Cahill said the general principles of emissions trading have been agreed upon, but the panel was still working with the Environmental Protection Agency to develop a mechanism to track the trading, he said.

The commission is made up of government leaders and environmental officials from 12 northeast and mid-Atlantic states, the District of Columbia, and the U.S. Environmental Protection Agency. It was established several years ago by Congress to address complaints by northeastern states that power plants in the midwest and southeast have blown pollution across state lines.

Smog is formed when nitrogen oxides (Nox) mix with chemicals in the air in the presence of sunlight and heat, making summer the prime time for unhealthy air. Industrial air pollution has been linked to asthma and other diseases.

The commission said that all 12 states had agreed to participate in an emission trading programme to reduce Nox emissions.

Under the planned programme, companies could use two kinds of emissions trading credits.

Rate-based emission credits would allow companies to document a pollution reduction beyond the cuts required by regulators, which can then be sold, according to the panel

Another option would be to use mass-based discrete emission reduction credits, which allow emission reduction credits to be sold in pounds or tons.