on the market, said John Palmisano, managing director of Evolution Markets LLC.

"If we don't ratify Kyoto, our tons (of greenhouse gas emissions) don't have any value," Palmisano said.

He cited figures released by Deutsche Bank that peg the global emissions market at about $100 billion by 2010, about half the size of the U.S. wholesale electricity market.

That's a dramatic increase from the $50 million in 2001 trading reported in a World Bank study, Palmisano said.

MARKET-ORIENTED TRADING

Under the Kyoto pact, if a company reduces its emissions of greenhouse gases beyond its goals, it can sell the additional reductions to another firm. If a firm misses its goal, it can buy allowances to offset its emissions.

Evolution Markets hopes to act as a broker to bring together buyers and sellers of emission reduction contracts. But U.S. firms will find it nearly impossible to participate in the market because companies cannot verify their emission cuts through a system sanctioned by the Kyoto agreement.

Other nations are moving toward emission trading schemes.

The European Union has proposed a mandatory system for carbon dioxide trading among its members by 2005 and possible international trading by 2008. Member EU nations have pledged to cut emissions 8 percent below 1990 levels by 2012.

A handful of U.S. and Canadian firms have begun to trade emissions to meet voluntary commitments to cut gases.

Canadian-based Ontario Power Generation has bought a series of emissions credits, including 6 million tons this week from Blue Source LLC. Blue Source provided the emission reductions from oilfield carbon sequestration projects in Texas, Wyoming and Mississippi.

Other companies that have experimented with emissions trading in recent years include the Royal Dutch/Shell Group, Suncor Energy Inc, TransAlta Corp, Niagra Mohawk and BP Amoco.

US FIRMS PLAY CATCH-UP

Companies based in Kyoto-participating nations will develop technologies to reduce greenhouse gas output, leaving behind U.S. companies, said Joseph Romm, a former Department of Energy official and now director of the Center for Energy and Climate Solutions.

"We are going to be importing those technologies and creating jobs in other countries," Romm said.

Meanwhile, because of its car-dependent society and urban sprawl, the United States could benefit by reducing its energy use and selling the resulting greenhouse gas emission credits to other nations, Romm said.

"The U.S. would be selling credits because we have an abundance of inefficiency," he said.

A global summit next month in Johannesburg will discuss climate issues with some 100 heads of state.

The Kyoto Treaty is scheduled to go into effect after 55 nations producing 55 percent of the world's carbon dioxide emissions agree to participate.