The question comes up among policy makers and those in the carbon offsetting business, and more recently among consumers: should carbon offset providers be non-profit entities, or will carbon emissions be more effectively reduced by for-profit companies who make money with every offset purchase?
After Carbon Catablog’s series of interviews from the non-profit world (see the roundup here), today we speak with Tom Arnold, founder and chief environment officer of America’s famed TerraPass.
A fan of reading blogs for news and offsetting information, Arnold says his company is motivated both by profit and the mission of saving the environment. With a money-back-guarantee on offset purchases, Arnold says, “TerraPass challenges the traditional assumption that you either work on a business that destroys the environment or work at a non profit to protect it.”
Armed with educational resources and a web presence like no other, TerraPass has a bold goal to build a world where as many people offset as recycle.
And does this world include both for-profit and not-for-profit carbon offset providers? “Yep, there’s room for both,” says Arnold, “Just like car sharing or childcare, a blend of for-profit and non-profit business models have flourished.”
Read on.
What motivated your company’s founders? Profit or the environment? What is their background?
Were we motivated by profit or the environment? Yes!
TerraPass challenges the traditional assumption that you either work on a business that destroys the environment or work at a non profit to protect it. TerraPass is about combining our passion for business with a platform that engages consumers to learn about, reduce and offset their carbon emissions.
TerraPass was founded by grad students in a class I took at the University Pennsylvania. The professor, Karl Ulrich, challenged us to create a way for individuals to buy carbon reductions to balance out their own personal emissions from driving.
In a way it was a personal thing for him because although he was a dedicated environmentalist who biked to school everyday, he wanted to do something about driving up to cabin in Vermont.
As for me, I loved what we had created, and after graduating worked to make it into a sustainable business.
In running your business, how do you strike a balance between achieving environmental goals, and making a profit for your shareholders?
Our goal is to eventually do both.
On the first, we’re doing better than we expected. In 2007, over half a million people came to TerraPass.com to calculate their carbon footprint and read about ways to lower it.
Well over 100,000 units of TerraPasses have been sold, a reduction of over 400,000 tons. We also do a nice trade in energy reducing gadgets, like the top selling smart strip, which helps you manage standby power or the Kill-A–Watt, which helps you measure how much juice each of your appliances is using.
On the second goal, let me just say we’re lucky to have patient investors that are willing to provide capital to enable us to operate at a loss as we invest in the market’s growth.
Who is your competition? (A few names)
There are many great companies and organizations around the world that provide similar services to TerraPass and we enjoy their help in building a robust market.
They aren’t really the competition though; the thing we fight hardest against each day is inaction. This is very early in the market, and we’re working to build a world where as many people offset as recycle – about 35% nationwide.
Clearly it’s going to take the whole industry, and lots of different approaches to get to that kind of adoption.
The voluntary carbon market is experiencing a lot of growth, but there is also an increasing amount of competition. From your sense of the marketplace, do you think there is room for more players, or do you expect consolidation?
I think consumers will have plenty of choice for the foreseeable future. There’s a big need for educating consumers, that’s what makes a service like Carbon Catalog valuable.
Your company invests a lot of money in advertising. Obviously this is a strategic move, but does advertising have educational value as well? Please explain?
Thankfully a lot of the best ads encourage people to calculate their emissions – it’s good for us, and ultimately good for awareness, even if they don’t buy an offset.
Considering the additional tax advantages that non-profit providers can give their customers, do you believe you can compete in the long term?
Yep, there’s room for both. Just like car sharing or childcare, a blend of for-profit and non-profit business models have flourished.
What are the most attractive benefits you offer your clients?
TerraPass is a place you can come to fight climate change. On one site you can use the industry’s best carbon calculators, get conservation tips and climate change news, buy a selection of energy savings products, and get high quality domestic offsets.
We’re proud of our customer service – calls and emails get returned in one day, and we provide a money back guarantee.
