With the European Union formally launching the trading in mandatory greenhouse gas emissions in the new year, global commerce now includes a wholly new business which, many believe, will soon develop into the largest of all commodity markets.

Called carbon trading, this business that is related to agreements on climate change, and conceived under the Kyoto protocol, asks energy-intensive companies to restrict their harmful gas emissions to officially determined levels, or face penalties.

While those failing to meet their carbon reduction targets will be allowed to buy the cuts achieved by others, the efficient ones exceeding their targets will be able to make money by selling the surplus. The emission permits that are bought and sold will have a financial value and will have to be treated by companies as a balance sheet item. Once the Kyoto protocol comes into effect, in a month or so, this trading will cross European boundaries to acquire fully international stature.

To begin with, the EU has brought under its ambit only six categories of energy-intensive sectors-electricity generation; heat and steam production; mineral oil refineries; processing and production of ferrous metals; manufacture of cement, bricks and ceramics; and pulp and paper sector.

But more industries are bound to be included in future. Already under consideration are sectors like aluminium manufacture and aviation.

The concept of such trade is not wholly novel. A market for trading in the acid rain-causing sulphur dioxide emissions has existed in the US for almost a decade.

No doubt, the companies forced into this business were none-too-glad at first, but they soon came round. In Europe, many carbon brokerage companies have already sprung up in London and other cities, and have begun futures trading in carbon emissions.

India-though not yet required to curb its emissions-has been actively pursuing clean development policies and, hence, stands to gain. It has been promoting the use of alternative sources of energy and installation of anti-pollution devices in factories.

Emission trading will help the country's industry, agriculture and plantation sectors to cash in on their achievements in this field. Some companies, such as ITC, have already been toying with the idea of entering carbon trading and have started planting trees over large areas.

The carbon sequestering by these stretches will be convertible into tradable accounts. Besides, the World Bank has reportedly bought the entire potential carbon emission savings for the next 10 years of a remote Andhra Pradesh village, Powerguda, which abounds in Pongamia pinnata trees, whose seed produces a natural oil to replace diesel. This apart, an officially sponsored "climate technology bazaar" held in New Delhi last year had led to finalisation of deals with foreign companies worth $325 million, for collaborative environment-friendly projects.

Environment-conscious countries like India are not the only ones likely to gain from carbon trading. Other developing countries, too, will benefit from the increased flow of foreign investment in modern, environmentally clean technology.

This should indeed quicken their economic development. But, they will have to begin preparing for it right away.