Could carbon credits fund bike-sharing systems?

A few weeks ago at an angel-investment presentation, I had the fortune of meeting the founders of Philadelphia-based CityRyde, bike-sharing consultants who are launching a platform called “Inspire” to facilitate the exchange of carbon credits between bike-sharing agencies and carbon producers (or investors).

What the guys at CityRyde (a competitor of MetroBike, the consultants implementing Capital Bikeshare) are proposing to do is to enable bike-sharing agencies to sell—on existing carbon markets—offset credits based on the CO₂ saved by their clients who cycle rather than drive.

For those who aren’t familiar with the carbon-trading concept, virtually every industrialized nation in the world except the United States (and in some circumstances China) has adopted legislation that requires CO₂ producing industries to “offset” their pollution above a certain threshold by buying carbon “offset” credits.

Regulated under the Kyoto Protocol, these offset credits are generated by thousands of individual projects that reduce the amount of carbon in the atmosphere. Examples include reforestation, methane collection, and the generation of renewable energy through nonpolluting methods. In addition to carbon offsets that nations mandate under Kyoto, there is also a growing “voluntary market” to allow polluters to offset their pollution by choice.

Though it’s not often discussed in this country, the market for carbon trading is enormous. In 2007, noting that the carbon trading market could approach $1 trillion a year in a decade, the head of Barclays Capital Environmental Markets stated, “Carbon will be the world’s biggest commodity market, and it could become the world’s biggest market overall.”

According to CityRyde founders Timothy Ericson and Jason Meinzer, a bike-sharing operator could net a million dollars a year (or more) from selling on the voluntary market the carbon credits earned by its customers using their Inspire system.

Capital Bikeshare’s annual operating costs are expected to be about $1.4 million/year, with 60-70% recovered from user fees. The 1100-bike system cost about $5 million in capital costs. Thus, if Inspire were implemented, it might suggest that a system comparable to Capital Bikeshare could cover most of its operating costs in a year, or else expand by 200 bikes a year at no cost.

Whether it all pans out as the founders predict is something that will be left to time to prove, but Ericson makes it sound simple: the market is there, the four major bike-sharing manufacturers are in various stages of discussion with CityRyde, the agency operators who have heard about it are excited, and all that’s left is for bike-sharing to be validated as a carbon offset.

Under Kyoto, the UN Clean Development Mechanism (CDM) is the sole accrediting methodology for new forms of carbon offset. In the voluntary market, there are a number of accreditors. CityRyde is in the process of submitting its proposal for acceptance to the Voluntary Carbon Standard program. A decision could come as soon as January.

Perhaps the next question is whether someone can help sluggers capture their piece of the carbon market.