The US' policy shift on climate change will push the world on the green path.

The US House passed the energy and climate bill - known as the American Clean Energy and Security Act (ACES Act) - two weeks ago. It is seen as the US' first step toward addressing the problem of climate change.

Even Americans say that if their country wants to be the world leader in the fight against global warming, it needs to walk the walk. The US generates a disproportionate amount of greenhouse gases (GHGs) that aggravate climate change.

The change in the US climate change policy came about after Barack Obama took over as the president. Obama's action deserves special credit because he inherited what environmentalists consider a disastrous US climate policy. In fact, the US is the only industrialized country not to have ratified the Kyoto Protocol. The treaty, negotiated in 1997, came into force in 2005 and would expire in 2012.

This protocol is a legally binding agreement under which industrialized countries are required to reduce their collective GHG emissions by 5.2 percent, taking 1990 as the base year. The goal is to lower overall GHG emissions calculated as an average five years from 2008 to 2012. National targets, for example, range from 8 percent cuts for the European Union, 7 percent for the US and 6 percent for Japan.

Most of the industrialized nations support the Kyoto Protocol with the only notable exception being the US. Even before negotiations on the treaty began, the US Senate passed a resolution saying the US should not sign any protocol that failed to include binding targets and timetables for developing and developed countries both. Otherwise, that "would result in serious harm to the economy of the US".

In 2007 a US report commissioned by the Washington-based National Environmental Trust showed some individual states in the US created more pollution than many developing countries put together.

Till Obama was sworn in as the US president, leaders from the rest of the world were deliberating on what their countries should do beyond the Kyoto Protocol. But the new US administration has now swung into action, and seems eager to lead the battle against climate change. And the world is waiting for the US, though a late-comer, to lead by example.

The ACES Act aims to cap GHG emissions at 17 percent below the 2005 level by 2020, and increase its targets through 2050. The Europeans have pledged a 20 percent reduction from a much earlier base year, which will require much more aggressive cuts. At the core of the ACES Act is its "cap-and-trade" provision for carbon emissions. Businesses would have to pay for permits for every ton of carbon they emit. High polluters, such as coal-powered electricity plants, could buy carbon credit from low polluters. This part of the US bill has made many Americans, especially energy-intensive plant owners, uneasy. And provisions supposed to offset their competitiveness concerns have made the US domestic legislation an international issue.

At the congressional hearings last week, Mississippi Governor Haley Barbour discussed the cap and trade tax, the renewable electricity standard and the tax increase proposed for the oil and gas industry.

"These increased energy costs will hit small businesses hard and will particularly hurt energy-intensive industries like manufacturing or computer processing," the Mississippi governor said. "These energy policies would cause electricity rate to increase, which would make their U.S. generators non-competitive compared to facilities in China, India, Brazil or Russia."

There are fears that the US could see many of its industries move to other countries with lesser or no curbs on GHG emissions, making a possibility called "carbon leakage" a reality.

The cap and trade regime scares Barbour. "There is nothing to stop a large government like China from investing heavily in carbon emission permits instead of US Treasuries," he said.

That could result in US-based industries being unable to buy those permits, he said. Or they would be forced to pay much higher prices for them, which in turn could make American businesses even more non-competitive against Chinese manufacturers.

Dan DiMicco, CEO of the largest US steel manufacturer Nucor Steel, said the cap and trade tax could force his company to close its US-based plant and shift production to China.

The ACES Act requires "international reserve allowances" for energy-intensive imports from 2020 unless a new international agreement meeting the bill's objectives comes into force.