(FORTUNE Small Business) – Tony Rogers is a member of the rosebud Sioux tribe who lives on the tribe's South Dakota reservation. He doesn't have an engineering degree, hasn't worked for a power station, and has never invested in the energy markets. Yet Rogers is an entrepreneur at the cutting edge of green energy development. He is director of the Rosebud Sioux Tribe Utility Commission—the group responsible for building the first wind turbine on a Native American reservation.

Rogers's reservation, located in Rosebud, S.D., is dependent on electricity from Basin Electric Power Cooperative, a Midwestern utility that generates most of its power from coal. Basin produces more carbon dioxide per megawatt-hour than any other utility in the country, according to a recent report by a national coalition of environmental groups. At the same time, the Great Plains states have enough wind to generate roughly 2c times the total electricity consumed each year in the U.S., all of it pollution-free, says John Dunlop of the American Wind Energy Association, based in Washington, D.C.

Although wind energy is a $2-billion-a-year industry in the U.S., it provides less than 1% of the country's total electricity. That is about to increase, though. Wind is the world's fastest-growing energy technology, according to the U.S. Department of Energy. Thanks to plummeting costs (at around 4 cents a kilowatt-hour after subsidies, wind energy can be less expensive than that produced by some new fossil-fuel power plants), installed capacity increased 36% last year—enough to light the city of Detroit.

The Rosebud Sioux stumbled on the idea of converting their wind into electricity in the mid-1980s, when they started looking for a low-cost energy source and discovered that the wind on their reservation could theoretically power one-twelfth of the U.S. "Our jaws dropped," says Robert Gough, secretary of the Intertribal Council on Utility Policy (ICOUP), a consortium of tribes in the Great Plains. "We had a tremendous resource with tremendous potential."

The project took more than eight years and cost $1.2 million. "We wanted to show that a tribe can own something 100% and benefit from it 100%," says Rogers. Rosebud Sioux hired a Lakewood, Colo., company, Disgen, to install a 750-kilowatt, 190-foot-tall wind turbine—enough to power 220 homes. Initial financing came from a Department of Energy grant and a loan from the U.S. Rural Utility Service.

The tribal commission completed its wind turbine with the help of an an unusual financing mechanism known as "green tags." Under Department of Energy rules, the environmental benefits of electricity from renewable sources such as biomass, solar, and wind can be split off from the actual electricity and sold in the form of a renewable-energy certificate, or green tag. Each tag represents one mega-watt of clean energy. Much like the carbon-emissions credits that are becoming popular in Europe, green tags can be traded on the commodities market. In addition, individuals or companies without access to clean energy can buy green tags to offset their dirty energy consumption. Green tags not only help entities such as the Rosebud Sioux commission raise money for alternative-energy projects but can also have direct economic value. In the growing number of states that require utilities to generate a certain percentage of their electricity from renewable sources, for example, power companies can buy green tags to help meet their renewable-energy quotas.

As construction was beginning in 2001, the commission teamed up with NativeEnergy, an alternative-energy broker and marketer in Charlotte, Vt. NativeEnergy offered to buy up front most of the green tags that would be generated over the life of the Rosebud Sioux project. The company in turn sold the tags to a variety of green-friendly organizations, including Ben & Jerry's, Clif Bar, the Dave Mathews Band, and the Natural Resources Defense Council. Green-tag sales raised about $250,000—25% of the cost of the Rosebud Sioux turbine.

Ben & Jerry's isn't exactly a utility, so what does it get out of buying green tags? Great publicity. "It solidified what our brand stands for and why people buy our product," says natural resources manager Andrea Asch. "The investment comes back fourfold in recognition."

Today each wind-kilowatt that Rosebud Sioux sells into the local grid reduces Basin Electric's dirty-energy production by the same amount. Over the next 25 years Rosebud electricity will replace 50,000 tons of carbon dioxide, an amount equal to the emissions from 8,300 cars over the same period. The tribe hopes that the turbine will also generate revenue and jobs for the reservation, where unemployment is running at 82%, according to tribal estimates. Since the turbine's 150-foot blades started spinning last March, the tribe has inked an agreement to sell some of its power to a local Air Force base. And that's just the beginning.

The Rosebud Sioux commission is now planning a 30-megawatt wind farm with 18 wind turbines that is expected to go online next January. "Our goal is to become a service provider for this area and cities that are farther away," says Rogers. He sees energy as a better alternative to the reservation's current cash cow, its casino. "The wind farm will generate more funds, and wind is more reliable than people's pockets," he explains. "And besides, it's cleaner money."