Why Carbon Credits Don't Work

Carbon markets set up under climate-change agreements are supposed to reduce emissions of carbon dioxide. Credits are issued that correspond in some way to the desired carbon emissions (details vary). Companies that produce a lot of greenhouse emissions can then purchase credits from companies that produce fewer. Supposedly, this will fund new clean companies and projects that lead to a decrease in carbon emissions.

Here's the problem. Some of those new companies and projects would have been undertaken anyway, without the credits. In that case, the credits won't actually lead to less emission. An article in today's Wall Street Journal describes one such case.

For a carbon-credit system to work, it seems that you've got to have a competent regulatory body that can give credits only to companies and projects that need the credits to succeed. But this requires a detailed understanding of industries and economies all over the world, as well as new technologies. According to the Journal article, it's taken years for a UN regulatory body to figure out that it was issuing credits to projects that didn't need them. Overall, this sounds like an inefficient system.

A carbon dioxide tax, which assigns a cost directly to the thing that's supposed to be regulated, would work better. Make carbon dioxide emissions expensive, and then let the market work out the best way to deal with those costs.

Twitter to Get Ads?

One of the defining characteristics of a number of young, Web 2.0 companies is a lack of business plan. Twitter, a microblogging service in which people subscribe to short updates from friends, is a perfect example. The goal of its founders and funders has been to build a strong base of users, postponing the pesky task of making money.

A recent post from TechCrunch, however, hints that Twitter may be toying with the idea of inserting ads into users' tweet stream.

Twitter was down tonight, nothing really unusual for the San Francisco based startup (to be fair though downtime has improved since they dumped Joyent), but what was different is some reports of users spotting ads in their Twitter stream during the service difficulties. There were no ads evident when I visited Twitter, which may indicate testing only in preparation for a broad-scale rollout.

It wouldn't be surprising if Twitter took this approach, or if it offered a subscription-based version without ads. It's a service that has real value for a subset of its users, many of whom use it for crowdsourcing: ask a question on Twitter, and those who follow you respond with an answer.

I recently had a conversation with Loic Le Meur, Twitterer and founder of Seesmic, a video analogue to Twitter, regarding the subject of microblogging business models. Le Meur believes that a service must have a large number of users and dominate the market before it can reasonably start to make money. "When it is the default application, and it has mass adoption, then you can start monetizing it," Le Meur says. He adds that he personally finds enough value in Twitter to pay for it.

But people have had more than two years to grow accustomed to a free and uncluttered Twitter. And there is always the possibility that they might leave the service for any number of competitors, such as Pownce and Jaiku. Indeed, there's some anecdotal evidence that this could happen. Twitterific, desktop software that allows a person to receive updates and publish tweets, was one of the most popular Twitter downloads, but it's losing traction among competitors. Recently, Twitterific began to insert ads into people's tweet stream, which, says Le Meur, could be playing a part in the rising popularity of his recently acquired, ad-free software, called Twhirl.

Clinical Trials of Stem Cells: Proceed with Caution

With three biotech companies gearing up to begin clinical trials of their embryonic stem cell therapies, the FDA convened a panel yesterday to debate the safety of these therapies, the biggest concern being that these novel cell therapies carry a risk of cancer.

According to a stem cell blog called The Niche:

Three companies, Geron, Advanced Cell Technology, and Novocell, described their work bringing embryonic-derived cells in (respectively) acute spinal cord injury, visual impairment, and diabetes. One expert who wasn't on the committee said that the discussions had been impressively grounded in science, even getting into specifics about what assays might be considered. Attendees were surprised that no opponents of embryonic stem cell research showed up, but the FDA's announcement said explicitly that it was only the cells' safety that was under consideration.

The dark shadow of gene therapy looms over the regulators--the field suffered a major setback in 1999 when a patient died of cancer linked to the therapy. Scientists know that undifferentiated stem cells can form into a benign mass known as a teratoma when injected into animals, and they fear that a safety incident in the first round of clinical trials could devastate the already-troubled field. The cell therapies under development use differentiated cells, but the possibility remains that some undifferentiated cells may be left in the mix.

According to The Niche, major questions need to be answered to assess that risk:

How do we know what cells we have? How do we know what the cells will do in the body? Where do you put cells? Where do they go? What do they do? How many cells might be dangerous? How many can be useful? What can animals tell us? If the cells "go rogue" in a human participant, will we be able to stop them or even to track them? What's the best way to balance risk and benefit?

