Stephen Smith: From American Public Media, this is an American RadioWorks documentary.
Chris Erikson: Green 2.0. Greenside. Triple Green. Green Silk. Ooohhhh smooth.
Smith: American businesses are going green.
David Placek: There's going to be a huge scramble in this marketplace for ecological something - anything, really, okay?
Smith: From credit cards to biofuels to solar energy. Everybody's making claims.
Placek: There's going to be a lot of false claims. There's going to be a lot of sincere people. Perhaps some insincere people along the way.
Marianne Wu: It's not some sort of little blip that this is hot today. And you know, tomorrow it's going to be some next hot thing.
Smith: It's a Green Rush, from American RadioWorks. First this news.
[conference room chatter]
Placek: A name is something you build a personality and a brand around, right?
Smith: Around this conference table big brand names are born: Blackberry, Pentium, Powerbook. We're at the offices of Lexicon, a San Francisco marketing firm that has "branded" icons of the wired generation. The windows of this conference room look out over a sweep of San Francisco Bay, a useful reminder of the big world out there, of the sea and sky that today's meeting is all about. The job: naming and promoting introducing a curious new tool in the fight against global warming - a credit card.
Placek: I think your biggest challenge is getting people to really understand what this really does. Make this very tangible, here. You say, "Okay, if you buy a cup of coffee here, to offset that we're going to plant a tree."
Smith: That's Lexicon president David Placek. He's talking with Bay Area entrepreneurs Michel Gelobter and Chris Erikson about their idea for a so-called "green" credit card. The card would to help consumers offset the environmental harm they cause when they buy a pair of jeans or hop on an airplane or sip a double espresso.
Erikson: I think you're exactly right. People don't get it.
Gelobter: Cause most people -"Coffee? Climate change?" You know, you buy a cup of coffee. It takes hot water. The beans have to be shipped across the world. That all adds up. You know, as much as we love coffee, that adds up to an impact on our planet. Right?
Placek: You have to set up the fact, "Let's think about that cup of coffee," because nobody thinks about coffee.
Placek: Well, let me just show you Juan Valdez over here, who's planting that tree today in Costa Rica. And every time you walk in here and buy a cup of coffee from Starbucks, Juan is going to plant a tree for you. Now I'm going, "Well, this is pretty cool."
Erikson: If cool could be cool, that's one of our marketing objectives for sure.
Smith: Seems like a good bet: these days, cooling the climate certainly sounds cool. And, maybe, lucrative. We'll find out over the coming hour. This is an American RadioWorks documentary from American Public Media. I'm Stephen Smith.
Today's program is called green rush, taking its name from the California Gold Rush of the 1800s. For the past year producers Claire Schoen and Michael Montgomery have been looking at how entrepreneurs are rushing to make it in the marketplace - by going green.
Man: You can make just about anything become cool, right?
Smith: So, it turns out there are dozens of companies out there on the green rush frontier that will offset CO2 emissions. They'll offset your airplane miles of your electric bill, even your wedding, with environmental projects that claim to pull carbon back out of the atmosphere. But Chris Erikson and Michel Gelobter say they're taking the idea a step further: they'll help consumers offset everything they buy - by using their credit cards.
Back in the board room, the entrepreneurs talk about how to brand their card.
Erikson: One of the foundations we think that's so critical to everything we do is trust. We want the consumer to be comfortable that we're not scamming them.
Placek: Sometimes when you say trust me, you know, you want to do the, the opposite. But, if we created a brand here called "True." Just, uh, you're being true to the planet, true to yourself. Give me your plusses and minuses of that.
Erikson: Little things go off in my head about religion. [chuckle] I don't know where that came from.
Gelobter: I think it's really clear we don't want to be operating off of guilt.
Erikson: And the name needs to be focused on what people can do. What's happening with the world and what they can do about it.
Placek: Well there's going to be a huge scramble in this marketplace for ecological something -anything, really, okay? From credit cards to fuels to organizations to solar energy - everybody making claims. So, there's going to be a lot of false claims, there's going to be a lot of sincere people, perhaps some insincere people along the way.
Smith: So, can the marketplace save the earth? Can you, the average consumer, really erase the scar you make on the environment with your own, personal carbon offsets? We wanted to see if a plan like Erikson and Gelobter's could really work. There's nothing like it in the United States yet. So while they plan the rollout of their green credit card we decided to follow the trail of a similar card that's already been in business awhile, in Europe. Michael Montgomery picks up the story in Amsterdam.
[driving in car]
Gijs Zijlstra: We should get some gas for the car.
Margreet Jelsma: You know a place to go, close here?
Gijs: There's one near the parking garage.
Michael Montgomery: For three years, shoppers in the Netherlands have had the chance to live the carbon neutral life, simply by using their credit cards. At least that's what the Dutch company Tendris is promising. Tendris will undo the harm you do when you buy things that use fossil fuels - or when you by the fossil fuel itself.
Gijs: Where ever you go, go Texico. This is where we go.
Gijs: My name is Gijs Zijlstra.
Margreet: And my name is Margreet Jelsma. I'm the wife of Gijs. And we brought our son Abe with us. Ten years old.
Gijs: Anyway, so, we're going to the Hilemestrad now, I guess?
Montgomery: Gijs, Margreet and their son are shopping for gas, clothes, maybe some books and chocolate. They're armed with their green credit card.
[Walking into a shop]
Gijs: Can you help me? We're looking for jeans. Where can I try it on?
[Hangers moving on rack]
Margreet: This one is all right I think. How does it feel?
Gijs: A little tight.
[Beeps and clicks of cash register]
Clerk: In total it will be 181 euros and 14 cents.
Margreet: You need your GreenCard again?
Gijs: The only difference with this credit card is that it compensates the carbon dioxide that is emitted for the production of the products that we have bought.
