Brenden Millstein
MBA and MS '10
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The Problem |
Scientists all over the world are affirming that reducing carbon emissions will help us reverse climate change, clean up our air, preserve our oceans, and more. Carbon offsets have been one market-based approach to enable people to cost-effectively reduce their carbon footprint. In theory, if consumers are willing to put a price on carbon, competitive markets would find the least expensive way to create carbon reductions and then sell them to consumers, enabling the most cost-effective carbon reductions to occur first and be driven by competitive forces. In practice, 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, collapsed in 2010 under pressure from groups like the Environmental Defense Fund and the Natural Resources Defense Council due to a lack of transparency and enforcement of offsets.1 Other voluntary standards organizations, like the Gold Standard for example, have also been fraught with issues of “additionality,” meaning it is unclear whether their offsets actually result in additional carbon reductions.2 Although data is somewhat difficult to find, the rough size of the voluntary carbon market is $350 million per year. This means if a true carbon offset market could be created, a $350 million force for good could be unlocked. 1Bryk, D.S. (2006). States and Cities Should Not Join the Chicago Climate Exchange. Natural Resources Defense Council. 2Kevin Star of the Mulago Foundation |
The Novel Idea |
Working at NYSERDA, the state agency charged with solving New York’s energy and environmental issues, Millstein witnessed the rollout of a mandatory carbon cap-and-trade for New York’s power plants. The program, which was initiated in nine Northeastern states in 2008, establishes a limit or “cap” on the amount of a pollutant a plant can emit. Emissions permits, or allowances, which represent the right to emit one ton of carbon dioxide, are then sold to power plants throughout the region. The total number of allowances is capped, and power plants are required to buy the number of permits equivalent to their emissions. Those who need more must buy them from those who reduce their pollution and need fewer. Millstein realized that NYSERDA’s own customers — office buildings and manufacturing plants executing energy efficiency projects — could eliminate their entire carbon footprint. After reducing energy use as much as possible through efficiency in their own back yard, by buying carbon allowances themselves and voluntarily taking on the public “cost” of polluting, customers could contribute to renewable energy and energy efficiency projects in the U.S. that would balance out their remaining carbon footprint. The idea for a social enterprise to broker such purchases was born. Carbon Lighthouse is a nonprofit enabling corporations and consumers to eliminate their entire carbon footprint using domestic, legally enforceable, and transparently tracked carbon allowances. The enterprise aggregates consumer demand for carbon offsets and uses its purchasing power to buy up permits at quarterly auctions, removing such allowances from the market and sending consumer dollars toward efficiency and other green projects. The organization finances its purchases through partnerships with companies offering energy efficiency or solar power goods and services. Carbon Lighthouse shows their customers that by donating a small percentage of savings that have resulted from greater efficiency measures, they can, in effect, become completely carbon neutral. Carbon Lighthouse “returns” the permits to the auction house, where they are permanently “retired,” effectively reducing the amount of carbon emissions in the atmosphere in a traceable way. Carbon Lighthouse thus provides 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 allowance 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.” Although Carbon Lighthouse is a nonprofit, its financial model benefits from Millstein’s knowledge of business. The organization takes advantage of the $350 million voluntary market for carbon offsets in the United States, which has been growing annually by more than 30 percent over the past 6 years. “Demand for allowances from the voluntary sector supports prices from $10 to $45 per ton,” he says. This allows the organization to develop a mission-based co-marketing strategy with multiple private sector partners without resorting to the traditional grant-funding nonprofit model. We’re essentially leveraging the infrastructure of the entire alternative energy world.” By partnering with consumer-based organizations, Carbon Lighthouse makes it profitable for people to become carbon-free. “We’re scaling up fast enough to truly combat climate change,” Millstein says. 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.” |
The Innovator |
Millstein, who took hiking trips with his family in Yosemite National Park from the time he was three 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 a full 200 miles away,” he recalls. “By the time I was eleven the mountain had disappeared behind haze.” Millstein developed a robust understanding of energy systems studying physics at Harvard, working in Department of Energy labs, and acquiring a joint MS from Stanford while earning an MBA from the Graduate School of Business in 2010. Working for NYSERDA, he helped more than 275 manufacturing plants and office buildings in New York City identify, execute, and fund energy efficiency and demand response projects. At Stanford, Millstein 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,” he says. “Nevertheless, 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. 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.” |