How Kotoo's investments reduce emissions – Kotoo

Summary:

Kotoo buys and retires operating permits needed by coal power plants. You can think of it like rival fans buying all the tickets at a sporting event so the loyal fans need to find another source of entertainment. The money raised by the permits is then used to build more renewable energy and reduce people's energy bills.

Governments are slowly limiting the number of permits available each year, but Kotoo allows individuals to help lower emissions faster because permits Kotoo buys become unavailable to power plants, forcing them to reduce their emissions.

An Analogy:

Imagine the government has a concert venue and it’s throwing benefit concert for renewable energy by a band called Carbon Dioxide (CO2). All the power plants have attended the CO2 concert for decades. Some people want power plants to attend a concert by a new band called Renewable Energy so they buy and shred the tickets to the CO2 concert so that the power plants can’t attend. Since the power plants can’t do without music - they go to the Renewable Energy concert instead. They learn that Renewable Energy is so good (it’s cheaper!) that they never go back to the Carbon Dioxide concert. Eventually all the seats in Carbon Dioxide concert are empty so the band stops playing and shredding tickets is no longer needed.

While the Renewable Energy fans could just go to the RE concert - buying out the CO2 tickets still builds renewable energy since it’s a benefit concert while also preventing CO2 from being emitted. It ultimately converts old CO2 enthusiasts rather than waiting for Renewable Energy to become so dominant it overtakes CO2.

Details:

Another way to think about emissions is by thinking about fuel because emissions are directly related to fuel burned.* But some powerplants get more electricity out of a given amount of fuel - just like how different cars go different distances on the same amount of fuel. So we can think about power plant emissions just like how you might think about gas mileage - some go further than others but the ones that are more efficient are more expensive.

Let’s say that there was a fixed amount of fuel available every three months. Every three months, everyone shows up to buy the fuel but there's only a set amount available. Since people want more fuel than is available - the government sets up an auction and sells it to the highest bidders.

People who have less efficient, and therefore cheaper, equipment have more money for fuel but they need to buy more of it. And those that have more efficient equipment need less and may save money even though their equipment cost them more up front.

Over time, the amount of fuel available decreases so if the amount of fuel people require doesn’t change, then the fuel gets more expensive. However, the more expensive the fuel, the more it makes sense for people to upgrade to more efficient machines to save money on fuel or run the risk of not being able to operate.

The beauty of this is that everyone can choose an upgrade system that works for them on a time horizon that makes sense for them regardless of what type of fuel they need. And there is more than one option, here are a few:

they can stop making electricity
they can operate their power plant more efficiently with the fuel they have
they can pay for upgrades to their plant to make their fuel go further. This costs money up front but saves them money when they have to buy less fuel.
they can build a fuel free power plant (aka renewable energy) which also costs money but saves them money on fuel

Lastly, while all this is happening, the money raised from the auction are spent building new fuel free powerplants and helping people use less electricity - so those that need the fuel are also building a future in which no fuel is needed.

Kotoo allows individual people to drive this change faster by showing up to the auction and buying permits that we don’t plan to use. This makes less fuel available and increases the price. As prices increase, power plants will save more and more money by making one of the 4 choices above. And as prices increase more and more money is available to build fuel free powerplants.

*For a certain type of fuel, it is mostly true that a gallon of that fuel will always make the same emissions. Combustion nerds (aka the author) know that it is possible to burn fuels in dirty and clean ways but the analogy holds because technology to burn fuel more cleanly usually costs more money because it is newer. It is also true that different types of fuels create dramatically different amounts of emissions (coal is twice as dirty as natural gas) but more fuel always means more emissions and outside of this analogy, the price is set by emissions so it’s robust to how fuel is burned and what type of fuel is being burned

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