The project should cost about 33 million euros ($42.73 million) and will be partially financed by the region of Veneto and the Italian Environmental Ministry, Rome-based Enel said today in an e- mailed statement. The power plant is slated to begin electricity generation by the end of 2007.

Starting this year as part of the European Union's efforts to reduce pollutants, about 12,000 factories and power plants in the 25 EU countries will be granted an allowance setting the amount of carbon dioxide they can produce. Companies that emit more than their allowance need to buy extra pollution credits in the market or face fines. Those that emit less can sell their surplus.

The plant Enel is building in Marghera, in northern Italy near Venice, will have a capacity of 20 megawatts and produce no carbon dioxide emissions, the company said. When fully developed, non- polluting sources of energy will allow many of Europe's industrial companies to cut emissions of carbon dioxide and earn money by selling unused pollution credits.

General Electric Co.'s Italian unit is among the project's partners to develop the power plant.