In Hudson, a small town nestled in the scenic Appalachian foothills of western North Carolina, the county government is capturing methane, a potent greenhouse gas, from an abandoned landfill and turning it into fuel—with help from General Electric, AES Corp. and Google.

The methane-capture project is the first significant carbon offset deal to emerge from Greenhouse Gas Services, a joint venture of GE and AES, with MissionPoint Capital Partners, that has been operating under the radar since it was formed back in January 2007. Google is the venture’s first announced customer, besides a GE-branded credit card.

Now, with climate-change regulation from the Obama administration on the horizon, Greenhouse Gas Services is aiming to ramp up its business – capturing or reducing global warming pollutants. Recently, I spoke with GHGS’s CEO, Mauricio (Mo) Vargas, who says the GE-AES venture intends to be a major player in the U.S. carbon market.

New Energy Finance predicts that the regulated U.S. market will be worth $1 trillion or more by 2020. Such estimates are little more than wild guesses, but most people who understand carbon markets agree that the U.S. market will be a huge deal.

“We’re the big dogs here,” Vargas says. “Whether that’s true today, that’s not the point. That’s where we are going. We’re going to scale this up.”

“The new administration is pushing climate change legislation extremely hard,” he says.

I met Vargas (below) at AES’s corporate offices in Arlington, where the joint venture operates. AES is one of the world’s largest power companies (132 generating plants in 29 countries on five continents) and an early player—back in the early 1990s—in the carbon business. GE is, well, GE.

Vargas, who is 38, had previously worked for GE, then did a stint at AES and became CEO of the JV last March. He’s got a MBA as well as a degree in mechanical engineering.

He told me that GHGS is pursuing several types of projects, all of which capture or prevent the emissions of greenhouse gases and thereby generatecarbon credits, which the company then sells to corporate or individual customers. Its projects include methane capture from landfills, coal mines or agricultural waste; renewable energy projects that reduce emissions by replacing fossil fuels; or land or forestry management projects that increase the capture of CO2.

“We’d like to build three or four projects with each type of technology, and see how they go,” Vargas says.

Vargas was coy about identifying particular projects to which GHGS is committed, but he said they include a landfill deal in suburban Virginia and a large project to capture methane from cow manure in Minnesota. “It’s not the sexiest of businesses,” he says, referring to the cow dung project.

For now, GHGS is selling carbon credits into the voluntary offset market. Google, for example, is buying offsets in an effort to meet is goal of becoming carbon neutral. (I searched in vain on Google’s site to see if the company has met its goal.)

Buyers of voluntary offsets, like Google, are typically doing so to enhance their reputations, so they are looking for more than carbon credits. They want to be able to talk about how they offset their emissions. So building a wind farm or creating a small-scale hydro project in a poor country has more value than, say, trapping industrial gases from a factory in China.

“They want a story,” Vargas explains. “Coal mines are releasing much more methane than an agricultural project will, but they are less attractive in the voluntary market because they are related to coal.”

The real business opportunity for GHGS will come when the company can sell offsets to companies, most likely coal and oil companies, that will be regulated under cap-and-trade legislation proposed by the Obama administration. Companies that burn fossil fuels will need to either buy allowances that will permit them to emit carbon dioxide, or buy offsets from companies like GHGS.

“Our goal has always been to go into the compliance market,” Vargas says. “The voluntary market is a warm up.”

The GHGS venture is worth watching. I’m pleased that Mo Vargas will speak next month at Brainstorm Green, FORTUNE’s conference on business and the environment.

If you want to learn more about carbon finance, I can point you to a webinar that I moderated last week for the Edelman public relations firm and the Environmental Markets Association. It’s long—about 90 minutes—but it features expert commentary from Thad Heutteman of the consulting firm PEAR, Wiley Barbour of the American Carbon Registry and Mark Grundy of Edelman. You can access the webinar slides from this link.  Here is a link to the audio.

Finally, I did a podcast with Mo Vargas for The Energy Collective that should soon be available there. I’ll post a link when it goes up.