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So long to gas guzzler guilt

Company allows drivers to pay for the smog they produce, then reduces it from other sources.

June 21, 2005; Posted: 12:16 p.m. EDT (1616 GMT)

By Peter Valdes-Dapena, CNN/Money staff writer

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NEW YORK (CNN/Money) - For $160 you can turn a Hummer H2 into a zero-emissions vehicle. No tools or mechanical ability are required.

That's the promise of a California company called TerraPass. It would cost less, of course, to turn a Chevrolet Cobalt into zero-emissions vehicle. That would only be about $40.

The idea is the latest implementation in the trading of "pollution credits." Those are the market-based innovations, introduced a few years ago, which allow smoke-spewing companies to buy and sell the right to emit certain amounts of pollutants into the air.

The stickers TerraPass sends its customers do nothing to stop pollutants from coming out of a car's tailpipe. Instead, the company offers its customers the chance to reduce pollutants from other sources, like power plants, in an amount equivalent to that produced by their car.

That way, you can drive your car while having no net effect on the amount of pollution in the air, the company says.

The company started as a class project at the University of Pennsylvania's Wharton School, said Tom Arnold, TerraPass's chief environmental officer and sole full-time employee.

He also has three students working for the company and a three-member advisory board.

The company is a for-profit enterprise, but caps its profits at a maximum of 10 percent of revenues.

Those revenues so far, Arnold says, are "itsy-bitsy-teeny-weeny." The company started selling TerraPasses in November and had sold about 620 as of last week.

If you buy a TerraPass, the money will be used to purchase smog allowances on the Chicago Climate Exchange. The Climate Exchange allows polluting companies that produce less than a certain amount of airborne pollutants to sell credits to other companies that then allow them to go over the limit.

The overall limits are reduced over time making it more costly to exceed them. Organizations and companies that buy pollution credits reduce the overall supply of credits and also make it more costly for companies to exceed the limits.

TerraPass also invests buyers' money in power-generating wind farms and other projects that reduce air pollution.

Since car drivers are under no legal compulsion to try to compensate for their tailpipe emissions, the TerraPass will only appeal to those who feel some guilt about their driving, and want to do something about it.

Not surprisingly, few SUV drivers have been buying them. Most have gone to owners of fuel-efficient cars that produce relatively few pollutants.

That initially surprised Arnold.

"We fully expected to target SUV drivers with SUV guilt," he said. "It just doesn't exist"

Instead, he's been travelling to environmental fairs pitching the idea to those who, for the most part, drive fuel efficient small cars and gas/electric hybrid vehicles.

"Environmentalists have a very conflicted relationship with their cars," said Arnold.

As for himself, Arnold doesn't own a car. He commutes to work by bicycle.

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