And investors are gearing up for what they hope will be a huge market once the United States establishes its own national scheme to reduce greenhouse gases, said speakers at a carbon-emissions trading conference here Monday.

"Depending on the proposal, a federal scheme in the United States could see demand for carbon credits between 300 million metric tons a year and 1.3 billion tons by 2015," said Guy Turner, director of New Carbon Finance, a London-based research firm.

With California preparing to implement a landmark greenhouse gas law, other states are beginning to mull their own carbon-cutting initiatives.

That's led experts in this sector, a crossroads for financial speculators and environmental activists, to forecast that a federal mandate to reduce carbon emissions is only a matter of time.

"I think you'll be surprised at how fast policy will move," said John Bohn, a member of the California Public Utilities Commission.

The man who appointed him, Calif. Governor Arnold Schwarzenegger, in September signed a law that requires the state to reduce carbon emissions by 25% by 2020, using caps and market mechanisms including emissions trading.

"The eyes of the world are on the U.S. carbon market," said Martin Whittaker, a director at MissionPoint Capital Partners.

For the past two years, however, the United States has been absent from the bulk of carbon-trading activities. It rejected the Kyoto Protocol, which allows countries and companies to trade emissions-reductions credits as a way of cutting greenhouse gases.

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Still, there are ways to bet on pollution credits -- both here and abroad.

In January 2005, the European Union launched a trading platform that lets companies polluting more than their allowed maximum to buy credits from low polluters. This process aims to reduce overall emissions by providing a monetary disincentive for corporations to pollute. It's created a roughly $25 billion market. And speculators can participate.

MissionPoint, an investment firm started by hedge fund veteran Mark Schwartz, last fall had to turn away investors on a $335 million, clean-energy private equity fund, so great was the demand to participate.

"We have capital directly at risk in the carbon trading market," Whittaker said.

Hedge funds have been increasingly active in the carbon-trading market, drawn by the chance to make money in a new, relatively inefficient market where much of the risk depends on future regulations. And the asset class, which is not subject to interest rate or other typical risks, provides diversification.

"It's correlated differently to other assets," said Alex Rau, a principal at Climate Wedge Ltd. Oy. The carbon management and investment adviser recently teamed up with London-based hedge fund Cheyne Capital to offer voluntary emissions reductions to companies.

There are about 40 funds trading emissions, mostly in the United States and Europe, Energy Hedge Fund Center co-founder Peter Fusaro said in an e-mail interview.

U.S. corporations can trade on a voluntary basis through the Chicago Climate Exchange, Inc., which counts about 200 members.

With European emissions trading dwarfing the U.S. market, a lot of investment money has landed in London.

The United Kingdom now manages about 60% of the world's private money invested in carbon funds, compared to 10% for the United States, estimates New Carbon Finance.

London, already hosting energy and other commodities trading, got a boost from the U.K. government's support, said New Carbon's Turner.

With changes afoot in the United States, that portion could change.

"The U.S. has the capacity to be dominant," he said.