08/27/2010 01:24 pm ET Updated May 25, 2011

Once Again Fossil Lobby Tramples Clean Tech Start-Ups

Cross-posted at Triple Pundit


The year was 1978. Jimmy Carter was president. The air was abuzz with the promise of solar energy. No pollution, no oil to run out of, no imports, no OPEC. We hadn't even heard of global warming yet, but it was still a great idea. The Solar Energy Research Institute began operations in Colorado. Small solar manufacturers and R&D companies began popping up, bolstered by solar tax credits and government research assistance. I was newly a father, working as an appliance repairman, making $7.50/hour. I needed a better job, or better yet, a career. What better than to work in a field I truly believed in. So I went to night school, setting off down the road to what would eventually be a couple of engineering degrees. I did well and was rewarded with a number of job offers. There was only one problem: by the time I finished school it was 1982 and Ronald Reagan was now president. The solar panels had come off the White House roof and the dozens of fledgling solar companies had all dried up like unwatered seedlings scorched under a hot summer sun. The job offers were mostly from defense contractors. I settled on an office equipment company. At least they didn't use that to hurt people.

Fast forward to 2010. Once again there is a Democrat in the White House. And with the startling realization that man-made climate change has become the biggest threat to our way of life and our future, the air is once more abuzz with talk of renewables. But this time, instead of giving up the White House to an oil-obliged president, we have an oil-obliged Senate that's refused to pass a Comprehensive Climate and Energy Bill. As a result, this summer could spell doom for more fragile green seedlings.

According to James Kim, partner at Khosla Ventures, "For companies depending on some type of CO2 subsidy, this is probably the death knell."

Until Congress puts a price on the emission of carbon dioxide, it is impossible for companies to make hard line investment decisions that impact their emissions profile, since they are unable to complete anything other than a completely speculative cost/benefit analysis regarding those investments, not to mention any subsidies or tax credits that could potentially impact purchasing decisions.

That is really bad news for any companies hoping to compete against artificially cheap and heavily subsidized fossil fuels and nuclear. Most experts agree that only a price on carbon that reflects its true environmental, social and political cost can level the playing field in a way that reflects the reality of the situation. This could put a bit of a damper on the clean-tech enthusiasm we saw at the beginning of the year.

A number of start-ups, particularly those aimed at capturing or reducing carbon like Climos which has developed a technique of fertilizing ocean algae to reduce atmospheric carbon, or Skyonic Corp., which has technology capable of capturing carbon emitted in cement and other manufacturing processes could find themselves in a somewhat vulnerable situation for a while. Skyonic just received $25 million in stimulus money from DOE to fund a Phase 2 demonstration project involving a cement plant.

Until the issue is resolved, venture capitalists are keeping their distance. "We've never seen that it's viable to build a company whose entire financial success is based around the existence of a carbon tax or cap-and-trade system -- especially before you know what it's going to look like," says David Berry, a partner at Flagship Ventures.

With no price on carbon, these companies may as well be selling air conditioners to Eskimos. Hey, wait a minute, without a climate bill, that might just be a good business to get into.