Nestled in one of those mazes of humble short buildings so typical of Silicon Valley is a small start-up called Picarro. The air of silence and the apparent inconsequentiality hanging around its small Sunnyvale office space are the perfect cover for an undercover agent. Picarro might not claim to be one, but its job doesn’t seem too different. The start-up manufactures devices that measure emissions of greenhouse gases, including carbon dioxide, methane, nitrous oxide, hydrogen sulphide and so on.

Most of the emissions reported today are estimates that can often be 40% or more off the mark. In such a world, Picarro’s precision can catch green liars red-handed, pretty much like a detective or an undercover agent would.

“At Picarro, we’re building gas and isotope analysers that can measure all the major greenhouse gases anywhere in the world accurately,” says Michael R Woelk, President and CEO, Picarro. One of those tough “anywhere” spots is a lab dug six metres below ice, in Greenland. Other places where Picarro’s analysers are perched include the Eiffel Tower, the Mauna Loa—Hawaii’s largest volcano—and the Zugspitze—Germany’s highest mountain. As for the analysers in question, they look as mundane as extra-large inverters.

The mechanism, however, might not seem as familiar to lay people. Here’s how it works: air enters the device through an inlet. Once inside, lasers are used to energise the air column. The laser is then shut off and the exact measurements are taken using an array of photo-detectors that translate the emission spectrum into electrical voltages.

Recognitions Galore

It took Picarro’s R&D team an exhaustive nine years to perfect the technology. The collection of patents in its office shows that the labour was well worth it. After all, it won the company nine patents from Stanford University, 12 licences and six pending patents. It also won the company a string of recognitions, such as the Frost & Sullivan North American Technology Innovation of the Year Award in 2009, the Editors’ Choice Silver Prize at the 2009 PITTCON tech expo, and a runner-up prize in the environment category at the Wall Street Journal Innovation Awards last year.

Without accurate measurements, it’s hard to enforce regulations or run a carbon market. That’s where Picarro comes in.

The awards are for what the technology actually promises to achieve. In a world where green awareness is growing, carbon emissions are coming to the forefront. Copenhagen was all talk. The first step towards walking the talk and cutting greenhouse emissions is to simply measure them right. Only when the exact magnitude of the problem is known can an appropriate solution be developed.

For instance, according to a report in Canada, volatile organic compound (VOC) emissions from oil refineries were estimated at 153 tonnes. The accurate emissions, however, were over 32 times higher, at a scandalous 5,000 tonnes. VOCs include hazardous carcinogenic toxins like benzene, 1,3-butadiene and toluene.

Sharing similar concerns, Houston Mayor Bill White requested the US Environmental Protection Agency (EPA) to reconsider the way emissions are measured. Houston, a city in the state of Texas, is a hub of oil refineries and chemical plants. It has consistently failed to meet federal ozone standards. The challenge of accurately measuring the greenhouse gases is the first thing that it wants to get out of the way.

“It’s the height of irresponsibility for our legislators to build an economy based on estimates. They should base it on accuracy. After all, carbon emissions affect everything, most of all, the global economy. Emissions affect everybody irrespective of whether they’re rich or poor, men or women, grown-ups or children,” says Woelk.

Coming Clean: China, a big polluter, is one of Picarro’s largest customers.

That includes the burgeoning carbon emissions trading market. Here, regulatory bodies issue carbon emitters a limited number of allowances that permit legal release of carbon dioxide into the atmosphere. If emissions exceed the organisation’s number of allowances, it must buy or trade for more, or face stiff penalties.

Countries adopted this at the Kyoto Protocol in 2005, as a means to meet their carbon reduction obligations. ABI Research’s market study titled ‘Carbon Capture, Sequestration and Emissions Trading: The Global Outlook for Global Carbon Markets’, forecasts that the global carbon emissions trading market will reach a scorching $395 billion by 2014. That’s over three times the $118 billion in allowances that were traded in 2008.

“Carbon emissions trading can make it economically sensible for companies to reduce their carbon emissions,” says Larry Fisher, Research Director at NextGen Research, the emerging technology research wing of ABI Research. “If a company can reduce its carbon emissions below its cap, it will have carbon credits to sell, rather than the reverse situation, in which it would have to buy carbon credits to compensate for excessive emissions.”

We’re building analysers that can measure all the major greenhouse gases accurately anywhere in the world.Michael R Woelk, President and CEO, Picarro

But it’s hard to enforce any regulations without accuracy in measurement, says Fisher. “And it’s hard to run a carbon emissions trading market place unless we are able to exactly verify the carbon emissions generated or reduced or eliminated.”

