NOVA IGUACU, Brazil -- In a big dirt pit here, workers wearing protective masks piled rocks around cement columns jutting up from rotting trash. Some 6,000 miles away, Dutch officials awaited word of their progress.

The Brazilian workers and the Dutch government have been brought together in an unusual partnership by the Kyoto Protocol, the international treaty under which most industrialized countries, other than the U.S., have pledged to reduce their global-warming emissions by 2012.

The workers are building a modern landfill, a rarity in the developing world. The columns are part of a system to capture methane from the city's decomposing rubbish before it wafts up into the atmosphere. Methane is a particularly potent global-warming gas; by burning it, and thus converting it into a less-potent gas, carbon dioxide, the landfill will significantly reduce its output of global-warming pollution.

That makes this garbage pile a gold mine in a new international market: the buying and selling of greenhouse-gas emission "credits." Each credit that a buyer in the industrialized world purchases from a seller in a developing country reduces the buyer's obligation to clean up its act back home. In theory, the system will reduce global emissions of greenhouse gases by sending money from industrialized nations to developing ones to tackle projects that otherwise wouldn't have gotten off the ground.

"Just by flaring methane," explains Pedro Moura Costa, a 41-year-old Brazilian-born scientist who founded EcoSecurities Ltd., the company behind the gas-recovery operation, "you're creating a lot of credits."

The Netherlands agreed under Kyoto to cut its greenhouse-gas emissions 6 percent below 1990 levels by 2012. Cutting a ton of emissions in the Netherlands is expensive: about $25 to $50, Dutch officials estimate. So for half their planned cuts, the Dutch shopped around mostly in developing countries for cheaper deals. Here in Nova Iguacu, they've agreed to buy as much methane as this landfill is expected to snag -- for $4.15 per ton.

"We never can reach this target by doing things at home" exclusively, says Maurits Blanson Henkemans, the Dutch economic ministry's senior official on climate issues.

The Kyoto treaty's architects envisioned this international trade in invisible gases as the perfect combination of Earth Day and Adam Smith: Think globally and act locally, and do it in a way that cuts costs. But the experience here shows that harnessing the free market to fight global warming is proving more complicated than the theorists hoped.

The landfill is capturing much less methane than expected; exactly why is a matter of dispute between Mr. Moura Costa's firm and the Brazilian company that's operating the facility. Meanwhile, the attempt in Nova Iguacu to help the atmosphere is raising a thorny social issue on the ground: what to do with impoverished scavengers whose only source of income is taken away when a tightly controlled modern landfill replaces an old-style dump that was open to all.

The landfill also points up a question about the Kyoto emission-credit market itself: Whether it will jump-start a global shift away from CO2-producing fossil fuels and toward renewable-energy sources such as the sun and wind.

By offering credits for emissions-reduction projects, the treaty's backers hoped to promote renewable-energy projects like solar panels and windmills -- and thus reductions in carbon dioxide. After all, CO2 is the most prevalent of the gases building up an atmospheric layer that's trapping reflected heat from the Earth's surface just as a greenhouse locks in heat.

So far, the results aren't encouraging. Renewable-energy projects recently have been producing only about a third of the credits sold on the international market, according to a report from the World Bank, one of the market's biggest boosters.

The problem is that CO2-reducing projects are proving less desirable to credit buyers than projects that go after more-potent, but less prevalent gases. A project that avoids the emission of a ton of CO2 produces just one credit. But, because scientists say a ton of emitted methane does as much damage to the planet as 21 tons of CO2, a project that cuts a ton of methane generates 21 Kyoto credits.

So, aiming to get more bang for their bucks, many buyers of Kyoto credits are flocking to projects that have nothing to do with CO2: adding incinerators at chemical plants to get rid of a particularly strong hydrofluorocarbon gas, for instance, and capturing methane from landfills.

