HONG KONG (Dow Jones) -- Two Chinese chemical companies are among the participants in the largest greenhouse-gas emission trade in history, a $1 billion deal that should dramatically reduce the release of a waste chemical into the atmosphere that is believed to cause climate change, according to a media report Tuesday.

The World Bank, several utilities firms, international banks and trading firms are behind the deal designed to help the two mainland China chemical companies reduce annual emissions equivalent to 19 million tons of carbon dioxide a year, the Wall Street Journal reported in its online edition.

The companies, based in Jaingsu Province on China' s eastern coast, release HFC-23 gas directly into the atmosphere. The gas is a waste product created during the manufacture of a refrigerant, and is rated 11,700 times more damaging to the environment than carbon dioxide. Part of the funding will be used to purchase incinerator technology that will destroy the gas.

Approximately 75% of the money is coming from European and Asian corporations, generated from the sale of emission credits used to meet the terms of the Kyoto Protocol.

The Journal reported the money will be put into a new Clean Development Fund that will be used to promote forms of renewable energy and to remove other gases believed to cause global warming.

The Chinese government will be benefit through a series of existing taxes on the two chemical companies.

" We think this is a very positive development. It says something about the commitment of China to do something about climate change," The Journal quoted Joelle Chassard, manager of the World Bank' s carbon finance unit, as saying.

Chassard helped write the rules for such trades of pollution credits and negotiated the first international deals.

China is the world' s second-largest emitter of greenhouse gases, but is not bound by Kyoto regulations because of its status as a developing nation.

The U.S. is the world' s largest source of greenhouse gases, but declined to join the Kyoto treaty in favor of voluntary reduction programs. (END) Dow Jones Newswires 08-29-06 0146ET Copyright (c) 2006 Dow Jones & Company, Inc.