But if all goes well, a decade from now these pioneers in the Kyoto Protocol's carbon market will be the commanding players in a business worth billions, possibly tens of billions, of dollars per year.

The market is one of three incentives under the UN pact aimed at easing the cost of reducing carbon dioxide (CO2) pollution, the main culprit for global warming.

Under Kyoto, 38 industrialised countries -- now 36, with the refusal of Australia and the United States to ratify it -- pledged to limit their output of greenhouse gases by a deadline of 2008-12.

Each country can decide how to achieve that target, apportioning the burden among consumers, taxpayers or corporations by using for instance carbon taxes or laws or awareness campaigns to promote energy efficiency.

The carbon market is a big component in that basket, and traders believe that the Russian ratification of Kyoto on Friday will give the newborn sector an enormous boost.

"It brings the certainty that you have long-term targets, the certainty that there will be a legally-binding cap on CO2 emissions until 2012," Atle Christiansen of Norwegian traders Point Carbon told AFP.

"That, in combination with the approach of January 1 (when the European Union starts the world's first carbon market) and the rise in market liquidity brings confidence that this is actually going to work."

In the runup to Russian ratification, which cleared its last major hurdle on Friday with approval by the Duma, trade in the European market has surged.

More than a million tonnes of CO2 changed hands in September, nearly double the figure for all of 2003. It remains tiny, though, when compared with 2.2 billion tonnes annually that can be potentially traded within the EU from next year.

The aim of the carbon market is to provide a financial carrot and stick for corporations to meet emissions goals.

If a company is clean and tidies up its pollution, it can sell the rest of the quota on the carbon market.

Its buyer is a company that needs to purchase emissions in order to escape financial punishment for overshooting its target.

The Protocol's rulebook does not spell out how signatory countries should operate their market.

But experts say that in the absence of the United States -- which pulled out of Kyoto in March 2001 under President George W. Bush -- the format will almost certainly be determined by the European Union (EU), the first out of the blocks.

The 25-nation EU uses a "cap-and-trade" approach. Governments set individual emissions targets for 12,000 plants that are big CO2 emitters, such as coal, and oil-fired power plants, chemical works, pulp plants and cement and glass factories.

For every tonne of CO2 that goes over their target, these plants are liable to a fine of 40 euros (48 dollars) during a three-year transitional period.

From 2008 to 2012, the punishment zooms up, to 100 euros (120 dollars) per tonne of CO2.

Kate Hampton, a policy analyst with London merchant bank Climate Change Capital, said that drawing up the inventory and deciding on industry allocations has been a nightmare in assessment, bureaucracy and squabbling.

"It's been a lot of bean-counting and because the bean-counting is complex, there's been a lot of nit-picking," she told AFP.

"Verifiers, consultants, accounts and banks are a burgeoning industry."

There has also been some fierce lobbying by some industries for looser caps on emissions controls, she said.

Canada and Japan are planning their own carbon markets and are likely to ensure that their regulations harmonise with the EU's. Interlinked markets get more players and liquidity and the best price.

Only western countries and the European members of the former Soviet bloc signed up to Kyoto's targeted emissions cuts. Developing countries do not have specific targets and thus will not take part in the carbon market

Even though it is a Kyoto holdout, the United States will be indirectly involved in the carbon market, through companies that have plants in the EU and have to submit to the caps by law, and also most probably through traders who want to make a buck by acting as intermediaries.

Bush's abandonment has meant surrendering pole position to Europe which, ironically, opposed the carbon market in the marathon negotiations to flesh out Kyoto's rulebook.

Moving first can be risky, but it can also mean gaining trading expertise and the financial clout that makes your region or capital the natural hub of business, said Hampton.

Leading that campaign is Britain, which has been running a pilot scheme of its own to gain skills in how the market will run. The scheme will be subsumed into the EU within a couple of years.

London's International Petroleum Exchange is gearing up to allow carbon futures to be traded by the end of the year, in the same way that oil and gas futures are traded now, and spot trading will come next year.

According to a survey of 200 companies in 13 countries published in May by Germany's European Energy Exchange, turnover in the European market could range next year from 125-250 million tonnes, rising to 400-800 million tonnes from 2008.

At today's price, which fluctuated strongly at the start of 2004 but has hovered between eight and nine dollars per tonne in recent months, that would be worth some seven billion dollars per year in the EU alone.

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