The lesson: Even with what amounts to a global-warming tax inducing much of the West to invest in the developing world, renewable energy isn't proving economic on a broad scale. "Perhaps we'll have to do some more incentives for renewable energy," says Charles Cormier, a World Bank official who works in the global-warming-credit market. "It's not there yet at the scale that was intended."

Despite these hurdles, the emission-credit market is growing. And governments aren't the only buyers. The countries that have ratified Kyoto are divvying up responsibility for meeting their targets among the companies that operate in their countries. So businesses too are lining up to buy cheap emission credits in the developing world.

So far, governments and private investors ranging from Japanese and Canadian power companies to London and Parisian banks have pledged more than $1 billion toward the purchase of greenhouse-gas credits in developing countries such as Brazil, Chile and India.

The U.S. has rejected Kyoto, arguing that it will hurt U.S. competitiveness with developing countries like China and India, which are rapidly becoming industrial powerhouses but aren't subject to the treaty's caps. Still, some U.S.-based multinationals also are considering buying credits. They have to comply with the treaty in many of the countries where they do business. Many companies hope those credits will qualify under any global-warming caps the U.S. might impose in the future.

Coca-Cola Co., for example, is considering investing in methane-capture projects at Brazilian landfills, says Jeff Seabright, the Atlanta-based beverage maker's vice president for environment and water resources.

The idea of turning pollution into a tradeable commodity originated in the U.S. In 1995, the federal government began capping emissions of sulfur dioxide, a common pollutant from power plants that contributes to acid rain. To make it cheaper for industry to comply, the government created a pollution-trading system. Companies that kept emissions below their capped level got credits they could sell to companies that didn't meet their quotas.

Around the same time, international talks were gearing up to curb greenhouse-gas emissions. The U.S. argued any cap on those substances also should be tempered by a credit-trading system. Behind its argument was an environmental fact: Because global warming is a truly global phenomenon, the atmosphere is equally happy with any greenhouse-gas emission cut, wherever it's made.

Cutting emissions in developing countries is likely to prove environmentally crucial. Unless the fastest-growing nations shift toward a greener path of industrialization, moves to reduce emissions in the industrial world will matter less and less. Within a generation, today's developing countries are on track to collectively cough out more greenhouse gases than today's industrialized ones.

When the Kyoto treaty was negotiated in 1997, it endorsed the notion of greenhouse-gas trading. That gave Mr. Moura Costa, a guitar-playing native of Rio de Janeiro, the business opportunity he had been preparing for.

After earning a Ph.D. in England in 1991 in the biotechnology of tree production, Mr. Moura Costa spent the early 1990s working for a company planting trees in a Malaysian rainforest.

By the time Kyoto was negotiated, Mr. Moura Costa had moved back to England. Out of the ground-floor study of his row house in Oxford, he founded EcoSecurities to make a buck off the fledgling greenhouse-gas market. The company would assemble emission-reduction projects in developing countries, package them into Kyoto credits, and then find buyers for the credits in the industrialized world.

It wasn't long before Mr. Moura Costa began to appreciate the value of trash. "We came across the idea that landfills are a very cost-effective way of generating carbon credits," he recalled one afternoon, sitting in his Oxford study and sipping tea.

In 2001, he heard that S.A. Paulista, a Brazilian civil-engineering company, had won a contract to replace an old dump with a new landfill here in Nova Iguacu, a gritty city of about 800,000 people roughly an hour's drive from downtown Rio.

Paulista officials were confident they would turn a profit through the fees they would charge the landfill's customers. But then Mr. Moura Costa approached them with a pitch he said could bring in even more money: peddling Kyoto credits.

"Hey, you have this liability," Mr. Moura Costa recalls telling Paulista officials. "We can turn it into an asset."

He proposed installing extra equipment to capture and burn methane produced by the landfill's rotting trash -- a common practice in the industrialized world.

At first, the methane in Nova Iguacu would be burned to treat the landfill's dirty runoff. Eventually, the methane would be burned to produce electricity to help power the city. Both those processes would emit carbon dioxide. But because carbon dioxide is so much less potent than methane as a greenhouse gas, they would amount to global-warming victories that generate Kyoto credits.