Saleswoman: Never heard of it, but it is very interesting.
Gijs: You didn't know?
Clerk: So actually you have to buy more and more and more for a better world!
Montgomery: To make for a better world, GreenCard claims to do two things. It uses a complex algorithm to estimate the amount of carbon emissions created in each purchase -- called a product's carbon footprint. Then it neutralizes these emissions through carbon offsets.
Amber Nystrom of Tendris explains that GreenCard tries to take carbon out of the air by having trees planted.
Amber Nystrom: So we would be taking a small percentage of the money generated in that financial transaction and investing that in preserving a tree that would cleanse that CO2.
[Back in the shop]
Gijs: There you are.
Clerk: This is your receipt.
Margreet: Abe, you coming?
Margreet: What did we buy right now? Trousers for you? And a T-shirt for Abe. And how much was it altogether?
Margreet: Oh God. What do you think, how many trees should we plant right now with this amount of money?
Gijs: But it is not the amount of money that they compensate, but the CO2 that is used.
Margreet: OK. Yup. Now I understand.
Gijs: Let's see where we go now.
Margreet: Ah, this is Unlimited Delicious. I want to go in here. This is chocolates. We can't pass here.
Montgomery: The family buys some chocolate and moves on to the bookstore.
Gijs: This is the book they were talking about. It was on this radio show on Sunday morning.
Margreet: What about the CO2 emission from this? From a book? More than chocolate?
Gijs: (chuckle) I guess it's more than chocolate. I haven't got a clue, actually.
Margreet: I don't know. It's intuition.
Gijs: What you do you print it and you cut it and you make the paper and you have to transport it and it has to be here in the shop, with the lights, stuff like that.
Gijs: I would think it's less CO2 than the clothes and I think it's more CO2 than the chocolate.
Margreet: Well let's see it on the bill later.
Gijs: Yes, we can see it on the bill later.
Montgomery: GreenCard's big draw is offering to neutralize carbon emissions - at no charge to customers. Tendris partner, Warner Phillips explains that the issuing bank sees this as a promotion -- just like offering free airplane miles -- to attract new customers who will spend more and stay with the card longer.
Warner Phillips: We don't charge you for offsetting. It's relatively easy to get the credit card. You just sign up. It's like a credit card. It is a credit card. So we're making it very easy and attractive for people actually to contribute.
Montgomery: It's been said that carbon offsets are really just a way of absolving people of the sin of polluting the air. What's your response to that?
Phillips: I think it works for a lot of people to relieve their guilt feeling by using this credit card. Cause, people - they want to contribute, but they also want to have the good things in life.
[Abe: Counting steps in Dutch.]
Montgomery: Back at home, the family analyzes the purchases they made with their GreenCard. They hit the Internet to count their trees.
Gijs: Now let's see how much carbon we're compensating
Gijs: Log in "Visa." There we go. All right. What you can see here is the CO2 credits this month. 427 this month.
Margreet: What does that mean 427?
Gijs: That's a good question. This says 16 credits equals one tree. Okay?
Margreet: That's clear. That's clear.
Gijs: For getting gas we compensated our CO2 by four trees. And it's only the gas, so it's not the trousers and the chocolate and all the other stuff.
Gijs: Well that's not too bad. We had a good day. We saved the Earth.
Montgomery: Carbon offset schemes like the GreenCard compensate for a carbon-rich lifestyle. But offset companies say their real aim is to coax consumers and businesses to switch to a low-carbon diet. Zijlstra says the GreenCard has opened his eyes.
Gijs: It makes you aware that you are emitting CO2 even when you just buy a beer in a bar, or something. Making people aware is the first step in solving it.
Montgomery: But, does knowledge change behavior? We asked Tendris' Warner Phillips:
Montgomery: What evidence do you have that this GreenCard has changed the habits of some of your customers?
Phillips: If we look at the customer base that we have which is a lot of, it includes a lot of families actually, it appears to be people that do want to do something about their responsibility. But we, in all honesty, we do not have concrete proof that they've actually changed their lifestyle, take the airplane less or if they've shifted from car travel to bike travel.
Montgomery: The Dutch family's statement shows how to count the number of trees that are being planted to compensate for their day's carbon emissions. But it doesn't say exactly where the trees are being planted or by whom. Nor does it say who's getting the money from the credit card company to plant the trees.
Our search for answers led us to Africa - a remote region in western Uganda near the border with Congo. On a muddy path that winds through tall spear grass, fifteen workers are carrying machetes and balancing baskets on their heads.
Ranger Wilfred: Right now we are going to the planting site. And you'll be seeing what is being carried out.
Montgomery: We're at Kibale National Park, in the lush foothills of the mist-covered Rwenzori Mountains. Ranger Wilfred Chemutai manages between 300 and 500 workers on a vast tree plantation.
Ranger Wilfred: This seedling is right now the height of 30 centimeters. We put in a basket and carry them to the field, to the planting site.
The worker comes with a seedling, he puts it down and then he covers it with the soil. So from this seedling now we are going to measure 5 meters spacing. And then we plant another tree.
Montgomery: It turns out that Tendris, the company offering the green credit card, doesn't actually plant trees. Instead, it buys credits for newly-planted trees from a middleman, a Dutch foundation named Face. The Face Foundation, in turn, is paying the Uganda Wildlife Authority to plant 86,000 acres of trees. Sam Mwanda directs field operations for the Wildlife Authority.
Sam Mwanda: Tendris commits funds for carbon offset which it sends through Face to Uganda Wildlife Authority. Uganda plants the trees that get the carbon from the atmosphere. And as it grows, we are all able to, you know, save the world, so to say.
Montgomery: So far, the Uganda Wildlife Authority has planted about 20,000 acres with indigenous trees - thanks to offset projects like Tendris's GreenCard.
