"It is breaking a lot of new ground as the first international trading system and the greatest ever in terms of economic coverage," Dimas said during conference on European energy at the Brookings Institution in Washington. "The scheme will give European business -- including U.S. companies based in Europe -- a first-mover advantage through the invaluable early experience they will gain."

Dimas joined Lucien Lux of Luxembourg and Britain's Lord Whitty to meet Paula Dobriansky, the U.S. undersecretary of state for global affairs, among others, to discuss future programs to address climate change.

Talks between Washington and the EU headquarters in Brussels in the past rarely have led to any substantial developments, except general agreement on the importance of developing new technologies to help mitigate global warming.

"The United States has not signed the Kyoto Protocol and this right now hinders it joining the emissions-trading system," Dimas said during a later news briefing at the EU Delegation in Washington. "There is difference in the approach of fighting climate change. I cannot say that our approach is better."

The EU has been one of the strongest proponents of the Kyoto Protocol to the United Nations Framework Convention on Climate Change, while the U.S. government so far has rejected the treaty, citing economic concerns.

The protocol -- which went into force Feb. 16 and expires in 2012 -- aims to reduce carbon-dioxide emissions overall to maintain an annual global surface temperature increase of 2 degrees Celsius (3.6 degrees Fahrenheit) above the 1990 level. The EU has pledged to lower its global greenhouse-gas emissions by 15 percent over the next two decades.

The visit by Dimas coincides with the release of a new report from the U.S. Energy Information Administration, an independent arm of the Department of Energy. The report suggests that action by United States to eliminate greenhouse-gas emissions would have a minimal effect on the U.S. economy -- one of the leading arguments the Bush administration has used to drop out of Kyoto.

The report from the EIA, requested by Sen. Jeff Bingaman, R-N.M., said reducing U.S. greenhouse-gas emissions by 4 percent by 2015, and by 7 percent by 2025 -- as recommended by the National Commission on Energy Policy -- would cost 0.15 percent of the national gross domestic product.

"This EIA report validates the widely held view that it's possible to have a meaningful program to reduce greenhouse-gas emissions without harming the U.S. economy," said Bingaman, the senior Democrat on the Senate Energy, Commerce and Transportation Committee.

Dimas said the economic benefits of the EU's emissions-trading system were based on a market-based model proposed initially by the United States, which later was abandoned.

"We recognize the crucial value of market-based mechanisms to harness the creativity of the business sector, to offer economic incentives to cut emissions and to reduce compliance cost," he told conference attendees. "Our emissions-trading scheme will reduce the cost of achieving our Kyoto target by about a third, saving EU industry millions of euro."

The European trading scheme, which took effect Jan. 1, was devised to cut CO2 emissions by 8 percent from the 1990 record level by 2012, as required by Kyoto. Under the plan, which will be reviewed in 2006, governments of the 25 members states have set proposed limits on how much CO2 can be emitted per year from about 12,000 energy-intensive plants located throughout the union.

Industrial plant owners who obtain emissions allowances are free to sell them to others who have not been able to achieve reductions. Dimas said companies that achieve emissions reductions soonest can expect collectively to receive about 30 billion euros a year.

"This means the system will not only provide a cost-effective means for EU-based industries to cut their emissions, but it would also create incentives for business to invest in emission reduction projects abroad, for example, in developing countries or in Russia," he said. "In turn, this will spur the transfer of environmentally sound technologies to other industrial countries and developing nations, giving tangible support."

Russia agreed to ratify Kyoto under intense political pressure from the EU, but the country is expected to withhold its emissions permits to allow their price to rise, wrote the German Institute for Economic Research in the latest issue of its weekly newsletter.

Dimas explained the EU emissions-trading scheme has created a new currency based on CO2 and a new emerging emissions market. Already in its early stages, the volume of trade allowances has been steadily increasing.

"We have already seen trading days with allowances for more than 2 million tons of carbon dioxide changing hands," he said.

Donna Borak is a Business and Energy Correspondent for UPI Science News. E-mail: [email protected]