Energy companies say the bourses may have the edge over brokers as exchanges are a less risky way of trading with the thousands of firms which will be involved in the scheme, the world's first international market for trading emissions.

"We see trade going more towards exchanges than OTC brokers," said Paul Lee, an emissions trader at UK-based generator International Power.

"If you look at the counterparties, many are very small installations dotted around Europe. Doing a trade through an exchange is easier as there is a standard contract and it's a cleared market which eliminates credit issues."

The four exchanges are Germany's European Energy Exchange (EEX), the Oslo-based Nordic power bourse Nord Pool, Austria's EXAA and Britain's International Petroleum Exchange which has set up an emissions trading venture -- the European Climate Exchange -- with Chicago's Climate Exchange.

The EU scheme involves 12,000 sites across the bloc including power stations, steel-makers and other energy-intensive industries.

Companies are given CO2 limits and if they exceed these, they have to buy allowances -- essentially the right to pollute -- from firms which undershoot their target.

Barclays Capital has estimated the emissions market could be worth up to 40 billion euros ($53.30 billion) a year, if its growth matches that of the region's power markets.

GERMAN EEX MAY BECOME LEADER

The Leipzig-based EEX may capture much of the exchange trade as Germany is Europe's largest CO2 producer and the bourse already has a flourishing power trading market.

Nord Pool also has a large power market but the fact Norway, a non-EU member, is not in the scheme may count against it, some traders said.

"We are examining all options, but are particularly looking at the EEX and Nord Pool," a spokeswoman for German utility RWE, one of Europe's main CO2 producers.

"The CO2 trading concepts of these two seem to be the most mature with the EEX being the slight favourite," she added.

EEX will hold a daily auction of CO2 contracts in January and if this spot market develops, it plans to start futures trade in the second half of the year.

Nord Pool says it is on track to launch trading and clearing of EU CO2 allowances in January, first with forward contracts for physical delivery.

"We are still going for trial trading in January and full trade when the national registries are up from March," Nord Pool's spokesman Hartvig Munthe-Kaas said.

Governments have to issue allowances in January and February but spot trade can only start in March once national registries, where details of the quotas are stored, are running.

The European Climate Exchange had planned to launch futures contracts in early November but this has been delayed until tests linking a central computer database in Brussels, which tracks allowances with registries in individual states.

"We have no firm launch date -- we are waiting for the registries to be confirmed," an official from the European Climate Exchange, which is based in Amsterdam, told Reuters.

"They are now testing links between countries with the central EU registry and that has been slightly delayed."

Traders say the Austrian bourse, the EXAA, is an outsider as the power market there is so small.

(Additional reporting by Nicholas Brautlecht, John Acher)