A planned regional cap and trade scheme covering 10 North Eastern and Mid Atlantic US states took a major step towards its January 2009 launch after New York's Environmental Board gave the green light to the accompanying regulations.

Each of the states signed up to the Regional Greenhouse Gas Initiative - Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island, and Vermont - has agreed to issue its own regulations for the scheme.

Under the New York proposals, energy companies will have to buy emission allowances at auction with the first auction scheduled for late next month. They will then be able to buy in further credits on the secondary market if they exceed their emission caps.

The annual emissions cap for the whole state will stand at 64.3 million tons of carbon dioxide with the 10 state region capped at 188 million tons. Under the scheme the capos will be tightened each year from 2015, increasing pressure on firms to cut emissions.

However, the proposals are facing opposition from some business groups who have argued it will force up energy costs and damage New York's competitiveness. Concerns are also mounting that with a similar coalition of seven Western US states and four Canadian provinces working on a similar scheme for launch in 2012 the US could end up with a confusing patchwork of trading schemes.

Speaking to the Associated Press, Gavin Donohue, president of the Independent Power Producers of New York trade group said that with neighbouring states such as Pennsylvania not signed up to the scheme New York's competitiveness would be compromised. "A national program, with all states on a level playing field, is the right approach to reducing CO2 emissions," he said, adding that electricity bills could increase by as much as nine per cent as a result of the scheme.

However, Peter Iwanowicz, director of the Office of Climate Change at New York's Department of Environmental Conservation insisted that concerns had been overstated, telling the AP that average domestic electricity bills would rise by just 78 cents a month as a result of the scheme.