Worldwide Demand

Indeed, the very legitimacy of the promising carbon-trading market was questioned when the United Nations suspended SGS UK, the world’s largest auditor of clean-energy projects. SGS UK could not prove that its staff had correctly examined projects that were then approved for carbon trading schemes. The embarrassing incident happened in September last year, a couple of months before the global climate summit in Copenhagen. A year earlier, Norwegian company DNV had also been penalised for similar reasons. That explains why government bodies are increasingly feeling the need for Picarro’s precision. The state of California recently bought seven devices from the company to measure its methane emissions. The California Air Resources Board spent about $400,000 on the devices.

The start-up’s analysers are being used in 49 countries by scientists at organisations like the EPA, the International Atomic Energy Agency (IAEA), the American Geophysical Union (AGU), and so on. China happens to be among Picarro’s biggest customers, having purchased 16 of the company’s devices. It makes sense; last year, China proposed a 40-45% cut in its carbon intensity—the amount of carbon dioxide emitted per unit of economic output—by as early as 2020.

At the 2007 World CO2 Experts Meeting in Helsinki, Lingxi Zhou, a scientist from the China Meteorological Administration (CMA), heard Picarro Chief Technology Officer Eric Crosson’s pitch. Even though she didn’t get to sample the device, Zhou was apparently convinced enough to order five gas analysers, and later, another 11. The 16 analysers have been stationed in Shangdianzi, Longfengshan, Linan and Waliguan. They enable Zhou and her CMA colleagues to accurately measure and study China’s greenhouse gases.

Walking The Talk

The CMA incident exemplifies Picarro’s curious marketing strategy. The company is more focused on R&D than on marketing. It spends 30% of its revenues on R&D, but employs just three salespersons, one of whom is a part-timer. “Our marketing strategy is not to talk about the product as much as about what it can actually do,” says Woelk. So, of course, he targets green events like the AGU annual meeting in San Francisco and the European Geophysical Meeting in Vienna. These conclaves are frequented by scientists like Zhou—the biggest users of Picarro’s instruments.

But his tiny team doesn’t travel all around the world giving demos. “A demo is a laborious process, and with all that travel, it’s carbon-intensive,” says Woelk. Prospective clients can remote-control Picarro’s devices through iPhones, thus getting a demo that’s good for the environment, and for the start-up’s expense sheet.

“Picarro has more in common with Amazon than say, Agilent,” says Woelk. Agilent is Picarro’s behemoth rival. It is listed on the New York Stock Exchange, has a presence in 110 countries and clocked $4.5 billion in revenues in 2009. Picarro is backed by established venture capitalist funds like Benchmark Capital, Greylock Partners and Dag Ventures, but it’s still a much smaller start-up.

When it comes to money matters—funding, revenues, sales and, in fact, any numbers at all—Woelk wraps himself in a shroud of secrecy. The only figure he is open to sharing is the price of the company’s instruments. Gas analyser’s prices start at $50,000. Isotope analyser’s costs begin at $65,000 and can go up to $100,000. Even a fellow Valley start-up like Los Gatos Research has cheaper isotope analysers, with prices starting at $38,950. And there are umpteen other analysers in the market, some costing as little as $4,500. “It is a very dissected industry,” admits Woelk.

“We’re building a carbon market from scratch. The business challenges are the same as in building up any nascent market,” says Woelk.

The company claims that apart from being precise and sturdy, its analysers are so user-friendly that even children can run them. “We’re going to enable anybody who is ecologically concerned to measure emissions. You can even measure your neighbour’s emissions,” says Woelk.

He likes to add kids to that list. Later this year, Picarro plans to tie up with organisations like the California Science Teachers Association and the National Science Teachers Association. The partnership would create science projects wherein high school students will measure emissions.

Then, international passengers might find Picarro instruments travelling with them. The In-Service Aircraft for a Global Observing System (IAGOS) is considering carrying Picarro’s instruments aboard aircraft to measure greenhouse gases at different altitudes and different locations.

Biotech companies are another good prospect for Picarro’s analysers. Just as they measure the atmosphere, the machines can measure the breath footprints of rats and speed up the results of experiments. For instance, you can feed a certain medication to a sick rat and measure its breath to calculate the impact of the medication sooner than in other normal tests.

Picarro is in the right place at the right time. There’s a heated debate on over inaccurate climate change predictions. If the company’s machines are as accurate as it claims, it should be able to find many takers for them.