While this could be the year clean-tech goes mainstream the way the Internet did in the mid-1990s, young companies can’t base their business models on government-issued carbon credits.

That was the majority view of a panel of heavyweight venture capital investors who spoke at the Wall Street Journal’s ECO:nomics conference on capitalism and climate at the Bacara Resort & Spa in Goleta on March 4. Among the speakers was Vinod Khosla, whose Silicon Valley venture capital firm has invested in at least three clean-technology companies in the Tri-Counties.

Khosla was bullish on energy-efficient technologies in lighting and automobile engines. In Goleta, he has invested in Kaai, a light-emitting diode firm that makes a high-efficiency blue laser diode, and EcoMotors, a firm designing a combustion engine whose pistons face each other lying flat rather than in a V-shape.

Khosla has also invested in Camarillo-based Transonic Combustion, which is developing a super-high-compression fuel-injection system for automobiles. EcoMotors and Transonic Combustion are working toward 100 mpg fuel efficiencies with standard gasoline engines.

“I think the area of internal combustion engines offers huge opportunities in a $200 billion market. There’ll be a revolution there,” Khosla said.

The panel also addressed the criticism that a focus on energy efficiency could ultimately worsen climate change because it could stoke additional demand for energy by making each joule go farther.

“It’s like a bucket of water that has a hole in the bottom,” said Paul Holland, a general partner at Silicon Valley-based Foundation Capital. “You can focus on refilling the bucket, but at some point you have to fix the hole. You’ve got to do both.”

Khosla said that he’s invested in companies that don’t need a “price on carbon” to make their business models succeed. Under cap-and-trade systems for dealing with carbon, clean energy companies could get credits to sell to polluters.

“It’s because I grew up in India, where there are no subsidies,” Khosla said. “[Companies] shouldn’t defy the laws of economic gravity.”

Holland concurred, saying his venture firm has passed on investing in companies with carbon-credits written into the business plan. “That, in our case, has made us automatically turn them down,” Holland said.

But John Doerr, a partner at Kleiner Perkins Caufield & Byers, said the downturn in the economy has shown the need to put a price on carbon so that investors will put money into clean technology.

“When that happened, all the follow-on investment for these disruptive ideas disappeared,” Doerr said. “When a price is put on carbon, it’s going to be the consistent price signal investors have been waiting for.”

Doerr said putting a price on carbon could be one of two “Netscape moments” for clean technology, referring to the initial public offering of Netscape in 1995 that drew mainstream investors to the Internet space. The other “Netscape moment,” Doerr said, would be for a clean technology company with broad appeal to go public. “It’s got to grab the average investor,” he said.

Khosla said he thinks that company could emerge as early as this year — if the space isn’t too crowded. He worries there instead will be a “nanotech moment,” referring to the spate of nanotechnology startups that generated more optimism than returns.

“My concern is that too many companies have filed [to become public], and we’ll have a nanotech moment,” Khosla said.

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