TerraPass, a firm started by a Wharton business class, buys renewable energy credits (RECs) in bulk from wind farmers and other green power producers. It then resells small bundles of these credits in the form of TerraPasses to car owners who want to offset pollution emitted by their automobiles.

Unlike a utility that may need RECs to fulfill state renewable energy requirements, individual TerraPass buyers cannot actually make use of their RECs; the credits purchased are effectively retired and taken out of circulation. This reduction in supply theoretically helps stimulate the production of more green energy. In a sense, TerraPass distills the environmental and economic benefits of renewables without undertaking the full risk of resource exploration and development. Chief Environmental Officer Tom Arnold says that after TerraPass has proven its concept, it will launch a wider marketing campaign. He expects investor returns to eventually reach 10 percent.

Gregg Dixon, vice president at EnerNOC, an energy conservation consultancy, saw so much opportunity in this business model that he became one of its first investors. "To be an angel investor, to be on the ground floor of something truly new, you have to have a big stomach for volatility and risk," he says. "You have to place your bets in such a fashion that you expect nothing in return, but if you get something, it’s going to be enormous. I believe we’ll be forced to wake up to the issue of global warming, forced to wake up to the need for renewable energy."

TerraPasses are priced at different levels based on the number of RECs that compensate for carbon dioxide pollution produced by a specific car model. The owner of a gas-guzzler pays more for his TerraPass than the owner of a hybrid.

Dixon himself is a customer. He buys TerraPasses for his family cars, including a fuel-hungry SUV. Dixon predicts success for the TerraPass not only because it inspires people to fight global warming, but equally important, because it stirs a fundamental human impulse.

"What is the price of a clear conscience?" he asks. "When we go to church on Sunday, people put a lot of money in that basket. I think that they do it because ultimately they want a clear conscience."
 
Photograph courtesy General Electric Company.

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