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Russ: This is The Business Makers show, heard here and online at thebusinessmakers.com, and it's guest time on the show today, and I'm very pleased to have with me Susan Wood, CEO of Sindicatum Carbon Capital Company Americas and Rob Toker Business Development Director for Sindicatum Carbon Technology. Susan, Rob, welcome to The Business Makers show.
Rob: Thanks for having us.
Susan: Thanks for having us. Thank you.
Russ: You bet. Well, let's start with you, Susan. And why don't you give us a description of Sindicatum Carbon Capital Company.
Susan: Pleased to do so. Sindicatum Carbon Capital was actually formed in 2005. We are a greenhouse gas and clean energy projects company. And we're based out of London. We were formed to take advantage of the international carbon market that Kyoto Protocol created an international carbon market where you could create carbon commodities and trade them in the market. Last year I believe it was a $900 billion nationally traded market. SCC Americas, as we like to call ourselves, was created back in December of 2007, in order to take advantage of the rapidly developing U.S. carbon market. Right now, we only have a voluntary market in the U.S., but we've been here since 2007, and we have a technology arm of which Rob is the business development director here in the U.S.
Rob: The firm is set up along geography and project type. And we have a few groups, a finance group, the climate change group, which is essentially an enhanced regulatory group, and a technology group that cuts across geography and project type. Technology is going to be an important piece of the puzzle for our firm, just as it is for the clean energy world generally. We see it as an important competitive advantage, key differentiator for our firm. It speaks to why these environmental commodities, emissions reductions commodities are important. They're seen as by the policy makers who set them up as a spur to innovation. How do you get technology de-risked? How do you get technology deployed in an industrial scale where you can actually have an impact on climate change issues?
Russ: Okay, Susan, you described the industry, I believe, as $900 billion last year. How much did Sindicatum Carbon Capital capture?
Susan: It's a notionally traded carbon market, so that would be carbon credits that are traded on an exchange or exchanges in Europe and the rest of the globe. I believe we had a fair chunk of carbon credits that went into the market last year. A lot of the carbon projects that we develop and the renewable energy projects that we develop, take a couple of years to get through the process. So we have probably the next two years, three years, we'll be a significant contributor to that market.
Russ: And how much is taking place in American already?
Susan: Activity picked up significantly when Obama was elected. And the Waxman-Markey bill that is currently passed through the house and is going to be looked at by the senate this fall, outlines basically a cap-and-trade program for carbon. So there's a lot of money, and there's a lot of companies that have come over from the international market looking to start businesses here in the U.S. and create projects here in the U.S.
Russ: Okay, since it's not necessarily official here yet, it's still on a voluntary basis, the participation? Is that correct?
Susan: It is. There is one small regulated market in the northeast called the Regional Greenhouse Gas Initiative. That started actually last year. And so that's small and somewhat contained. The voluntary market is national. It's fairly robust, if not fragmented. It trades somewhat infrequently, and there's not any price transparencies, so understanding the value of the commodity is still tough, and most of the trades are over the counter, which means they're not going through any sort of an exchange or, or that sort of thing.
Russ: Okay, now let me make sure that I understand and our listeners understand the nature of a voluntary market. This would mean, say you had an energy producer that knew that they were not necessarily producing clean energy, but certainly wanted to voluntarily participate in this exchange. And then, therefore, would buy credits, carbon credits, from somebody who either has or is, is putting together a clean energy production. Is that correct?
Susan: That would be a good example.
Russ: Okay, so money actually goes from one to the other, just because of carbon and trying to do what we possibly can to make clean energy?
Susan: Yes, yes. There's actually a good example, Seattle City Light voluntarily agreed to be carbon neutral, and so they go into the market every year and buy carbon credits. You'll notice if you go book your flights online-I think Continental.com-you can make your flight carbon neutral. You can go to websites like Terrepast.com and make your entire lifestyle carbon neutral. So bands like the Dave Matthews ban have made their tours carbon neutral, and that's really the buzz word, you know, out there right now.
Russ: Okay, but this first example up in Seattle, Power and Light, that means that that utility decided to do this, which obviously affected the rate that its customers pay, correct?
Susan: Yes, yes, I believe it being a regulated utility, there would be a pass through.
Russ: Okay, now Rob, back to technology. My imagination goes wild, the role of technology, but are we mainly talking about information technology or all across all technologies?