[Cutting tall grasses]
Ranger Wilfred: What is being carried out here now is the cutting of elephant grass, because it is a weed.
Montgomery: Workers care for the saplings for six months. Sam Mwanda says that in addition to sucking CO2 from the atmosphere, the planting is good for the local eco-system.
Mwanda: Advantages of tree planting are many. You are helping to improve the conditions of this park. Elephants and buffaloes, they have now reappeared.
Montgomery: The local wildlife may be thriving here, but the human population is not. During the bloody reign of Idi Amin, villagers took refuge and began farming in two areas, which later became national parks. More recently, the villagers were deemed "encroachers" and evicted by government troops. It's here that trees are being planted for carbon credits. Sam Mwanda:
Mwanda: Both Kibali and Mount Elgon had been encroached, where local people get in, clear the land, plant their crops. They have now been removed. And we are trying to have the forest come back to as natural a process as possible. And that's why we are planting there.
Montgomery: At a village about a mile from the Kibale tree plantation, we spoke with locals about what happened.
Villager #1: (Translated) I was in Kibale National Park before coming here…It was police and the military that came in and forcefully evicted us ... by a process of burning houses. ... Everything of my household was burned. ... A radio cassette, a bicycle, household effects, and even food stuffs that I had just got from my gardens was all burned down. ... They came with guns, they had guns…They beat me up. And this is part of the scar.
Montgomery: The villagers and some local environmental groups blame the Face Foundation for their plight. Sam Mwanda of the Uganda Wildlife Authority counters that the evictions were carried out before any deal was made with the Dutch group. What's more, Mwanda says jobs created by tree planting have boosted the local economy and helped the displaced villagers get land.
Mwanda: If one tried to compare their situation now and that before, you would definitely see a big leap in the standard of living. A big leap for the better.
Montgomery: The villagers dispute this. They say the tree planting money is not enough to keep a family alive. They also say the evictions crowded villagers onto small parcels of land, poorly suited for farming. So instead of growing their own crops, locals work as tree planters in the Park.
Villager #1 (Translated) We had been promised land before being evicted, but after being evicted, there was as good as no land that had been promised.
Villager #2 (Translated) When I was working for Face it was as a result of desperation. Because I'd been chased away from my own place where I was my self boss. So I didn't have an option but to work for Face.
Timothy Byakola: You think that, "Oh, this is such a nice thing that somebody is putting across money to plant trees. Why would such a thing look bad?"
Montgomery: Timothy Byakola is an activist with the Ugandan Climate and Development Initiatives. He supports the villagers' claims.
Byakola: So what the issue really is now is that with the emergence of this carbon trading, tree planting now in Uganda, it is business.
Montgomery: A bad business for the workers, says Byakola. What's more, these trees may not live long enough to do their job. The Face foundation sells its carbon credits when the trees are only one year old. But the trees won't mature for decades. So, in a way, today's carbon offset is borrowing from tomorrow's air. And many of today's trees may be dead before they can do any good. Timothy Byakola says angry villagers have re-entered the Park to cut and burn the new trees in protest.
Byakola: If you are going to plant your trees in an area where the local communities are disenfranchised, you'll have those trees cut down, which is what has actually happened.
Montgomery: And there's a broader debate about whether trees actually work to reduce carbon at all. Dan Lashof is a climate scientist at the National Resources Defense Council. He's also advising a rival green credit card company. Lashof says trees are only effective in holding carbon while they're standing. When they die, the process of locking in -- or sequestering -- the carbon is reversed.
Dan Lashof: Whatever material's on the ground will be decomposed by bugs and microbes and fungus and that would take all the carbon dioxide that over a period of years was taken out of the atmosphere and put it back in the atmosphere very quickly. And at the end of the day you haven't accomplished what you were planning to accomplish.
Montgomery: Other groups in the carbon trade disagree. They say clearing forest land for development is a huge contributor to global warming. Laurie Wayburn directs the Pacific Forest Trust. Her group sells carbon credits from a 2,000 acre redwood forest. Its customers include House Speaker Nancy Pelosi and California governor Arnold Schwarzenegger. Wayburn says giving customers an incentive to preserve trees is a valid way to store carbon.
Laurie Wayburn: Forest loss, forest depletion is 45, 50 percent of the problem of excess CO2 in the atmosphere. That's why it's so critical to work with forests to pull that CO2 out of the atmosphere.
Lashof: The challenge for consumers right now is that there really isn't a widely accepted and transparent standard for what qualifies as a good offset. So right now it's a bit of buyer beware.
Montgomery: Lashof and Wayburn agree that the U.S. government should step in to regulate the carbon market. After our visit to Uganda, we asked Warner Phillips of the Dutch credit card company about the controversy over trees.
Phillips: If things happened that were not anticipated, then that needs to be fixed. We've been the first in the world to go out there and do this credit card, which means that we have an extra responsibility because if we screw it up for ourselves, we're actually going to screw it up for the competition as well.
Montgomery: Phillips says Tendris is re-evaluating its work with Face, the Dutch carbon broker. But the company remains committed to offering carbon offsets to consumers. In fact, Tendris has big plans for global growth.
[Outside Warner's new house]
Phillips: Kees, it's the movers! (chuckle) Yes the movers.
Montgomery: Tendris is eyeing California as the next hot market for its climate-saving product. Recently, Warner Phillips moved with his wife and two children to San Francisco to prepare for the U.S. launch of Tendris's green credit card - which they are renaming "ClimaCount."
Phillips: It's a big truck huh? Big Truck.
Phillips: It has all our stuff in there.
Phillips: That's all our stuff. We packed everything. We sold our house in Holland. Burning bridges as we go.
[Speaks in Dutch to Kees]
We hope we're here for a while. Otherwise my wife's going to kill me. We're expecting the baby in about a month's time.
