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Greenhouse gases are the ultimate global pollutant. A tonne of emissions anywhere in the world has virtually the same impact on the climate. That is why the countries of the world decided to include international emissions trading as an integral part of the Kyoto Protocol.

Emissions trading works much like any market: One company can pay another to reduce emissions on its behalf, which lowers the overall cost of pollution reduction. Canada is one of the few developed countries that doesn't yet allow firms to get credit for participating in global emissions markets, but that may change as a result of two important announcements in recent days.

Last Friday, Stéphane Dion released the Liberal climate-change plan, which would allow companies to meet up to 25 per cent of their reduction targets through international trading. The next day, Environment Minister John Baird indicated for the first time that he may be open to including international trading in his forthcoming climate change plan. This announcement was a major surprise, and a welcome one. For several years, the federal Conservatives have said international emissions trading is ineffective and a waste of taxpayers' money. But nothing could be further from the truth — emissions trading is one of the essential tools needed to prevent dangerous levels of climate change. It also is essential to help the world's poorest countries achieve development without imperilling the planet.

Carbon dioxide is the main greenhouse gas. When CO2 is emitted, it makes its way up into the atmosphere, where it circulates and lasts for decades, causing changes in our climate on a scale not seen in modern human history. The impact is global; a tonne of CO2 emitted in India affects us just as much as a tonne emitted in Canada.

The recognition of CO2 emissions as a global problem inspired the countries of the world to come up with an ingenious solution when they met in Kyoto in 1997. They created the Clean Development Mechanism, allowing countries to achieve part of their greenhouse-gas reductions through emissions trading. This novel idea was driven by three realities:

-- First, because industrialized countries have been the primary cause of global warming (they produce 75 per cent of the world's CO2 with just 20 per cent of the population), they need to take the first steps to reduce emissions.

-- Second, it is essential to get developing countries involved in emissions reductions as soon as possible, because if they fuel their economic growth using old, dirty technologies (the way we did), it will spell disaster for the Earth's climate.

-- Third, including developing countries in the Kyoto regime lowers the overall cost of reducing emissions, since there are many opportunities for low-cost reductions in poor countries.

The Clean Development Mechanism allows rich countries (including Canada) to buy emission reduction credits from developing countries. The choice of the word "credit" was unfortunate; it makes it sound like no real reduction is occurring, when in fact there will be every bit as much reduction — it's just that it will happen somewhere else, and have just as much benefit for our climate. Maybe a better term would have been clean development "investment."

Lately we have heard some federal politicians (and others) say that Canada would have to ruin its economy to meet its Kyoto targets. But when they say that, they are ignoring emissions trading. They are assuming Canada has to meet its entire Kyoto target through domestic cuts. But that is not what Kyoto requires; it says that countries will meet their targets through a combination of substantial domestic cuts plus international trading. If Kyoto had allowed only domestic cuts, Canada would never have agreed to such an ambitious reduction target. Canada and other countries set their Kyoto target knowing they could be met, in part, by investing in clean development abroad.

Emissions trading is not new. It was first invented by Canadian economist John Dales in 1968 and has since been used with great success. For example, the U.S. program to reduce acid rain uses emissions trading, and has achieved 25-per-cent greater emissions reductions at 40-per-cent lower cost than through conventional regulation. The success of the U.S. program inspired Ontario to develop its own acid-rain emissions trading program.

So we know emissions trading can work. In fact, on a global scale, it works a lot like international development aid — only better. Each year, Canada spends billions helping poor countries improve their environmental, health, and socioeconomic conditions. Global emissions trading is simply another form of development aid. In fact, it is some of the most effective aid we can give, because it helps poor countries develop in climate-friendly ways. That helps them and it also helps us, since Canada will be one of the countries most affected by global warming, as we're already witnessing in the Arctic.

International emissions trading is still in its infancy, and is not yet a perfect system, as its critics are quick to point out. The rules are still being refined, and some of the projects being promoted in international markets would have dubious environmental benefits. But that is not surprising. Like any global market, emissions markets have good investments and poor ones. Fortunately, there are more of the former, but we still need to be discriminating about which projects we invest in, as we would be in any new market. Trading should be limited to projects with clear environmental and climate benefits.

Most countries now participate in emissions trading, and it is high time that Canada did so too — not as a substitute for domestic reductions, but as a supplement. The recent announcements by Mr. Dion and Mr. Baird are hopeful signs in this regard. If designed well, emissions trading will help poor countries by supporting clean development and help us by lowering the cost of Kyoto compliance and reducing the emissions that threaten our future.

Stewart Elgie is an environmental law professor at the University of Ottawa. Dan Gagnier is senior vice-president of Alcan Inc. and chair of the International Emissions Trading Association.