Rob: Yeah, I mean, it's the whole spectrum. I mean, IT is something we don't get into as a firm too much, but if you look at IT with respect to accounting and verification technologies. How do you know you've reduced a ton of, of CO2 or greenhouse gas, and how do you tract that reduction over time? So sensor technologies, sensor integration, wireless integration, database technology, analytics technologies. There's clearly a place for IT. You know, the range of technologies that we're involved with, everything from very simple hydrokinetic devices. There's a technology company in Houston, Hydrogreen Energy, that we think very well of, all the way over to very complicated, abstruse, white, biotechnology, and industrial biotechnology. So this is essentially crossover technology from the pharmaceutical and biotech world where you can produce an advanced bio fuel using those same methodologies and tools. So it's everything in between.
Russ: Okay. Okay, we're going to be back with more with Rob Toker, business development director with Sindicatum Carbon Technology, and Susan Wood, CEO of Sindicatum Carbon Capital Americas after this. You're listening to The Business Makers show, heard here and online at thebusinessmakers.com.
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Russ: This is The Business Makers show, heard here and online at thebusinessmakers.com, and continuing on with Sindicatum Carbon Capital with Susan Wood, CEO, along with Rob Toker with the technology business development group. Why don't one of you give us a description of cap-and-trade for dummies? I think it would be real good to go through a basic explanation.
Susan: I'd be absolutely happy to. It's a somewhat esoteric concept, but it's been around for many years. Back in 1994 the acid rain program developed here in the United States. So actually the United States is the leader in creating cap-and-trade. It's designed to be an economic mechanism whereby you incentivize companies and entities to reduce their emissions, as opposed to the traditional way of environmental compliance in emissions reductions, which they call command and control.
Russ: Well, would that also be right to say it's kind of a market-based system as opposed to a tax even, because I've heard some people say we should have just a carbon tax?
Susan: Absolutely, it's a market-based system here, right.
Russ: Okay.
Susan: The cap-and-trade program for carbon works very similar to the acid rain program. So a cap-and-trade program in itself collects a universe of entities that they want to have reduce their emissions. So let's say all of the power plants in the United States. We then say that all of those power plants have to reduce their emissions by 10%, and we're only going to issue you something called allowances up until the number will be the amount of tons of that pollutant that we want you to emit per year. So I'm power plant x. I'm emitting 100 tons per year of carbon. You want me to only emit 90. You're only going to give me 90 tons of allowances per year.
Russ: Allowances?
Susan: They're called allowances, right. And that is a commodity that's actually in the market and traded, and those are allowances. I then am the power plant, and say where am I going to get these additional 10 tons?
Russ: Okay, which is, you're looking for additional allowances.
Rob: So you could either invest in a new technology that frees up allowances under the cap, or-
Susan: -or you can go to the market and buy them from somebody who has over complied. So maybe they went down to 40 tons, and so they have an additional, you know, 40 tons sitting out there or 50 tons sitting out there. Or in the case of CO2, in carbon, you can go to an offset project. And an offset project is a project created by an entity that is not within that cap. So to give a good example, let's pick a landfill. And a landfill actually emits quite a bit of carbon. It generally emits about 70,000 tons per year on average. If you go in and create a collection system, put a collection system into that landfill, collect the methane that's on the landfill, and destroy it, you can create carbon offsets. And those offsets can then be, what, they have to go through a verification system, but they can then be transferred into the cap-and-trade program.
Russ: Meaning, sold, right?
Susan: Sold, right.
Russ: And so your energy company that was emitting 100 tons of problem, and now they're going to cap it at 90, could buy actually from the landfill?
Susan: Correct.
Russ: Wow, okay.
Rob: You know, the idea of verification is extremely important. A lot has been written about the similarities between a, a carbon market and carbon instruments, with currency. You know, the value of a currency, if someone came in with buckets full of dollars and started dumping it into the, the market, you'd dilute the value of that currency. So controlling for the value of the commodity, of the synthetic acid, I like to call it.
Russ: Me, me, meaning actually verifying that it has value, because there was a reduction.
Rob: That's right. I think we may have talked about this in passing previously, but I think it's interesting though, that if you look at carbon markets as a way for policy makers and, and politicians to address a market failure-that's the term that's used. Take it for what it's worth-where the true cost of creating something, some sort of useful asset, either power, or cement, or steel, doesn't take into account all of the costs, all of the social costs. So carbon is one of them, could be other things, security issues, energy security issues, etcetera, using a market-based mechanism to internalize those negative externalities, I think, is, is kind of an elegant solution. It's kind of an interesting way of approaching the problem. And things like carbon tax don't do that. There's no hard upper limit to how much violators can put out there.
Russ: Plus, plus, isn't it also true that a carbon tax puts the money in the government, and they decide how to allocate it then. And there's a quite a few of us that don't think that they're real good at that either.
Rob: I mean, that route, that route, you're right. I mean, that route, this is a belief in the market as the most efficient way to allocate capital.
Russ: Right, now back to Sindicatum business. At the end of the day, Sindicatum is really a construction company, and a project management company. Would that be right?