Kees: (Running. Chattering.)
Phillips: Everybody that we've been talking to about this green card concept-everybody says: "Sign me up, I love it. Sign me up. Now."
Montgomery: However, with all the uncertainty, Phillips says Tendris' U.S. credit card will move away from planting trees.
Phillips: Trees are not going to solve the problem. What is going to solve the problem is if we get a lot smarter about how to reduce carbon emissions in the earth's atmosphere which always reminds us this Dutch saying we have, which is: it's better to close the tap than mopping with the tap open (Says it in Dutch) Which is, you know you're treating the symptoms of the problem and you're not getting to the core of the problem.
Caroline? I lost my wife already.
Caroline: Oh, I know this one. It's a big trunk.
Caroline: Wow, a big fire truck and Winnie the Pooh. It's nice to see your own stuff.
Smith: I'm Stephen Smith. You're listening to Green Rush, an American RadioWorks documentary. As the Dutch company, Tendris, moves into the U.S. market, it's running into competition from other companies also wanting to make money on the fight against climate change. Earlier in our program we met a group of cooking up a brand name for their green credit card. Producer Michael Montgomery catches up with them.
Montgomery: The first order of business is to nail down a name from a list developed by branding company, Lexicon. Chris Erikson, Michel Gelobter and Carter Brooks discuss their options.
Erikson: So, we're going to try and settle our naming.
Gelobter: Are we really gonna do that now? This is the drama part of the radio show.
Erikson: Lexicon gave us, actually, 43 names. And in their descriptive names, they have "Green 2.0," "Green Side," "Triple Green," "Green Silk" - oooh, smooth. In the more corporate-sounding names, they had "Verion," "Seven Across," "Change Point" like tipping point. Then they had sort of zippy names like "Zift" and "Wix" and "Xeel" with an X. We had names like "Biome" and "Capital G" and "Cooler."
Montgomery: The name they gravitate to is "Cooler."
Erikson: We could call our products "Cooler," like "the Cooler Card," "Cooler Shopping."
Carter: Yeah, if we start figuring out some of those plays on Cooler.
Erikson: Be cool.
Gelobter: Cooler inside.
Erikson: Be a climate cooler. I think it all works.
Gelobter: So we go with "Cooler" in that case (whisper) I want there to be a little more tension here.
Carter: Okay, man. I'm fighting for "Greenside."
Erikson: Yeah! I want "Green Rewards!"
Montgomery: Cooler is learning from the mistakes of others. The company won't rely on tree planting for offsets. Instead, it's looking for ways to stop greenhouse gases from being released in the first place - like solar cookers in India and energy conservation projects in the U.S. We caught up with Michel Gelobter and the Cooler team in the Midwest, as they investigated a creative approach to saving the planet:
Gelobter: We're right outside of Hilbert, Wisconsin, at the Holsum Dairy Farm. And we're doing what's called in business "due diligence," checking out one of our major suppliers for greenhouse gas offsets.
Ken Buelow: My name is Ken Buelow and we dairy here in Northeastern Wisconsin. I dairy about, oh, five miles from where I dairied with my grandfather.
Montgomery: Holsum Dairy's high tech operation does not look anything like the farm Buelow's grandfather ran. In a huge barn, Buelow shows Michel Gelobter a rotating, circular platform that operates around the clock, milking 3,000 cows three times a day. It looks like a giant cow merry-go-around.
Buelow: What happens is we have a flow meter in the line where the milk's going through. And so it will shut the vacuum off and then it'll pull that unit off and…
Gelobter: Amazing, amazing.
Buelow: You think it's amazing. I think it's just another day.
Montgomery: Holsum Dairies is doing more than just producing milk. Cow manure creates methane - a potent greenhouse gas. And Ken Buelow's dairy is capturing and storing that methane from the cow manure. Preventing the methane's release into the atmosphere earns the farm carbon credits. The farm then sells those credits on the booming global carbon market, through an offset company called Driving Green.
Duane Toenges: If you look at a dairy farm, there is just a lot of manure. And so it creates the opportunity to capture that methane.
Montgomery: Duane Toenges is U.S. manager for Driving Green.
Toenges: The dairy we are visiting here today, at one time, the manure would have went into a storage lagoon and methane is then emitted into the atmosphere. What Driving Green does is we work with people to help them capture that methane. Because of the fact we can document that that methane was not emitted, we can sell it as an offset.
Montgomery: Buelow leads Michel Gelobter to the feed barn. It runs the length of four football fields. Here cows are busily chewing their cud to produce milk - and manure.
Buelow: We'll scrape all our manure with a skid steer to the center of these barns. And then we have gravity flow from here to the digester.
Gelobter: Okay, all right. Is that hole in the ground here?
Buelow: You can see the grates inside the free stalls? And we'll just push our manure down into that.
Gelobter: Hear the poop falling back there? Can you catch that up on the radio now? (Laugh) It's not so sweet.
Montgomery: The manure lands in a digester which speeds up the natural process in which bacteria decomposes manure and excretes methane. But here, the methane is captured rather than being released into the air. Then Holsum Dairies takes its environmental practices one step further by using the methane as fuel for an on-site electrical generator.
Buelow: Our electricity goes out to the grid. It goes out to the power lines that feed electricity to all the homes and other farms in our area. So we sell it all back to the utility.
Montgomery: The next stop is the highlight of the tour.
Buelow: This is our calving area. These babies were born probably in the last hour. We'll average about 400 calves a month.
Carter: That's like 10 a day!
Buelow/Carter: Yeah, 10 to 12 a day.
Buelow: Busy place. And those 4 are going to calve in the next hour. You can see legs coming out of that one cow there.
