Addressing climate change, maintaining clean air and drinking water, and protecting our natural surroundings are primary concerns of more and more individuals around the planet, and one way to safeguard our resources is to help everyone reduce his or her environmental footprint. While cutting back on one’s own emissions is the preferred way, consumers and corporations may not have the option or the ability to completely eliminate their environmental footprint.
In recent years, a market has emerged to provide consumers and businesses with opportunities to counterbalance their greenhouse gas emissions by purchasing so-called carbon offsets, earmarked to help fund carbon-reduction projects throughout the world. The majority of the funds supposedly go to renewable-energy, energy-efficiency, or reforestation projects that lower emissions and pollution levels, but it has proved difficult to get clear and reliable information about how successful these projects are or, in some cases, whether they even exist.
Carbon Lighthouse Association enables corporations and consumers to negate their entire carbon footprint by covering the costs of purchasing and retiring the allowances that certain U.S. power plants are legally required to buy in order to emit carbon dioxide. The organization, co-founded by Brenden Millstein, MBA/MS ’10, is the nonprofit arm of Carbon Lighthouse, an energy service that assists owners of nonresidential buildings in cutting energy use and employing energy-efficiency strategies and solar installations.
Carbon Lighthouse Association provides access to trustworthy emission-reduction measures by participating in auctions held by the Regional Greenhouse Gas Initiative, a mandatory market-based regulatory program through which nine Northeast and mid-Atlantic U.S. states work to reduce emissions by the power sector. RGGI auctions off allowances authorizing the emission of 1 ton of carbon dioxide each, and the proceeds are reinvested in programs including energy efficiency, clean and renewable energy, and greenhouse gas abatement. Thanks to Carbon Lighthouse Association’s innovative model, which prevents power plants from purchasing legal emission capacity, it expects to reduce carbon emissions by 7,500 tons per year by the end of 2012.
Scientists all over the world affirm that reducing carbon emissions will help us reverse climate change, clean up our air, preserve our oceans, and more. Carbon offsets and carbon trading have been among the market-based approaches allowing people and companies to reduce their carbon footprint.
However, global carbon markets have been plagued with issues of double counting, lack of transparency, and outright fraud. The Chicago Climate Exchange, the world’s largest voluntary carbon market, shut down trading in emissions allowances in 2010; it had faced criticism from public interest and environmental advocacy groups, including the Natural Resources Defense Council, because of low emissions-reduction goals and loopholes for violators. Voluntary standards organizations have faced questions about “additionality”: That is, it’s unclear whether offsets actually result in emission-reduction measures that weren’t already planned or in place.
The Novel Idea
While working at the New York State Energy Research and Development Authority, which advances energy solutions to improve the economy and the environment, Millstein witnessed the rollout of a mandatory carbon cap-and-trade program for the power sector. Under the program, which was initiated in 2008, the nine RGGI participants set annual regional limits on emissions from larger fossil fuel-fired power plants. Emission permits, each authorizing the emission of 1 ton of carbon dioxide, are sold by the states at quarterly auctions open to all qualified parties. The total number of available allowances is capped, and power plants must possess sufficient permits to cover their emissions. Those that need more allowances than they hold must buy them from those that need fewer.
Millstein realized that NYSERDA’s customers — including office buildings and manufacturing plants executing energy-efficiency projects — could negate their entire carbon footprint. After reducing energy use as much as possible on-site, they could themselves buy carbon allowances, or so-called pollution permits. While voluntarily taking on the public “cost” of polluting, they’d be contributing through RGGI to renewable-energy and energy-efficiency projects and wiping away their remaining carbon footprint. The idea for a social enterprise to broker such purchases was born.
Carbon Lighthouse Association enables corporations and consumers to eliminate their entire carbon footprint using domestic, legally enforceable, and transparently tracked carbon allowances. The enterprise aggregates demand for carbon-reduction measures and uses that purchasing power to bid against regulated entities, buying up permits at auction. That removes those allowances from the market permanently and sends dollars toward green projects, while pushing utilities to use cleaner sources of power. By retiring the permits, Carbon Lighthouse Association effectively reduces carbon emissions in the atmosphere in a traceable way.
Furthermore, Carbon Lighthouse donates a portion of its earnings to its not-for-profit arm. So, in tandem, Carbon Lighthouse the energy service and Carbon Lighthouse Association the nonprofit provide customers and consumers who want to do the right thing with a vetted and highly affordable means of doing so.
“By using just a portion of their savings, customers can become completely carbon-free, profitably,” says Millstein. “They don’t have to worry about dubious carbon-offset brokers who may never actually deliver on their promise to reduce the carbon imprint by planting trees in foreign or difficult-to-verify places. And customers don’t have to deal with the legal and bureaucratic hassle associated with the process of entering government auctions.”
Carbon Lighthouse Association aims to take advantage of the roughly $350 million market for voluntary carbon offsets in the United States, which has grown annually by more than 30 percent over the past six years.
“Demand from the voluntary sector supports prices from $10 to $45 per ton,” Millstein says. “We’re scaling up fast enough to truly combat climate change.”
For the young, socially minded entrepreneur, that means mitigating the effects of the developed world on the developing one.
“While the United States, Europe, and China have produced most of the carbon-related emissions, the poor in other countries are paying for it. It’s good to be a part of an organization that is trying to reverse that.”
Millstein, who took hiking trips with his family in Yosemite National Park from the time he was 3 years old, started witnessing the devastating effects of pollution and climate change as a young child.
“When I started those trips, we could see clearly all the way to Mount Diablo [in the San Francisco Bay Area], a full 200 miles away,” he recalls. “By the time I was 11, the mountain had disappeared behind haze.”
Millstein developed a robust understanding of energy systems while studying physics at Harvard, working in Department of Energy labs, and working for NYSERDA, where he helped more than 275 manufacturing plants and office buildings in New York identify, execute, and fund energy-efficiency and demand-response projects.
He acquired a joint MBA from Stanford GSB and MS from Stanford University in 2010. At Stanford, he strengthened his business expertise and networks through coursework and various venture capital projects.
“I was looking to join a startup that could make customers 100 percent carbon-free for less than the cost of coal power, but I couldn’t find one — so I started my own,” Millstein says.
“I was able to talk to hundreds of companies that are now potential partners, and benefited immensely from the guidance and enthusiasm of professors and fellow students,” he observes. “Out of that, I was able to form Carbon Lighthouse with my longtime friend and colleague Raphael Rosen.
“It’s really hard to start an enterprise, but I can’t think of a better — and more fun — place to do it than Stanford.”
Brenden Millstein received an MBA from Stanford GSB and an MS from Stanford University in 2010. In 2011, he was awarded Stanford GSB’s Social Innovation Fellowship, which provides up to $180,000 in funding, along with advising and support, to graduating students who want to start a nonprofit venture that addresses a pressing social or environmental need during the year after graduation.