They are champions of the emerging emissions trading market, which would allow countries, and by extension companies, that can meet their emissions reduction targets at relatively low cost, to sell emission rights - in the form of carbon permits - to countries and companies that face higher costs in meeting their targets.

They are anxiously monitoring political developments at The Hague, because the outcome of the talks at the end of the week will determine the size and scope of the emissions trading market.

A successful conclusion, which boosts the chance that the Kyoto Protocol will be ratified, would create powerful incentives for heavy emitters of greenhouse gases to become involved in the trading market.

A nascent market in emission trades is already under way. Take, for example, a recent deal in which Trans-Alta, a Canadian utility, agreed to buy 3,000 tons of greenhouse gas emission reductions each year for the next seven years from Hamburgische Electricitats-Werke (HEW), a German utility with extensive wind power generating capability.

This deal, which was brokered by Natsource, a New York-based broker, was the first transatlantic example of emissions trading. Several countries, regions and companies are also planning or conducting emission trades.

The early experiments have underlined the complexities involved in conducting, monitoring, verifying and enforcing a trading scheme. Much of the incentive for the participants in these early schemes is the desire to gain experience that can help them influence the rulemakers as they work out the fine details of the trading schemes.

Behind the scenes at the talks in The Hague, companies are discussing the market structures of trading schemes, which may differ between countries and regions. Last week, 35 large energy companies gathered at the inaugural meeting of the Emissions Market Development Group, which was launched by Arthur Andersen, the consultants, Credit Lyonnais, the bank, and Natsource, the broker.

The group intends to establish an international carbon "bank", which would offer to exchange the various credits generated by different corporate and national trading schemes for a common currency.

But in spite of the evident interest in the market, its evolution is being hampered by the uncertainty about whether the Kyoto Protocol will enter into force - a step that involves ratification by industrialised countries responsible for 55 per cent of greenhouse gas emissions.

Inevitably, the number of trades and the price of carbon credits has been reduced by doubts that countries will have to comply with the Kyoto target, which requires overall greenhouse gas emissions to be reduced by 5 per cent between 1990 and 2010.

Political disagreements at The Hague also cast uncertainty over the eventual size of the trading market. The US is pressing for a widespread and unrestricted use of emissions trading, arguing it reduces the global cost of tackling climate change.

But there is strong opposition to the unrestricted use of emissions trading from the EU. It is concerned that certain countries, notably Russia and Ukraine, will be able to meet their targets with minimal effort and could then sell large quantities of emission credits - dubbed hot air to others.

The EU wants a ceiling on the use of emissions trading, arguing that countries should meet at least half of their Kyoto commitments by domestic action.

This long-standing disagreement between the US and EU has been one of the chief obstacles to gaining agreement on the final shape of the Kyoto Protocol.

The US has seized on an announcement by Russia that it would use the proceeds from its sales of carbon credits to invest in "clean" energy as offering a way out of the impasse.

Frank Loy, head of the US delegation, said the Russian initiative should allow the negotiators to put the hot air issue and the imposition of a ceiling on emissions trading behind them.

Yet businesses operating in Europe and some other parts of the world are likely to face curbs on their carbon emissions, regardless of the fate of the Kyoto Protocol.

In the view of Natsource, the broker, that should encourage an increasing number of risk-adverse companies to explore emissions trading as "low-cost insurance against exorbitant future compliance costs". www.epa.gov/globalwarming/index.html www.ft.com/climate