On the offset front, we really speak to Americans that want to support domestic clean energy offsets that are third party verified and happen in the same year you buy them.
We’re also proud to have the first entity-wide verification report, so that you know that even our contracts and purchases are checked by an outside auditor. If you’re really into offsets, we even offer a public comment period on new projects so you can see what is coming into the portfolio.
For those that like to buy while flying, our partnership with Expedia makes per flight offsetting easy. We also have a partnership with Enterprise, Alamo and National rent a car for rental car offset.
What do you think motivates your corporate customers to voluntarily buy carbon offsets? Are their customers demanding it?
About 95% of our business in 2007 was from individuals. We’re starting to see some interest from smaller businesses. For them, I think it’s much more about “living your values” than an explicit customer demand.
For most TerraPass corporate customers, offsets are just one part of a broader sustainability effort.
What is your company’s favorite offset project? Why?
One that is fun is the Scenic View Dairy in Fennville MI – a digester is used to create energy from the manure’s methane emissions (and destroy the harmful methane).
It’s the first digester in Michigan and the first digester in the US to both generate electricity and insert biogas into the local pipeline.
I like this project shows how diaries can both reduce emissions and be part of our energy solution. The picture (above) is me standing outside the manure mixing pit at Scenic View.
Michigan is cold in January!
How do you feel about possible stringent cap-and-trade regulations, or a carbon tax? Would it affect your business?
I’d run around in the street celebrating either.
We need some serious policy response to the climate crisis. We believe that there will always be folks that want to do more than their share, and that TerraPass will continue to exist even after regulation.
How important will climate change be for US voters in the upcoming election?
Voters should pay attention to climate in every election, and this one is no exception. Make sure your candidates, especially local senators and congressmen, are clear on their position.
This is low today, and I’m hopeful this will get bigger, but it’s likely to be framed in terms of larger energy issues.
One of the oft-cited reasons for being a company is the ability to raise money from investors. Has your company raised any funds, and if so, can you give some indication of how much, and from which sources?
Yep, when we started TerraPass we asked all the major non profits for counsel on whether to form as a non profit or a for-profit. They advised a for profit structure for this reason.
We’ve raised a few million dollars from investors in California and Washington and it has allowed us to make the major investments needed to offer the highest quality offsets.
Most indicators suggest we’re at the start of a recession, or at the very least a slowdown in growth. How do you think this will affect the carbon business in the US? Are you seeing any changes already?
Again, we’re aiming for a recycling sized market, so while I think there will be some blips along the way, we’re in it for the long haul. However, we are seeing this tighten credit terms for farmers, so carbon offsets are even more important to get these projects going.
Some companies invest directly in carbon offset projects, without using the services of a provider such as yourselves. What value does your company provide, in its role as an intermediary?
Most of the value we provide is screening out inappropriate projects, making sure the credits meet the highest third party standards, and then helping connect consumer demand with those projects.
Does your organization have an environmental hero or role model? If so, who?
Our role models are as diverse as the organization, but we’ve had a great time collaborating with Ed Begley Jr. on his show, book, and events.
Ed and his wife Rachelle have really opened up the green movement and made it accessible to Americans – the contrast in their relationship helps show that sustainability is a personal journey.
What is your favorite source of news? On the environment in general and on offsetting specifically?
We read prolifically in the office, both for the TerraPass blog and for our work. I’d have to say personally that most of my news consumption is from blogs.
We noticed on your website that a customer can get a “refund” on their purchase. A refund on a carbon offset? How does that work?
It’s just a simple commitment to customer satisfaction. If you’re not satisfied, for any reason, just give us a call and we’ll refund the money.
You get it at a retail shop, why can’t you get it for environmental services?
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Thank you Tom!
Researchers, journalists and the curious can peruse Carbon Catablog’s entire interview series through the following links:
::Not To Profit: Canada’s Offsetters
::Not To Profit: France’s Action Carbone