Montgomery: A wet and steamy calf emerges on cue - ready to begin anew the cycle of milk and manure. In the calving barn Buelow points out that the dried up solids from the processed manure are used for the cow's bedding.
Buelow: This was manure 20 days ago, before it went through the digester and separators.
Gelobter: Oh my God. It smells just like dirt.
Buelow: We have gardeners that will come and put it right into their garden. And we actually sell it to about seven other dairies for bedding as well.
Gelobter: So you're basically making fuel off of it. And then using the tough stuff that's still left to make stuff that you can build.
Toenges: He's actually recycling the manure.
Gelobter: Right, right.
Montgomery: Holsum Dairies turns manure into energy, animal bedding and also fertilizer - creating a closed loop ecosystem. This is important to Michel Gelobter because Cooler's success depends on trust - trust that the operation doesn't have a social down-side.
Gelobter: The folks who are going to be very interested in joining the Cooler system and making their purchases climate-neutral are going to be people who care about a lot of other things as well. They're going to care about the runoff to rivers, the way animals are treated.
Montgomery: But back at the dairy's office, farmer Ken Buelow reveals a possible snag in this offset operation. It turns out that his original motivation for capturing methane from manure had nothing to do with selling carbon credits.
Buelow: The energy... That's what makes it economical -- makes us allowed to do it -- is generation of electrical power. So it was something we decided we needed to do before we realized we'd be able to sell carbon credits, per se.
Montgomery: But a key question for the carbon market is whether an offset like this is providing an additional benefit to the environment. Climate Scientist and Cooler advisor Dan Lashof says it's very tempting to get paid for something you were going to do anyway.
Lashof: For example, improving the energy efficiency in a factory, might be a good thing and that's an activity that helps the climate. But if the company was going to do that with or without the offset, then you haven't gotten an additional benefit from investing in the offset and therefore it can't really compensate for the emissions that you were trying to offset.
Montgomery: Duane Toenges, the broker who's paying the dairy -- and hoping to sell the carbon credits to Cooler -- says methane recapture is a legitimate offset.
Toenges: If this dairy didn't capture methane, there would be methane going in the atmosphere. So, you know, it's above and beyond any normal management practice is how it meets the additionality test.
Montgomery: Still, we're left with the question of whether so-called "green" credit card companies are simply encouraging people to continue to consume - guilt-free. Michel Gelobter of Cooler says the benefits outweigh the risks.
Gelobter: We're not encouraging people to spend more. But at the end of the day, people still have to buy things. I mean, there's nothing you spend money on that doesn't emit greenhouse gases - from life insurance to a cup of tea. So to say that by giving people a way to shop that reduces that impact would be a bad thing strikes me to be burying our head in the sand.
Montgomery: Climate scientist Dan Lashof:
Lashof: There is a risk that some people could look at offsets as a way to get off the hook without changing their behavior. But hopefully in addition to buying offsets it will encourage them to say, "Well, I'm going to look to reduce my emissions directly by making sure that the next car I buy is much more efficient than the one I'm replacing."
Montgomery: So is offset dealer Duane Toenges ready to trade in his luxury Lexus for an energy-saving Prius?
Toenges: Not myself. [chuckle] I'm one of these people that - first off, I'm going to ride in comfort. But at least I can offset the emissions from my car. Now, granted, we need to change our lifestyles a little bit, but there's only so much lifestyle change you can make.
Smith: That may well be the problem. Some researchers believe it will take a lot of lifestyle change to deal with global warming. Carbon offsets could be may be part of the solution, but there's a growing push for universal standards to insure that offsets actually do help the environment. Both green credit cards -- Cooler and ClimaCount -- should be available to American shoppers soon. These companies are riding a new wave of consumer demand for products that are good for the earth. I'm Stephen Smith. You're listening to Green Rush, an American RadioWorks documentary.
To see a Tendris Visa card and statement, and to see photos of tree-planting operations in Uganda - visit our Web site, AmericanRadioWorks.org.
Green Rush is supported in part by the Kendeda Sustainability Fund of the Tides Foundation and the Comer Science and Education Foundation. Major funding for American RadioWorks comes from the Corporation for Public Broadcasting. Our program continues in just a moment from American Public Media.
Smith: In 1847, a remote hamlet in northern California was renamed San Francisco. Soon after, prospectors discovered gold in the nearby Sierra Nevada foothills. A mighty gold rush was on as waves of men and machines surged into the region to carve riches out of the Earth. Today's there's a different kind of frenzy underway. Think of this one as a green rush, and, like the gold rush, legions of the hopeful are lighting out for northern California to stake a claim.
Smith: If the green rush has a boomtown, maybe it's also here, in San Francisco, at the annual CleanTech Venture Conference. It's a gathering of alternative technology companies and investors. Each year the CleanTech rendezvous gets bigger - packing a vast meeting hall with investors who control more than a trillion dollars. Chasing these deep-pocketed funders are eager entrepreneurs.
Exhibitors: (Montage of voices)
My company is Global ID Group.
I'm with Best Energies
I'm with Audura Technologies.
Smith: And they're here for one reason:
Exhibitors: (Montage of voices)
We're raising capital.
There's a lot of venture capitalists here.
We're looking for some capital to build our first manufacturing plant here in the United States.
We need to raise money to make this a mass market opportunity.
We have brains, we have technology and if we add money, we will make money and we will clean the environment in ways that haven't been done before.
Smith: The investors are courting "venture capitalists" - people who bankroll companies with big risks in the hope of making a big profit in return.
James Horn: I think it's pretty clear that we're entering a new world.
Smith: James Horn, is with a venture capital firm called "Noventi," which focuses on clean-tech start-up companies.
Horn: I mean it's a $6 trillion market, the energy business. It's such a vast market that there is really is sufficient potential to justify the investments that are going into the market right now. And again, we are very early on in this process.
