The Kyoto climate change treaty is running into real trouble over a European Union proposal to cap emissions trading. A new study of the European proposal by the Paris-based International Energy Agency estimates that a trading cap would have the largest impact on the U.S., reducing its ability to make trades by two-thirds and requiring more domestic emissions cuts. The U.S., Australia, Canada, Japan, Russia, and other nations rejected the emissions cap plan at a meeting of climate negotiators at Bonn, Germany, which continues this week. American diplomats argue that the U.S. needs the flexibility to buy emissions rights from companies or other countries in order to cost-effectively meet its Kyoto obligation to reduce carbon-dioxide emissions seven percent from 1990 levels between 2008 and 2012.