California has become the first state in the United States to approve a carbon trading scheme.
Regulators passed a "cap-and-trade" framework to let companies buy and sell permits, giving them an incentive to emit fewer gases.
The aim is to create the second-largest market in the field, after Europe's.
State officials hope the scheme will be copied across the US, but opponents warn it may harm California's growth and lead to higher electricity prices.
The BBC reports the Air Resources Board approved the new rules late on Thursday. They are part of a climate bill passed by the state legislature in 2006, which set 1 January, 2011 as the deadline for enacting a cap-and-trade system.
The scheme means that from 2012 California will allocate licences to pollute and create a market where they can be traded.
California is the world's eighth largest economy. It already has strict climate-related regulations, including renewable energy mandates for utilities and tough fuel-efficiency standards for cars.