UK and California agree carbon trading deal

Britain and California are to sign a new carbon trading agreement, side-stepping opposition from President George Bush.

The announcement that could eventually bring California into the European carbon market was announced yesterday by Tony Blair and Arnold Schwarzenegger, California's Governor.

Carbon emissions trading, established by the Kyoto protocol in 1997, has been rejected by Mr Bush but global warming has emerged as a significant issue in California where the former actor has made the environment a key theme.

The agreement is a tentative first step to bringing California into the EU carbon trading scheme, whereby polluting organisations can buy credits from greener rivals. If successful it could open the way to other US states signing up, circumventing federal opposition from Mr Bush.

Ken Livingstone will follow the announcement with a second city-to-city agreement between London and Los Angeles at an event today, in a further sign of increasing co-operation over the issue.

A spokesman for the Prime Minister said: "Our differences with the US administration on this issue are well-known [but] we believe it is right to talk to other like-minded people ­ and we will."

The initiative follows Mr Blair's promotion of stem-cell research in California ­ another direct challenge to Mr Bush, who recently used his first presidential veto to ban federal funding for work on cell lines developed from embryonic material.

The formal climate change statement between Britain and California agrees to "explore the potential for linkages" in a carbon market that could stretch across the Atlantic. It also promises to collaborate on technology and co-ordinate scientific research programmes on the impacts of climate change.

Critics will claim the UK would need to win the agreement of every other EU state in a wholesale renegotiation before California could be included.

California's energy crisis leads to frequent power cuts and has forced green technology to the top of the political agenda there. Governor Schwarzenegger has called for a reduction in California's emissions to 2000 levels by 2010 and 1990 levels by 2020.