It sounded good to Paulista. "They sold us the idea very well," says Adriana Felipetto, Paulista's environmental manager.

Through the World Bank, which was promoting the nascent emission-credit market as a way to boost foreign investment in developing countries, EcoSecurities struck a purchase agreement with the Dutch government.

To pass muster with Kyoto's enforcers, a group of bureaucrats who meet in Bonn, Germany, the landfill's sponsors had to submit a detailed estimate of how many credits the landfill would generate. Taking into account Brazil's hot, humid weather -- great for decaying trash -- and how much gas would be likely to escape without being captured, the target came in at 14 million CO2-equivalent tons, or 14 million Kyoto credits.

The sponsors also had to show their project wouldn't hurt local people -- particularly the scavengers. Scavengers are a familiar sight at dumps throughout much of the developing world. They spend their days climbing amid the exposed piles of trash, collecting plastic bottles, metal cans and other materials that they then sell to recyclers.

A social worker hired by Paulista reported that 89 scavengers relied on the dump for their living. Paulista hired and trained about 20 of them to work at the new landfill. Other companies in Nova Iguacu hired about 15 more.

The city helped the rest form a trash-recycling cooperative, housed in a building in town. Garbage trucks bring recyclables to the building, where the former scavengers further sort the waste and sell the various components to recycling companies. The workers split the cooperative's revenue evenly among themselves.

While some of the former scavengers eventually drifted away, Salvador Braz da Silva is glad he stuck around. At the old dump, the 50-year-old father of four picked metal, bare-handed, and sold it to recyclers. He usually earned no more than about $85 per month -- low even by Brazilian standards. Now, directing trucks at the new landfill, he earns about $175 per month. He gets to and from work on a blue mountain bike and carries a cellphone.

Last November, the Nova Iguacu landfill became the first project in the developing world to get the Kyoto panel's blessing. But that doesn't mean everyone's happy with the deal.

For starters, the landfill isn't yet generating any electricity. More than two years after it opened, its methane still is being piped to a metal building where it's burned for heat to treat the landfill's liquid runoff.

Paulista failed to qualify for renewable-energy contracts from the Brazilian government that would have helped cover the cost of machinery to turn the methane into electricity. Now it's trying to arrange power-purchase deals with private companies, Ms. Felipetto says.

Mr. Moura Costa blames the delay on the clouds. When the landfill was on the drawing board, Brazil, which relies on hydropower for much of its electricity, was undergoing a drought. As a result, customers were willing to pay high prices for alternative energy sources. Since then, though, rains have come, bringing the price of hydropower back down and making customers less willing to pay extra for alternatives.

Even more worrisome: The landfill isn't capturing as much methane as expected. Instead of getting 85 percent of the methane it's producing, it actually appears to be snaring about 70 percent, Paulista's Ms. Felipetto says. And that means, at least so far, it isn't producing as many Kyoto credits as envisioned.

EcoSecurities' Mr. Moura Costa blames Paulista for the shortfall in methane production. Paulista has resisted paying to hire a methane-capture expert and installing specialized pumps to suck the methane out of the trash at a controlled and optimum rate, he says.

Instead, Paulista is letting the methane dribble out of the trash on its own. "It's an amateurish approach at the moment," says Mr. Moura Costa, adding that, if the situation doesn't change, his firm may pull out of the project because of the frustrations.

Ms. Felipetto says the gas-capturing equipment sometimes has to be shut down for the landfill's normal operations. "You can never get as much gas as you want," she says.

All this may leave the Dutch government in a squeeze. It has encountered similar logistical problems in several other developing-world projects in which it has invested. As a safety net, the country is considering buying extra credits in central Europe.

The Kyoto treaty presents the Netherlands with "a very tough target," says Mr. Blanson Henkemans, the Dutch global-warming official. Getting cheap emission credits from the developing world, he says, has proved "more difficult than we expected."