Susan: Yes, that's actually a very good description of what we do. We just build projects in the greenhouse gas and renewable space.
Rob: We deploy our own capital, though. That's, that's a key differentiator. The company has a pool of capital that it draws on, and many of the people who, who are in the same space, they don't. They don't have that, so.
Susan: Right, we're an end-to-end project developer. So we'll identify the projects. We'll implement the projects. We will put them through the verification process to take the environmental commodities out, and we will then sell them into the markets. So we don't actually verify our own credits. The third party verification is very important because you need the quality of credits on the market. And I think, as Rob said, otherwise you end up with an influx of, of credits. So it is very difficult to get credits out of the international trading scheme. And, um, most companies, or a lot of companies, have found it to be a barrier.
Russ: Okay, and at the end of the day, Sindicatum is doing this to make a profit.
Susan: Yes, we hope so. That is the plan.
Russ: Okay, okay. We'll be back with more with Susan Wood, and with Rob Toker with Sindicatum after this. You're listening to The Business Makers show, heard here and online at thebusinessmakers.com.
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Russ: This is The Business Makers show, heard here and online at thebusinessmakers.com, and continuing on with Susan Wood, CEO and Rob Toker, business development director of technology for Sindicatum. What do you guys spend your time doing these days?
Susan: We are out hunting for projects to spend money on. Right now our core focus of the company is methane abatement. We focus mostly on landfill gas to energy. We're looking at waste to energy, in general. We look at anaerobic digestion, which is collecting and destroying methane on dairy farms, and some wastewater treatment plants.
Russ: So you're actually out looking for companies that tackle those problems right now, and then if they're a real good one, what do you do?
Susan: We would actually step in and work with them to fund, implement the project, and then take all of the commodities out and share the revenues with them. So, we're, we're looking for landfill owners. We're looking for dairy owners. We're looking for coal mine owners.
Rob: I mean, one of the themes of the company, I think, is how do you take a waste stream, and how do you put it to beneficial use? I mean, so there's a history of, you know, taking a waste stream. We used to just dump pollution into rivers, you know, just raw sewage. And the philosophy here is well, let's take a waste stream and make something useful out of it. The technology processing, the technology selection question is obviously key to the economics, how these projects perform, so. And that's generally a function of their location. What are the attributes of the waste stream and what are the attributes of the economic environment, so the power price, if there's a tipping fee involved or, or the value of the waste stream. So-
Russ: But, but, let's, let's get more specific. Let's say that you found, you know, a big landfill that had a problem, but there was somebody already there sort of with an innovative solution, but they didn't have the wherewithal to build it, finance it, and things like-would that be your ideal partner prospect?
Rob: Yeah, I mean, the short answer is yes. I mean, municipal solid waste, mixed wastes, as a class, is fairly complicated. I mean, it's a heterogeneous waste stream. Landfill gases is a well understood, mature technology. We know how to put wells in. We know how to turn some of that into energy and put these through engines and, and create power. But there's other choices, too. There's a range of gasification technologies. There's a range of new emerging technologies like plasma arch technology. So, you know, the world is changing. Technology is driving it, but the conditions, you know, the market conditions that, that spur innovation, that's really what we're exploiting. And part of those market conditions are, are carbon markets.
Susan: Well, and, and what I would add to that is we're looking for projects. We're looking for landfill operators. We're looking for coal mines and dairies, but really at the core, these markets are supposed to spur innovation, which leads to us having a technology group, because we're looking for new technologies to deploy. So where's the better mousetrap? Because at the end of the day, the person that can build the better mousetrap is the one that's going to get ahead in this market. And so having a technology team looking for that, i.e. Rob, is really core to our ability to grow.
Russ: Okay, now I know you're still sort of relatively new in the United States, but do you already have partners like what we just described that you're working with?
Susan: We do. We have two projects actually in West Virginia, landfill projects that we have partners with. We have probably a pipeline of 20 or so more. Some of them are brought to us by technology developers. Some are brought to us by the actual landfill owners or the dairy owners. Some of them we go find. But generally, we do not have clients or customers. We do when we sell our carbon credits or our power, but we have project partners. It's actually a mantra across the whole company that we have project partners.
Russ: Cool, cool. Well, I really appreciate you two coming in and sharing your story with us.
Susan: Well, thank you very much. I, I've really enjoyed it. Thank you.
Rob: Thanks for having us.
Russ: You bet. We've been talking with Susan Wood, CEO of Sindicatum Carbon Capital Company and Rob Toker, business development director for the Americas for Sindicatum Carbon Technology. And you're listening to The Business Makers show, heard here and online at thebusinessmakers.com.