The emissions trading scheme of the European Union is the hub of the global market, and trebled to US$24 billion in turnover last year, the Bank said in a report presented at a news conference in Cologne.

Through a linked project-based market, European companies can meet their EU emissions caps by funding clean energy projects in developing countries, through carbon trade under the Kyoto Protocol on global warming.

That project-based market doubled to US$5 billion in 2006, and raised an extra US$16 billion finance for development of clean energy technologies, the World Bank said.

"We believe that carbon finance and the carbon market has a real development role," said Warren Evans, director of the World Bank's environment department.

Many policy makers in both rich and poor countries are pinning hope on carbon markets to finance the clean-up of heavy industry in poor countries, which are expected to contribute the lion's share of future increases in greenhouse gas emissions.

"GREEN GROWTH"

Predicting possible north-south finance flows of some US$100 billion per year in the years after 2012, the UN climate chief Yvo de Boer said the markets held the potential to "green world economic growth."

Kyoto's clean development mechanism (CDM) works by capping emissions by rich countries, forcing them to buy permits to emit greenhouse gases from poor countries, which some fear may raise business costs in the developed world.

"There are legitimate concerns about competitiveness," said de Boer. "Will that take jobs away from the US to the Chinese? I don't think so," he told the trade fair's opening session.

The World Bank report showed that the EU scheme in 2006 traded some 1.1 billion tonnes of carbon dioxide emissions permits while the project-based market totalled 466 million tonnes.

The EU private sector accounted for 75 percent of CDM demand while China led the world's sellers of carbon pollution allowances at 61 percent of the total, well above India and other Asian countries, the bank said.

It also looked ahead at the years 2008 to 2012, the second phase of the EU emissions trading scheme, which coincides with the target period of Kyoto.

The scheme handed out too many permits in its 2005-2007 first phase, contrary to its supposed aim to stimulate emissions cuts, prompting a carbon price crash.

"Most analysts believe that phase 2 will be short," said Karan Capoor, main author of the report, pegging the percentage of the shortfall at perhaps between eight and 10 percent.