Environment minister Phil Woolas has today admitted that climate change "terrifies" him, warning that there is a tendency for people to ignore the full scale of the geo-political risks posed by global warming.

"We're all used to seeing pictures of melting ice caps and polar bears and thinking about rising sea levels, but we don't see pictures of melting glaciers in the Himalayas," he said, adding that if those glaciers melt they will disrupt the flow of river systems, including the Yangtze and the Ganges, that provide water to 4.5bn people across "three nuclear-armed countries" in the form of India, China and Pakistan.

Speaking at the Corporate Climate Response conference in London, Woolas said that in the light of these realities, "if the government appears zealous on [the climate change] issue, it is with good reason".

The minister's comments echo a report last month from former senior advisor to the UK Prime Minister's Strategy Unit, Nick Mabey, which warned that a failure to curb climate change could result in century long conflicts on a scale similar to the two World Wars.

However, despite these threats Woolas expressed confidence that disastrous levels of climate change could be avoided, primarily through the construction of a "new economy" built around carbon trading and emission reductions.

"The fear factor [over climate change] is not the main message," he said. "The main message is that it is cheaper [to cut energy use]. If you want to get the price of fuel down then go green."

Woolas argued that carbon cap-and-trade schemes could help accelerate emission reductions and released new figures showing that despite widespread criticism of the first phase of the European Emissions Trading Scheme (ETS) total carbon emissions for firms covered by the scheme fell 2.9m tonnes in 2007 on a like-for-like basis. He admitted that the savings were modest when total emissions for firms in the scheme remained over 250m tonnes, but insisted the reduction in total emissions provided evidence that emissions trading can work to help "turn the oil tanker around".

The minister also argued that the extension of carbon trading in the UK through the government's new Carbon Reduction Commitment was part of a wider trend which should soon result in the formation of a global carbon market – one which he hoped the City of London will sit at the hub of.

"It was hugely encouraging to see John McCain endorse a cap-and-trade plan, which means all three candidates now support the idea," he said, adding that with a new scheme being prepared in Australia and South Korea also considering such a mechanism the groundwork was being laid for a genuinely global carbon market.

For many observers the cloud on the horizon remains the difficulty of engineering a UN-backed international agreement that would see all countries, including China, India and the US, endorse the binding emission caps required to make such a global scheme work.

However, Woolas again argued there was cause for optimism over the negotiations. "The good news is the US election and the fact that the Chinese government is part of the solution and not part of the problem," he said. "The Chinese economy might be part of the problem, but the Chinese government gets this issue – not least because of the damage climate change and pollution is doing to their country."

He identified an agreement on tackling deforestation as a top priority for the on-going talks, arguing that the issue was too readily ignored by many commentators. "Carbon emissions from the deforestation that happens every 24 hours equate to flying 25m people across the Atlantic," he said. "This issue dwarfs the debate over aviation [and] we have to get deforestation into the agreement."