Smith: A process some hope will help save the planet from catastrophic climate change. For the world to break its addiction to fuels that suffocate our skies -- it's argued -- the profit motive is an essential weapon. In the 1980s and 90s, venture capitalists were the risk-taking, financial powerhouse behind the Internet boom. Now they see green tech as the next big opportunity. And as in the Internet era, new companies are popping up in every garage - all looking for investors to back them. Producer Claire Schoen gives us a rare look inside one small start-up company with a secret technology it hopes will strike a vein in the green rush.
Claire Schoen: Guido Radaelli's rented house in the Berkeley Hills enjoys sweeping vistas of the San Francisco Bay. But the sparse furnishings hint at his status as a recent grad student. One peculiar addition to the decor is found in a loft overlooking the living room.
Guido Radealli: So we go upstairs where we grow algae. We are actually cultivating algae in closed fish tanks.
Schoen: Radaelli leads us to four ordinary fish tanks filled with a thin, light green liquid. When we first met last fall, these four tanks were the entire laboratories for Aurora BioFuels. Aurora is the brainchild of three guys fresh out of grad school at the University of California at Berkeley. Matt Caspari is an M.B.A. Bert Vic is a Ph.D. Candidate in bio-chemistry and Guido Radaelli studied chemical engineering and business. The three came together at school over a revolutionary idea: algae as a source for fuel.
Schoen: So, uh, it looks like a bunch of green water to me.
Bert Vic: It's a microorganism; it's a micro-algae, so it's not like seaweed or something like that - or kelp. You don't really see anything in the water except the color of the water changing. You can see them under a microscope.
Matt Caspari: Uh, you need to harvest the algae out of that water. And then we'll actually extract oil from it. So, you can get the algae out of the water and you can get the oil out of the algae. We've done it. We've done it. So, we know that much at least (chuckle). That's been proven.
Schoen: Helping fuel the world with humble algae oil is not as farfetched as it may sound. A hundred years ago, some of the first diesel engines ran on peanut oil. And today, fuel made from soy and corn is a booming business. But those crops have a problem - they depend on valuable farmland and precious fresh water. Algae, on the other hand, thrives in wastewater. All it needs to grow is sunlight and air.
Vic: The actual growing of algae is not anything that impressive. It's kinda like -- its just pond scum, really,
Caspari: Tell a little bit more about your love of the algae.
Vic: It's a love/hate relationship.
Radealli: It's a challenging relationship because I have to come here every morning, every night, take samples, check the pH, check the temperature, check the nutrient level and keep them growing as you do with your flowers.
Caspari: It's like his child.
Radealli: Yeah, it's true.
Vic: They are linked telekinetically.
Vic: The salvation of the world is in those tanks, right there. It may not look impressive, but it is.
Schoen: The Aurora team claims to have developed a technology that dramatically boosts algae's oil producing capacity to 100 times that of soy and other crops. They call it "super algae." It's a very profitable calculation - especially considering the amount of diesel burned by American trucks and tractors.
Caspari: We consume 60 billion gallons of diesel fuel every year, so if our technology does what we are claiming it can do, it's a major opportunity and it's attractive for venture capital investors and we decided to start thinking about, "Could there be a business for this?"
Vic: And I think we feel that this is the type of business that has a double bottom line, not only a very healthy, from a financial standpoint, but also from a social and environmental point of view as well.
Schoen: So, just add money?
Caspari: The odds aren't with you. The odds aren't with you to get venture financing. Once you get venture financing, the odds aren't with you that it will be, you know, at all successful. And even the successful ones, you know, you hear the company's sold for 100 million dollars. Well, how much do the entrepreneurs really own?
Vic: Founders only get a small portion.
Caspari: Not a lot. You know, it's kind of crazy, but you can't do this for the money. Go be an investment banker and you're much more likely to make good money. It just can't be the motivating factor.
Vic: You have to enjoy the process.
Schoen: There's a lot of money flowing into alternative energy - $70 billion in 2006. But as with any boom there's also fierce competition. Aurora needs to get its name up in lights so investors take notice. Six months after the company's founding, Aurora enters the Intel Challenge, the world cup of business plan competitions. We're at Berkeley's Haas School of Business where this year's Challenge draws competitors from around the globe.
Coordinator 1: So, in there are their name tags.
Coordinator 2: Yeah, Egypt, Jordan, no?
Coordinator 1: And then um, hello!
Competitor: Russians! Russians are coming. Great to see you at last.
Coordinator 1: Yes!
Schoen: Aurora is competing.
Vic: I think we'll win. [laughter] We have to go in with confidence.
Coordinator: Marvelous. Lunch is right around the corner.
Caspari: There's a prize of $25,000 and that helps. But, um, a strong lead with a venture capitalist is probably more valuable than that.
Schoen: Investors from Silicon Valley's leading venture capital firms are here to judge the competition - and also to scout out possible deals. One of the judges today is Marianne Wu of Mohr Davidow Ventures. Wu has already been talking about a deal with Aurora.
Wu: We have certainly had conversations with Aurora. Energy is the fundamental driver behind daily activity, behind industrial growth, behind our commercial infrastructure.
Schoen: It's time for Aurora to pitch its project to Wu and the other judges. The team moves from the bustling hallway to a small, wood-paneled meeting room.
Radealli: We are Aurora BioFuels. And we are doing something magic. We are turning wastewater into biodiesel using our proprietary super-algae.
Caspari: The problem with biodiesel today is that it mostly comes from agricultural crops. Agricultural crops are expensive. They have better uses than being burned for fuel. Our method allows us to produce vast quantities of bio-oil cheaply.
Schoen: The pitch is smooth - the guys give have been working on it for months.
Caspari: So that's really what we're doing in a nutshell.
[Questions overlapping each other]
Judge #1: What's your biggest fear about his business?
