Vermont Environmental Consortium

April 10, 2007
Green Values Transforming America's Economy
by
Daniel Hecht

“We are disrupters of a status quo based on agribusiness and fossil fuels.” “When the entrenched, who value owning, say that sustainability costs too much, we say that owning and consuming costs too much and delivers too little.”

The words ring with all the defiant bravado of those declarations by Ethan Allen, enshrined on our Statehouse walls.

They’re proposed values statements, now being drafted by the company’s members, of a new Burlington-based business, AgRefresh. Surprisingly, perhaps, they’re authored not by a wild-eyed revolutionary but by a lifelong capitalist entrepreneur.

Jeff Frost, AgRefresh’s founding partner, has spent three decades starting companies and conducting high tech and market analysis for major banks and utilities. He’s one of a new breed of entrepreneurs operating with a fresh vision of money – both its capabilities and its limits.

One of the most fascinating aspects of the new environmentalism is its effect on money. Environmental enterprise is redirecting capital into innovative financial instruments, trading exchanges, and investment opportunities.

These new capital flows tend to serve a dual purpose: not only to make somebody money, but to serve the public good by promoting renewable energy development and reducing greenhouse gas (GGH) emissions.

Astonishingly, the main thing they market is the absence of something.

Jeff Frost’s AgRefresh partners are Bob Foster, Middlebury dairy farmer and co-owner of Vermont Natural Agricultural Products, and Mateo and Andy Kehler, of Jasper Hill Farm in Greensboro. Their primary product is the lack of GHGs.

It’s one of many similar ventures starting up to provide revenue for developing renewable energy and reducing GHG output – and to make money.

Soon, maybe a lot of money. As the GHG market transitions from voluntary trading to compliance with federal and state requirements, The Economist projects that annual volume will reach $60 billion and will eventually top $1 trillion.

It works like this: Some individuals, companies, and states want to reduce the GHGs their activities contribute. That’s the demand.

It’s hard to instantly convert to using only renewable energy, but we can do it by helping someone else, better positioned to make changes, cut GHG emissions. So GHG reduction becomes a product.

In Vermont, farmers are potentially the leading suppliers of this product. If I choose, I might compensate for, or offset, my household’s emissions by paying a farmer to develop renewable energy or implement other GHG-reducing practices.

AgRefresh finds and enlists GHG reducers and through rigorous analysis assesses and certifies the quantity of reduction. It then packages this GHG absence as shares that people like me can purchase.

Customers of CVPS’s Cow Power program participate in a variant of the process when they pay a premium for electricity made from biodigested cow poop.

Importantly, however, the actual power can now be sold separately from the attribute. That is, you might buy the electricity itself while I buy the “greenness” of the electricity you bought. Green Mountain Power annually sells $360,000 of GHG reduction value, from its Searsburg wind farm, to a Massachusetts utility – while selling the actual electricity to GMP customers.

This double cash benefit creates an incentive to build green power generation plants. For power-producing farmers, it can provide a vital new revenue source.

But AgRefresh markets more than energy attributes – it packages and sells “farm ecology shares.” That is, it certifies a wide range of farm activities that reduce outputs of GHGs and other pollutants, or tie them up in new plant mass like tree plantings.

The idea of buying environmental virtue by proxy has many critics. Also, this market is still unregulated, with no real oversight; Jeff Frost describes it as “the wild West” – there’s a risk of fraud, as offset money may not end up invested in renewable energy or carbon sequestration.

So to reassure providers and purchasers, AgRefresh has established rigorous standards for itself. It specifies that 66% of shares’ value gets used for renewable energy development, methane capture, and so on. The projects funded must be new: The money I paid to offset my (ongoing) GHG emissions must go to developing new (ongoing and future) offsetting activities, not some earlier effort.

Similar mechanisms to create incentives for GHG reduction are proliferating worldwide. Major carbon trading marketplaces, such as the Chicago Climate Exchange (CCE), have arisen to connect buyers with sellers and to facilitate investment.

Such activity bodes a momentous change in the behavior of money. This market exists to serve a demand based on values: People want to invest in real benefits to the natural world and the public good. With money directed this way, corporate practices will have to acquire values-based measures of performance.

To quote AgRefresh again: “We are environmental populists working on behalf of the commons”; “We believe focus and passion will trump money and force.” Such values signal a long-overdue re-visioning of the way our economy should work.

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Daniel Hecht is a novelist and executive director of Vermont Environmental Consortium. For more information on any Green Grapevine topic, contact vec@norwich.edu.

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