Although the Kyoto Protocol establishes reduction goals for emissions of greenhouse gases by advanced industrialized nations, the target figure of each nation does not have to be achieved within its borders. Advanced nations can include in their quota some reductions achieved through projects they implement in developing nations.

This system is known as the clean development mechanism (CDM).

``I am well aware of the CDM and would like to cooperate,'' said Le Dung, deputy director general of Vietnam's Ministry of Science, Technology and Environment. ``We are interested in natural energy.''

In September 2000, Le held talks with Bunichi Matsuda, general manager of the overseas projects department at the Japan Energy Research Center Co., during Matsuda's visit to conduct a feasibility study for a CDM project.

Matsuda and his team of researchers were looking into the possibility of starting up a biomass project in Vietnam that would mix ethanol made from sugar cane with gasoline. The project aims to cut Vietnam's rapidly increasing consumption of gasoline.

According to Matsuda's calculations, the fuel mixture would lead to a 12 percent reduction in carbon dioxide emissions when compared with gasoline.

Many Asian nations are warming to the idea of CDM, which is expected to lead to the introduction of new technology and funds.

Of the 23 CDM project studies conducted by the Environment Ministry, 20 were in Asia. Fourteen involved reforestation projects.

About half of the 183 projects supported by the Ministry of Economy, Trade and Industry for studies of joint implementation projects are in Asia.

Chow Kok Kee, director-general of the Malaysian Meteorological Service, who served as chairman of a subcommittee for the Kyoto mechanism at the sixth session of the Conference of the Parties to the U.N. Framework Convention on Climate Change (COP6), focuses on efforts by businesses.

``We look forward to seeing Japanese firms allow Asian nations to participate in projects involving CDM,'' he said.

Savings earned through CDM emissions reductions projects abroad are referred to as carbon credits. Firms can count these credits toward their reduction efforts, and surplus credits can be sold through an emissions transaction on the market.

If carbon credits start being traded as a commodity like gold and soybeans, analysts predict a huge market could emerge.

Firms that buy cheap carbon credits only to sell them off for a higher price would reap profits, and vice versa.

Two simulations of this phenomenon recently kicked off in Tokyo.

At the end of July, 22 firms, including electric power, automobile and steel companies, joined an experiment run by Mitsui & Co., among others. Virtual news articles, including reviews of the effects of forests on carbon dioxide absorption and the announcement by various nations of company emission ratios, were circulated on a Web site. Simultaneously, active trading in carbon dioxide began.

A ton of carbon dioxide on the virtual market sold for anywhere between 1,000 and 40,000 yen.

In a similar experiment, 33 firms, including banks and trading companies, took part in a virtual market set up by Natsource Japan Co. and Mitsubishi Research Institute Inc.

Natsource Japan was created as a joint venture between several Japanese firms and a U.S. firm that is the world's largest emissions trader.

Participants in the experiment said they got a specific feel for the kind of tradings to expect since each company used emission ratios based on actual financial conditions and energy consumption levels.

There are several ways companies can reduce emissions: through in-house efforts, by moving into CDM projects abroad or by purchasing carbon credits on the market.

Reducing the cost of cutting carbon dioxide emissions looks likely to become a top priority for many companies.

Many of the firms that joined the virtual markets were members of Keidanren (Japan Federation of Economic Organizations) that have opposed regulated emissions tradings.

But after Britain announced the formation next year of a trading system, and with carbon dioxide tradings already taking place, Japan has begun to consider setting up its own market, forcing companies to speed up preparations for such a situation.

The emissions trading market could reach an annual level of $200 billion (24 trillion yen), according to an official of Natsource Japan. Of this, tradings in Asia could reach between 7 trillion and 8 trillion yen, with Japan accounting for about 1 trillion yen.