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San Francisco has always been an innovator on the political, cultural and environmental fronts. It's now pioneering the way in cashing in on a new industry being created around the idea of keeping carbon dioxide and other greenhouses gases out of the air.

San Francisco has always been an innovator on the political, cultural and environmental fronts. It's now pioneering the way in cashing in on a new industry being created around the idea of keeping carbon dioxide and other greenhouses gases out of the air.

Call it the carbon revolution.

Whether you are a believer, an agnostic or complete skeptic when it comes to global warming, there's one inescapable fact. Trading carbon is now a multi-billion-dollar business.

And cash-strapped cities, which generate much of society's greenhouse gases such as carbon dioxide, can turn carbon into a lucrative revenue stream. It hinges on leaders realizing many of their city's projects actually create environmental benefits that, in a world where reducing carbon footprints is becoming a prerequisite, can be sold off as carbon credits.

The man who is leading this idea is San Francisco Mayor -- and quite possibly California's next governor -- Gavin Newsom. Being mayor of green-minded San Francisco means that you are always thinking about your carbon footprint. Newsom drives an electric car, the Tesla Roadster in his case, and when he flies he dutifully buys carbon credits.

But when Newsom bought those carbon credits -- essentially buying a share in faraway projects reducing greenhouse gases to balance out his jet-fuel emissions -- San Francisco's mayor had a question. Why couldn't he buy those same carbon credits locally?

That gave birth to San Francisco's carbon fund, which will become active in the next few months.

The idea is to create carbon credits at home, generating green jobs and money for the local economy. The profits from the carbon fund would then be used to stimulate additional carbon-neutral projects that would reduce green-house gas emissions, generating further carbon credits that could be traded.

It sounds like hocus pocus at first. But in the carbon-trading market, which is now about $100 billion a year and growing fast, it's becoming clear that cities can be serious players.

San Francisco is blazing the trail.

For example, it might decide it will plant more trees in the city to suck up carbon emissions from cars. For every tonne of carbon taken out of the air, a carbon credit or offset would be created, valued at, say, $25 apiece. If the city were to plant enough trees to sequester 100,000 tonnes of carbon, San Francisco's carbon fund would have created $2.5 million in carbon credits.

Or it might work like this. If San Francisco is successful in introducing the electric car into the region, it could claim carbon credits because it is replacing fossil-fueled vehicles with near zero-emission technology.

Since the average driver emits about five tonnes of CO2 a year, that would translate into five carbon credits, worth about $125. So replace 100,000 fossil-fuel cars with e-cars and you would theoretically create $12.5 million in value to add to San Francisco's carbon fund.

You might even get carbon credits by retrofitting older buildings. Replace energy-inefficient heat plants with greener technology and a city would earn carbon credits for reducing its carbon footprint. Carried out on a city-wide basis, that could add up to hundreds of thousands of carbon credits, too.

The challenge, of course, is convincing buyers that municipal carbon credits are of real, lasting value. A city's carbon credits have got to be of the same standard as the carbon credits now being traded on the world's regulated carbon markets.

San Francisco's mayor knows that large-scale carbon deals aren't going to happen overnight. So Newsom is phasing in his carbon strategy.

In its early stages, the San Francisco carbon fund won't even trade carbon offsets. Instead, it will put a surcharge on city employees' air travel -- essentially a carbon tax of about 13.5 per cent -- and add the funds to its carbon fund. It's also opening up kiosks at San Francisco airport, to let passengers buy carbon credits as they check in.

That money will then be used to start up more carbon-neutral projects. The plan is to eventually create made-in-San Francisco carbon credits that will be fully audited and tradeable on the world's carbon markets.

Will it work? It's hard to say. But any big-city mayor ought to be thinking hard about a carbon strategy like this.

The bottom line is this: U.S. President Barack Obama has embraced carbon trading. So have many U.S. states. British Columbia has joined California and other U.S. states in anticipation of a continental carbon-trading system. Canada's federal government has indicated it will follow, too. Utilities and energy companies are already searching out and buying carbon credits to offset their greenhouse gas emissions, which are now considered pollution.

The carbon world isn't coming, folks. It's already here.