Green-tech pros eye cash in carbon

Forward-looking green-tech companies are trying to build a business by monetizing greenhouse-gas reductions.

The first electric vehicles to roll off Phoenix Motorcars' manufacturing lines will have a hidden, but potentially lucrative, asset embedded in them.

The company's battery-powered trucks, set for delivery this summer, will generate "zero-emission credits" from the state of California that could add up to serious money for the start-up if it can sell those credits to bigger automakers.

If that happens, Phoenix will need only a fraction of what it would otherwise cost to get its business going, said Bryon Bliss, the Ontario, Calif., company's vice president of sales. "It's the difference in how much venture capital money we need--something like $100 million versus $10 million."

Put another way, the credits could help the company be profitable in one year rather than five or six, Bliss said.

Phoenix Motorcars has hit upon a particularly scarce--and thus valuable--environmental credit. The state of California requires all automakers to produce a set number of zero-emission vehicles--or buy credits to offset the gas guzzlers they do make. Because it specializes in clean vehicles, Phoenix Motorcars expects to have an excess of these credits, which it could sell to auto manufacturers who don't meet the state's requirements.

But zero-emission credits aren't the only ones making their way into companies' business models. A number of forward-looking green-tech entrepreneurs and investors are betting on the growing value of other credits, notably those based on carbon.

As government policies that address global warming build steam, companies could start to generate revenue from offsetting greenhouse gases.

It's a novel business model, but one that is actively being explored, said Rob Day, a principal at the clean-tech investment arm of @Ventures.

"Some (entrepreneurs) have been writing into contracts that they own the carbon credits created by the products they manufacture," said Day, who said that carbon-restraining policies are likely to come to the U.S. in the next few years. "You can see the writing on the wall now."

Carbon finance
As an investor, Day favors companies that don't need to rely solely on revenue from carbon credits, or other forms of market-based environmental controls.

But others view them as a sound business model. A company called Planktos is building its entire revenue plan around sequestering carbon.

Later in May, Planktos employees will set sail for the Galapagos Islands, where they plan to seed a large area of the ocean with iron to stimulate the growth of plankton, which it says is in decline.

A portion of that plankton will die and sink, keeping carbon dioxide out of the atmosphere, said David Kubiak, the company's director of communications.

"We're mostly concerned with plankton that get below 500 meters. It puts them in deep enough ocean currents that they are out of the atmosphere for centuries," he said.

To make money, it intends to sell the carbon reduction that the plankton bloom causes. Kubiak said the company originally conceived of the idea as a research project to mitigate climate change but found that business people were willing to back the venture based on anticipated revenue from selling carbon credits, which were made possible by the Kyoto Protocol.

Planktos also has a subsidiary called KlimaFa, which plans to do essentially the same thing but with forest management. Its first project in Hungary has gained government approval, said Kubiak.

"What we're basically doing is ecorestoration...and the funding mechanism is the carbon credits generated by it," he said.

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