The Japanese company said this was the world's first-ever transaction by a company to buy rights to emit greenhouse gases together with coal in a single deal.

The deal follows the signing of a similar agreement with Centennial Coal last year for Tohoku to buy emission rights.

Tohoku will buy coal "for more than one year" and will purchase emission credits under separate contracts that will each take effect in the current fiscal year through March 2003, a Tohoku spokesman said. The price for the emission credits has not been finalised.

Under the scheme, Powercoal will burn methane gas, collected from drilling for coal, to generate electricity, allowing the Australian firm to save coal for thermal power generation.

The scheme will help cut global-warming gas emissions by 1.6 million tons per year in terms of carbon dioxide, which in turn will enable Powercoal to sell emission credits to Tohoku Electric.

Tohoku Electric plans to arrange similar deals with other Australian coal suppliers.