The 34 signatory countries -- which do not include the United States or Australia -- passed the final regulatory measures by consensus at the Montreal conference.

"The Kyoto protocol is now fully operational. This is an historic step," said conference chairman Stephane Dion, Canada's environment minister.

Under the protocol, the 34 agree to limit emissions of gases that cause global warming until 2012.

The Montreal conference is trying to set out preliminary plans to further cut emissions when the accord ends.

Kyoto was negotiated in 1997 and formally entered into force on February 16, 2005. However, it could not come into operation until after the formal adoption of the rulebook, which was drawn up over the past four years.

The signatories hammered out a mechanism for trading pollution rights. The final rules also eased pollution standards by allowing countries to take into account carbon dioxide produced by growing trees.

A separate system setting out sanctions for those who breach the protocol should be adopted before the 12-day conference ends on December 9.

"I am absolutely confident that the compliance system will be adopted next week," said Richard Kinley, acting head of the UN climate change secretariat.

Despite the troubles hounding efforts to restrict pollution, the UN climate secretariat hailed the new step taken at the conference and the launch of emissions trading.

"Carbon now has a market value. Under the clean development mechanism, investing in projects that provide sustainable development and reduce emissions makes sound business sense," Kinley said.

Under the mechanism, developed countries can invest in other developed countries, particularly in central and eastern Europe, to earn carbon allowances which they can use to meet their emission reduction commitments at home.

Industrialised nations can also invest in "sustainable development projects" in developing countries to earn extra pollution allowances.

On Wednesday, the conference debated a new proposal by Papua New Guinea to allocate carbon allowances to developing countries which combat deforestation.

The proposal was welcomed by Canada and Britain, and also Brazil, where deforestation is a huge problem.

The United States and Australia, which refused to ratify the protocol to the UN framework convention on climate change, attended Wednesday's session as observers.

Washington criticized the treaty, which called for reductions by six percent of emissions from the United States' 1990 levels, saying the reductions applied more stringently to developed countries than to developing ones.

The United States opposed on Tuesday any talk of extending Kyoto-style limits on greenhouse gas emissions.

Harlan Watson, head of the US delegation, said Americans did not want an approach that includes objectives or a timetable to reduce emissions.

"The United States is opposed to any such discussions," Watson said.

Washington has since 2002 embarked on a voluntary policy to reduce its emissions by 18 percent without harming the US economy, he said.

The United States, with five percent of the world's population, emits 25 percent of the world's greenhouse gases.

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