Judge #2: Why has the traditional algae method not taken off?
Judge #1: Is there a flanking technology out there that can trump you guys?
Schoen: The Aurora team explains to the judges how biofuels, made from plants like algae, fight global warming. While burning fossil fuels releases CO2 that was trapped underground for millennia, the CO2 released from burning biodiesel was just pulled out of the air as the plants grew. So it's simply recycling the same gasses over and over.
Judges: Nice job. Thank you.
Schoen: The idea of getting fuel from aquatic plants has existed for decades. But it seems to take an emergency to push America away from petroleum. A generation ago, the United States was facing another energy crisis, brought on by the OPEC oil embargo.
President Carter: The energy crisis is real. It is worldwide. It is a clear and present danger to our nation.
Schoen: That's President Jimmy Carter in 1979. In a major speech of his presidency, Carter outlined ambitious plans to cut oil imports and boost domestic production and energy conservation. He also charted a third path - today we call it "green energy."
President Carter: To give us energy security, I am asking for the most massive peacetime commitment of funds and resources in our nation's history to develop America's own alternative sources of fuel.
Schoen: President Carter invested millions in new government research centers like NREL, the National Renewable Energy Laboratories near Denver. The initiative was strong while oil prices stayed high. But in the early 1990's the cost of crude plunged. So did interest in alternative fuels. Still, government scientists were intrigued by algae. They marveled at its ability to produce up to half its weight in oil and its adaptability as a possible fuel source.
Al Darzins: So you can take this oil and you can actually make a biodiesel out of it, or alternatively you can give it to a petroleum refiner and they can make a so-called green diesel or they can make green gasoline as well.
Schoen: That's Al Darzins, a senior research scientist at NREL. Darzins says algae is so good at producing oil that, in theory, it could satisfy America's demand for jet fuel on just one percent of the land that it would take to do the same thing with soy. But in practice, Darzins says algae faces the same challenge that sunk other alternative energy schemes - cost.
Darzins: Can you make alagal oil today? You probably can. Can you make it cost effectively? Probably not with the strains that they currently have.
Schoen: So today, NREL is hoping to create new algae strains through genetic engineering. Matt Caspari says he'll be watching closely - a lot of Aurora's work is based on the government's pioneering research.
Caspari: The research that was done by NREL was critical at the early stages of allowing us to understand, kind of what had been done, what the challenges were, you know, engineering issues. Things that would take a lot of time and experiments to work out.
Schoen: Along with the tremendous advancements made in bioengineering and surging oil prices, today's renewed interest in alternative fuels is driven by a third factor - global warming.
Back at Berkeley, it's evening. The Aurora team is sitting in a packed auditorium, dressed in fashionable black suits.
Engel: Hi Everyone. Welcome to Berkeley.
Caspari: So we're at the finals of the Intel Berkeley Business Plan Competition. And very shortly they're going to be announcing the winners of this competition. We're excited, a little nervous, it should be fun.
Woman: And first place, drum roll.
Engel: Aurora BioFuels. Bravo!
Vic: We won. It was great.
Caspari: They gave us a very big check.
Vic: Physically very large.
Caspari: Something you see out of the movies.
Vic: Four feet long.
Man: Are you doing A round, B round what are you looking for?
Schoen: After the victory at the Intel Challenge, investors got a lot more interested in Aurora - including Noventi's James Horn.
James Horn: Winning the competition clearly means a lot about the viability of their idea. So it kind of started the ball rolling for us.
Schoen: Investors were circling. But weeks later Guido Radaelli and the rest of the Aurora team were still working from a small office in the basement of a local hotel.
Caspari: A couple of windows, but you don't get a whole lot of light. Kind of a cubicle environment.
Caspari: It's glorious.
Vic: It's glorious. It's kind of the garage-type mentality down here.
Caspari: The idea is to not have it too nice so you go out and get a real office with some real money, but in the meantime it.
Vic: It serves its purpose.
Schoen: Matt Caspari is spending most of his time now "doing meetings" with potential investors.
Caspari: We've luckily been in touch with quite a few new venture capital firms over the last few days that have, I guess, heard about our winning this recent prize, so. If they see something's going to come together, they circle.
Vic: Like sharks.
Schoen: Except the sharks aren't biting. What's more, competition is moving in on Aurora's territory. A number of other small California start-ups are working on algae-to-biofuel. Oil giant British Petroleum is investing 500 million dollars to build an alternative energy research center on the nearby Berkeley campus. Elsewhere, Boeing, Virgin Atlantic and the Department of Defense are also studying ways to refine oil from algae. Daunting competition for three guys and their fish tanks.
Caspari: I'm not just worried about little start-ups. I'm worried about big companies too. Because they can pour potentially as much or more money into an idea and put a lot of smart people to work on it. And the one advantage you have over a big company as small entrepreneurial start-up is you can move really fast and make decisions really quickly. So, I feel a huge pressure, um, to get results.
Schoen: Today Matt Caspari and Bert Vic are getting a call from yet another potential funder.
Caspari: We're waiting for a call from a venture capitalist. Um, he's invested in pretty high profile alternative energy companies. So, we're taking this call pretty seriously.
Vic: Does he have the plan?
Caspari: I did send him the plan. I'm pretty sure he's calling me but if I don't get a call in the next few minutes I'm going to check my email and confirm that.
Caspari: So that seems to be the call. Hello? It's Matt Caspari. How are you?
Venture Capitalist: Good. So we had a call, yeah?
Caspari: Yes. I guess we can tell you a bit about the history of the company and...
Venture Capitalist: (Interrupts) Uh, what I'm most interested in is - well, tell me about how the technology works.