The committee declined to speculate when it would release its guidance statement. But Geron has said it plans to begin trials of its cell therapy for spinal cord injury this summer.

Water Is the Next Oil

Oil, of course, dominates world economics and politics. But it's conceivable that some day, alternative fuels and other clean technologies, combined with the rising costs of extracting oil, could diminish petroleum's influence. But by that time, another scarce commodity--water--could come to dominate geopolitics, and venture capitalists are starting to take note.

The thinking goes like this. Biofuels are enormous consumers of water, says Jim Matheson, a general partner at Flagship Ventures, a venture capital firm in Cambridge, MA. And water is not always abundant where it's most needed. "So, increasingly you're going to see water as a scarce resource. I think it's going to drive not just economics but also a lot of geopolitical dynamics. So, we're trying to find technologies that can allow us to plug into this enormous value chain." He's interested, for example, in membranes and other water-treatment technologies that will allow biofuel-makers and others to reuse water. But he says there's a big challenge to making these new technologies successful. There has to be a way to scale them up to bring down costs. "The problem is that water is like the Internet. People love it and they use it all the time, but they don't want to pay for it," he says. "So the question is, how do you come up with a business model that actually works?"

One option, he says, is to develop technologies that can both clean up wastewater and extract energy from the waste, effectively adding value to the water. Matheson spoke as part of a panel on "green technology" investment at the Venture Summit East conference in Boston yesterday.

Filtering Internet Content

At the Venture Summit East conference in downtown Boston yesterday, CEOs of various tech start-ups gave five-minute spiels to peak the interest of venture capitalists. The consumer and media panel hosted several interesting companies, most of which focused on improving the Internet experience for the user and aggregating content more efficiently.

Mark Moran, the CEO of Dulcinea Media of New York, presented a Web search engine the company launched last year. The engine's findings are based on editorially reviewed content and links. Taglined "the Librarian of the Internet," findingDulcinea.com is a good idea in theory. According to Moran, users are inundated with information and often don't get what they're really looking for. "Internet search engines are powered by math-based algorithms--ones that lack the judgment and adaptability of the human mind," he says.

Unlike Wikipedia, the content on the site is entirely managed and written by the team, which links to sites it finds useful. The website's target is largely folks (824 million) who use the Web but are not familiar with social-networking sites. In particular, it focuses on the older demographic that is still learning to navigate the Web, and offers friendly guides (how to search the Web, how to find an apartment in New York, etc.).

While this hand-holding portal to the Internet might be appealing to people like my mom, who doesn't have an e-mail account and just recently learned to Google, the site still has gaps in many subject topics. That's not surprising--how can a group of 30 people write guides and find good links to every single subject?

When I asked Moran how they maintained enough manpower to sustain such an exhaustive system, he said they managed just fine. It seems, however, to fill those gaps, instead of trying to categorize the entire Internet--with more websites than any library--they might benefit from some automated page-hit searches to beef up their site.

FindingDulcinea.com believes that carefully evaluated links provides a better search engine than one that only considers page hits. While a site with a gazillion page hits may not necessarily be more worthwhile than another page, I still like seeing for myself what all the fuss is about.

User-Generated Content Comes to Businesses

This morning at Venture Summit East in Boston, I talked with Tony Perkins, founder of AlwaysOn, the company that puts on the event, about the trend of user-generated content moving into the workplace. Increasingly, companies are finding uses for social networking, blogging, and mashups (which are online applications that combine data and tools from different websites). IBM, for example, released more information yesterday about IBM Mashup Center, the company's software designed for making business mashups, adapted to the level of security companies require. GoingOn, a company with which Perkins is also involved, is an example of social-networking technology designed to include features of interest to businesses, such as e-commerce and advertising management.

Perkins suggests that businesses are relying more on these tools in part because people who grew up using technologies such as IM have now started their careers and are bringing their favorite online tools with them. Michael Rhodin, general manager of IBM's Lotus division, expressed a similar opinion earlier this year at Lotusphere in Orlando.

Perkins sees this move as the next wave for Internet companies. While consumer startups can be built with increasingly low initial investment, Perkins says things work a little differently in the business world. "You have to build ultrareliable infrastructure for your service, because companies can't afford to have a system break down and not have access to their information," he says. He adds that marketing to businesses can be more challenging than getting early adopters to try out a new Web service for fun.

Northeastern companies stand to benefit from the transfer of consumer technologies into businesses, Perkins says, suggesting that the traditional hard-technology expertise here will prove useful in adapting technologies to the levels of security and infrastructure robustness required by businesses.