Why Greentech is Hard

The two steps to building a successful organization seem to be: (1) Create Value then (2) Capture a percentage of the created value. Companies that can create a lot of value and capture a large percentage of that value end up becoming extremely successful. 

However, capturing the created value is dependent on being able to quantitatively measure and price the value being created. This is easier in some industries and harder in others. 

Take for example when a bank such as Citibank or Morgan Stanley grants a loan. In exchange for the value they provide to the borrower (access to the lended capital), the bank captures a percentage of the value by charging interest. In this case, it is easy to quantitatively measure the value provided - via a dollar amount - and price for services rendered - interest is paid in exchange for the bank’s services. 

This is much more difficult in an industry like climate tech. Unlike loans and mortgages, the idea of environmental impact is still an abstract concept, and thus has no standardized measure of value.

Take for example the fictional carbon capture company CarbonBad. Their technology allows them to remove one million tons of CO2 from the air. How much value have they created? How should the value be priced? 

Maybe by removing excess CO2 from the air, they have decreased area air pollution, therefore saving the local municipality millions in public health spending. How much of that value should CarbonBad be paid in return for their services? What about CarbonBad’s potential impact on decreasing wildfires? Should CarbonBad be rewarded a percentage of the area’s home insurance premiums?

Without a standardized way of measuring value, there is an inability to create consensus on how to price the services rendered.

The proposed carbon tax and carbon credit programs are promising steps in what I hope to be a wider trend of monetarily quantifying abstract value. By creating statewide, nationwide or even worldwide consensus on the price of carbon, we can more accurately value and create economic incentives among green tech companies. 

In the very long term, we could see a set monetary value assigned to things like wellness, happiness or quality of life. While I can't judge on the good or bad of this, I do believe that it would allow for the sustainable creation of more social enterprises.