Vic: The, the first piece of technology that we'll be working with enables us to control…
Caspari: I don't see a whole lot of benefit in telling them a lot about what we're doing on the biotech side and our plans. But it's hard to avoid it. Cause, you've got to tell enough detail to differentiate yourself from the other companies that are out there. It's tricky. We don't know who else he's talking to.
[Back to conversation]
Caspari: And using this technology, it will allow us to...
Venture Capitalist: I'm sorry to cut you off here. I just looked at the clock. I need to run of here to another appointment. But to be honest, you guys are probably a little early stage for us.
Venture Capitalist: But if certain things came together we'd be interested in looking at it.
Venture Capitalist: Thanks so much.
Capari: Thank you. Take care.
Venture Capitalist: Bye bye
[hangs up the phone]
Caspari: So, what do you think, Bert?
Vic: Well, first meetings are always difficult to get a read on people.
Caspari: You know, on the engineering side, he was trying to dig but we didn't give any real detail. I mean we didn't say....
Vic: He was just taking down the information.
Caspari: You don't know. He could have said, "If you guys are doing a deal, I'm in."
Vic: Yeah, I'm hungry.
Schoen: That investor turned Aurora down. Matt decided it was time to get help from an expert. So they turned to Jim Long, a veteran Silicon Valley deal-maker.
Jim Long: This, I think, really comes down to just finding the right investors.
Schoen: As Long explained it, investors run in packs, and Aurora would need to get a contract - or term sheet - with one investor to get others to follow.
Long: You know once you have the term sheet you can use that to go fishing a little bit more. It's like, "Gee whiz, we've got a term sheet. And the lemmings go (makes explosive-like noise). Right?
Caspari: Which is another reason why I said, "Let's get the term sheet and put pressure on them and ..."
Long: It's really getting them to spend the time fast. [snaps fingers] Right? And if it's the right guys, you can really get a long ways in an hour meeting - it's amazing. I think you're going to get this funded. You know, as long as you're not scared of the roller coaster of the startup, right? Which is buckle your seatbelt time and all that.
Schoen: Long's pep-talk energizes the team. Then, after nearly a year of planning, meeting and fundraising, Aurora nets its first investor.
Caspari: You know these guys I think.
Horn: Hello, good to see you.
Schoen: It's James Horn of Noventi. Thanks to Horn's investment, Aurora has moved to spacious, glass enclosed offices in an industrial park near Oakland. Matt Caspari invited Horn to check out their new digs.
Caspari: And as you come out here you can see we've got chemicals coming in every day.
Vic: A lot of the basic stuff that we'll need to conduct the science, like stir plates, stuff to weigh.
Horn: Aurora was very raw company at the first conversation. It was effectively three guys with a plan on how to create a new energy supply for a growing world. But it was not a stretch to think that we could adapt algae to produce biodiesel. So we made the investment. And it may take longer than we expect, but we are risk-takers by nature and we believe there is a chance to be successful here.
Schoen: How do investors measure success in the emerging green economy? It's clearly about making a profit. But for James Horn saving the world from global warming is a welcome benefit.
Horn: Using algae is effectively carbon neutral, it's not competing for food stocks, it's not competing for scarce water. In many ways it is kind of the ultimate solution for powering our cars. You know, 18 months ago, I never thought I would be investing in an algae company.
Schoen: Horn says Aurora's success depends on its secret, oil-boosting technology developed at Berkeley. Government scientist Al Darzins cautions that Aurora's claims are impressive, but...
Darzins: Have they actually proven that? I suspect it's theoretical at this point and maybe it's some small-scale lab stuff that they've done and they extrapolate and say, "Well, we should be able to produce..." But again, let's take that organism out of the lab and let's see what it does in the environment.
Schoen: Matt Caspari and James Horn say scaling up lab experiments in large, outdoor algae ponds is their biggest challenge.
Caspari: You're talking over hundreds if not thousands of acres of algae growth. So it's money and time to scale that up.
Horn: They are trying to do something on a very large scale which hasn't been done before - I mean, there are a number of hurdles that we haven't even addressed yet and that we won't be able to address until we can actually test it.
Smith: Renewable energy is no longer a tale of science fiction or distant dreams. That's obvious. Just look at the billions of dollars flowing into the market to back new, earth-friendly products such as green credit cards and biofuels. Investors James Horn and Marianne Wu say intense competition in this "green" marketplace is no passing fad.
Horn: Energy is the number one driver in the world. And if we can migrate to alternative energy supplies it can be an enormous industry, both in California and worldwide.
Wu: It's a much more fundamental change that we're going through. So, it's not some little blip that it's hot today and tomorrow it's going to be some next hot thing.
Smith: The marketplace can deliver wealth, of course, but it's hardly been eco-friendly until now. One-hundred sixty years ago, the California gold rush produced riches for some people, but hardship for many others - and the gold rush wound down in just a few years. It will be up to contemporary consumers, eco-entrepreneurs and their shareholders to see that today's green rush evolves from an economic frenzy to a fundamental, planet-saving change.
I'm Stephen Smith. You've been listening to Green Rush, a documentary from American RadioWorks. Our program was produced by Claire Schoen, with Michael Montgomery and editor, Catherine Winter. We had help from Ellen Guettler, Chris Chambers and Anna Sussman. The American RadioWorks team included Ochen Kaylan, Chris Farrell, Laurie Stern, Craig Thorson, Tom Mudge, Denise Nichols, and Misha Quill. At American Public Media: Chris Kohtz and Cory Busse.
Green Rush was supported in part by the Kendeda Sustainability Fund of the Tides Foundation and the Comer Science and Education Foundation. Major funding for American RadioWorks comes from the Corporation for Public Broadcasting.
To learn more about the new generation of biofuels, visit our website, AmericanRadioWorks.org. There, you can download this and other programs and sign up for our podcast. That's at AmericanRadioWorks.org.