BRUSSELS, Oct 1 (Reuters) - The European Commission, under pressure from business lobbies, has watered down draft rules to force companies to trade the right to emit a greenhouse gas. Documents obtained by Reuters show that under the system aimed at fighting global warming, heavy industries in the European Union will be able to buy the right to emit carbon dioxide (CO2) from other firms if they exceed a pollution quota. But the latest draft bows to several industry demands by halving the proposed fines, allowing the Commission to exempt certain sectors temporarily and enabling member states to give firms extra emission credits in special market conditions. The plan being completed by EU officials aims to create the world's first international marketplace by 2005 for trading the right to emit CO2, a by-product of burning fossil fuel. Oil refineries, power stations, steel works, ore smelters and a vast range of manufacturing industries would be covered by the scheme, part of the EU's strategy to reduce emissions of the "greenhouse gases" blamed for warming the climate. The EU executive originally aimed to propose the regulations in July but was persuaded to redraft them in a more business-friendly form after intense lobbying from industry, EU and industry sources said. COMPETITION The amended proposal contains key concessions to make the idea more palatable for firms which fear their costs will be squeezed as they are forced either to make energy savings or buy pollution credits from other firms to meet their quotas. European businesses are particularly concerned that new regulations aimed at achieving the emissions cuts required under the 1997 Kyoto Protocol on global warming could put them at a disadvantage to their U.S. competitors. The United States pulled out of the United Nations deal in March, becoming the only major industrialised country to refuse to be bound by the agreement to cut greenhouse gases by an average of five percent of 1990 levels by 2010. Under the proposed scheme, if a company emits more than its annual allowance, it will be able to buy credits from any firm in the 15-nation bloc that has not used its full quota. The price of such pollution credits would fluctuate according to supply and demand. Companies that failed to stay within their allowance or buy extra credits to make up the shortfall would be fined, but in the latest draft the level of fine has been halved to 100 euros ($91.41) per excess tonne of CO2. EU statistics show the bloc emitted 4,150 megatonnes of CO2 and other greenhouse gases in 1990 and has to cut this by eight percent by 2010 to comply with the Kyoto pact. INTERVENTION Another concession to industry is that governments could step into the market and issue extra permits if prices went too high. The draft does not specify a reference price. Governments could also exempt certain sectors from the scheme for the first three years if they can convince the Commission that they will achieve equivalent emissions reductions by other means. Commission officials said they hoped to propose the scheme to member states, along with other policy ideas, ahead of the next meeting of the U.N. climate change convention in Marrakesh at the end of this month. Creating a global CO2 emissions trading system will be one issue on the table in the Moroccan city.