The Car and Truck Fleet and Leasing Management Magazine

Company Allows Drivers to Buy Smog Credits

June 28, 2005

MENLO PARK, CA — For $160, a Hummer H2 can be turned into a zero-emissions vehicle, says TerraPass, a California-based company. It would cost about $40 to turn a Chevrolet Cobalt into a zero-emissions vehicle. How? Through the use of “pollution credits,” which allow companies to buy and sell the right to emit certain amounts of pollutants into the air. The stickers TerraPass sends its customers do nothing to stop pollutants from coming out of a car’s tailpipe. If you buy a TerraPass, the money will be used to purchase smog allowances on the Chicago Climate Exchange. The Climate Exchange allows polluting companies that produce less than a certain amount of airborne pollutants to sell credits to other companies that generate considerable pollution, such as power plants, that then allow them to go over the limit. The overall limits are reduced over time, making it more costly to exceed them. TerraPass was started as a class project at the University of Pennsylvania’s Wharton School. The company started selling TerraPasses in November and had sold about 620 as of last week. Organizations and companies that buy pollution credits reduce the overall supply of credits and also make it more costly for companies to exceed the limits. TerraPass also invests buyers’ money in power-generating wind farms and other projects that reduce air pollution. Since car drivers are under no legal compulsion to try to compensate for their tailpipe emissions, the TerraPass will only appeal to those who feel some guilt about their driving, and want to do something about it. Few SUV drivers have bought the “passes”; most have gone to owners of fuel-efficient cars that produce relatively few pollutants.
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