May 9, 2007 4:00 AM PDT

Green-tech pros eye cash in carbon

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.

CONTINUED: How much value is there?…
Page 1 | 2

See more CNET content tagged:
carbon, credit, Phoenix Technologies, business model, automobile company

5 comments

Join the conversation!
Add your comment
Zero Emission Credits
Can anyone tell my why the car owner shouldnt be the one to sell the credits they generate?
Posted by Renegade Knight (13748 comments )
Reply Link Flag
that seems logical
why should an automaker get a credit for a vehicle that could potentially have an impact (if not sold and driven, no impact)
Posted by jamie.p.walsh (288 comments )
Link Flag
What a waste.
Carbon credits are only vehicles (pun intended) for trading on the broken window fallacy. By being forced to divert capital into carbon credit markets, companies have even fewer resources and capital to commit to research and development of technologies of their own making. Now comapanies want to "sell" them credits?

If government wants to break windows, we should expect there to be glass makers following the vandals.
Posted by sumwatt (69 comments )
Reply Link Flag
It seems
that this system is self-defeating. I'm going to plant trees and then sell my carbon credits to a coal burning power plant or perhaps a steel smelt. So the carbon continues to be released in the air. Zero reduction. What mental giant concieved such a lame-brain idea. A wealth redistrabution scam. All this activity and money changing hands and nothing of any real value gets created. Great, I see economic difficulties in the near future.
Posted by suyts (824 comments )
Reply Link Flag
the value of carbon credits, ZEV credits
It's an imperfect system, but nothing in the real world is. In balance, the eco credits help. Here's how and why.

Without the credits, there is too much of an uphill battle to create and sell EVs, which is one of the most expensive and risky ventures an entrepreneur can embark on (look what happened to Tucker, DeLorean, Bricklin, et al, ).

With the credit system, the big manufacturers are getting away with creating more pollution, but no manufacturer wants to pay money they do not have to... they will look for ways to reduce their pollution output to reduce those costs. It gives the established automakers like GM an incentive to produce their own EVs.

By being able to sell credits, Phoenix and other clean vehicle manufacturers are not only building clean vehicles. A decade ago the automakers, GM most notably, went to great extremes to dismantle the laws that said they had to produce clean vehicles, and they went a step further to try to completely erase any reminder of EVs... they destroyed everything they made under loud public protest.

GM lied about the real reason they did not want to make them: most EVs only have one moving part in their drive train, are far, far simpler, and require almost no maintenance... no car maker can make much money on EVs once they leave the dealership-- no tune-ups, oil changes, fan belts, catalytic converters, etc. GM was terrified of disrupting the status quo, and they knew that EVs would last much longer before they ended up in the wrecking yards... they wanted to be able to sell you a new car every few years. The oil companies may also have been pressuring the automakers to keep from making EVs, too.

No matter how it starts, so long as practical EVs begin to populate out streets and highways, and people see just how much better they are in every way, they'll overcome their buyer's resistance. Many people today don't want to consider EVs for fear that they'll come to regret it... they would rather play it safe and let someone else take the risk of buying the first EVs.

The use of ZEV and carbon credits will die off without any intervention from anyone-- as soon as EVs begin to sell well and engine-powered car sales plummet, Phoenix and other EV makers will have too many credits and not enough credit buyers to whom they can sell.

The value of the credits will drop gradually at first, and then there will be a steep drop as engine cars lose market share... no one will want them.

The credits have no set dollar value. Phoenix has to negotiate with other companies to sell them. If Phoenix is suddenly selling 100,000 cars a year, the old-guard automakers will not only find it much harder to sell their gas-powered cars, but they'll be in panic mode to produce their own EVs and so will not need to buy credits from anyone else. That's the beauty of eco credits... they'll die a natural death without help from legislators.

When that happens, Phoenix will be a robust and vigorous company with no need for credit crutches, and they will be working to sell not only EVs, but solar panels to install on your roof, and high-speed charging stations to keep you rolling on interstate trips.
Posted by billdale (34 comments )
Reply Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.