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Greenhouse gas emissions have been receiving a lot of attention recently. Last week, President Barack Obama traveled to the Climate Change Conference in Copenhagen and pledged a 17 percent reduction in U.S. greenhouse gas emissions by 2020. Meanwhile, other initiatives have taken place both within the US and in other regions of the world. At this time, despite continued uncertainties, we may well stand on the precipice of an era in which carbon becomes a globally traded commodity and in which companies, particularly energy companies, are forced to monitor, track, report and reduce their GHG and other emissions.

Against this regulatory and legislative background, two software categories stand to benefit as companies seek to capture their carbon footprint, report on their emissions and trade various instruments to manage their emissions profile and allowances or simply profit from speculative trading in those instruments. Those two software categories are CTRM software for emissions and emissions monitoring software.

Environmental Software

SolArc announced yesterday that Sprague Energy has selected SolArc's Solution for Natural Gas to manage that company’s natural gas supply business, including deal capture, nominations, scheduling/logistics, billing and risk management.

According to the press release, Sprague has been a SolArc customer for more than five years, using RightAngle to manage their oil trading, marketing and risk management operations.

I talked with Alan Gunn, Solarc’s managing director of natural gas sales, this afternoon and he indicated that this deal was one of “several” new gas deals they’ve closed in the last few months (including a previously announced deal with Southcross Energy). He also said, “…and the year isn’t over yet”. Stay tuned.

As many of the world's leaders arrive in Copenhagen to try to seal a climate deal, the signals emerging regarding progress from COP15 are mixed. Yesterday, the negotiating process was subject to an "unexpected stop," according to Yvo de Boer, the United Nation's top climate official and it has indeed been a week of stops and starts as even on Monday, informal talks between the COP15 presidency and developing countries ended a daylong boycott of negotiations, which was apparently caused by controversy over the Kyoto Protocol. There has also been much public talk by those involved of "posturing" and "placing blame on others." On the other hand, the Danish hosts are said to be preparing a new compromise draft and many of the countries involved have already brought forward substantive voluntary commitments to the table including, for example, Japan's offer of a total of 15 billion U.S. dollars for climate aid for developing countries through 2012.

The Issues

Many of the issues that have arisen were not necessarily unexpected and include the following in summary:

Emissions

"Climategate"

One thing that the recent “Climategate” episode may have done is to rightly focus more attention on the science that is really the driving force behind the COP15 meeting currently taking place in Copenhagen. Reading through the hacked e-mails published on various blog sites, it becomes obvious very quickly that the rigor and pure approach of science has been totally overwhelmed and compromised by politics and money.

Science should work on the basis of an open, free debate and a fair peer review process. If that is stifled then what we have is neither science nor reliable. What these e-mails show can be summarized as follows:

* The neutral and unbiased approach necessary in science has been replaced with almost a religious fervor that seeks a particular finding at almost any cost including carefully choosing exactly what data is used,
* The data is a mess with, for example, instances of data from recording stations predating that stations inception and, data of unknown quality and origin,
* Avoiding public scrutiny of the data and assumptions even to the point of destroying it,

Arriving in Copenhagen the first thing you notice is how clean, modern and well-organized the city is. Well-served by an efficient public transport system, the bicycle is a favored means of transport and almost all main roads have wide bicycle lanes. Climate Change Conference delegates are offered bicycle rentals for free and have been quick on the uptake.

A City on a Mission

Walking through the airport, one is greeted with the anticipated billboards and posters advertising COP15 and, the many household name firms who desire to be associated with it, but it is lower key than might have been expected in keeping with this city's apparent image. Arriving at my hotel, I am handed two 200kg CO2 retirement certificates purchased on my behalf by the hotel which claims to be a part of the first Carbon neutral hotel chain, and provided with a small brochure which highlights all of the events and exhibitions associated with the Conference. And yes—Al Gore is in town! COP15 is definitely a show replete with pop band entertainment and pop politicians—but it is also deadly serious business.

For the next two weeks, the global media will undoubtedly spotlight the United Nations Climate Change Conference being held here in Copenhagen, Denmark. Without a doubt, the eventual outcome of COP15 is likely to have a significant impact on both you as an individual and your company. Indeed, if the kind of agreement envisaged by, for example, the European Union (EU) is reached, it is likely to have huge global economic, political and social ramifications and it will dramatically change our world and the way we live. However, while some form of agreement is virtually certain to emerge from Copenhagen, the actual shape and nature of the agreement has yet to be determined. So what exactly is at stake this next two weeks in Copenhagen and how did we arrive at this point?

Understanding COP15—The Kyoto Protocol

Triple Point Technology announced yesterday that they have licensed their Commodity XL(TM) for Hedge Accounting, Fair Value Disclosure and FAS 161 to Chiquita Brands International Inc. As noted in the press release, “Chiquita is a leading international marketer and distributor of high-quality fresh and value-added food products including bananas, fruits and green salads. With annual revenues of nearly $4 billion, Chiquita has operations in more than 80 countries worldwide”.

The press release provides some interesting discussion of Chiquita’s bunker fuel usage and market exposure that would result if they did not hedge (and also the necessity of proper hedge accounting to fully realize the benefits of those activities), including a note that Chiquita’s ship fleet burn more than 300,000 metric tons of bunker fuel every year (I know there is a banana boat joke somewhere in there!).

Aspect Enterprise Solutions (previously known as Oilspace) appear to be making significant progress and recently have hit a small gold vein in Africa announcing new clients for its ASPECTEtrm product including; Ovlas SA, a subsidiary of West African downstream petroleum conglomerate MRS Group,Nigerian energy commodity trading company Linetrale and African petroleum supplier Cirrus Oil of Ghana. It also recently announced a win at Blue Oil, a market leader in oil supply, storage and distribution along the Pacific coast of the Americas.

I had a briefing recently from President and CEO of Aspect - Steve Hughes to try to get a better understanding of the company and its products. Aspect was founded in 2000 by Steve Hellman (now non-Executive Chairman) and Lawrence Austen and offers a solution set that is entirely web based using the SaaS model. It currently has around 100 staff located in the USA, UK, Russia and Singapore. Steve describes Aspect as "the only market data aggregator with a trading and risk solution on same platform/UI." and points to its products "excellent price performance based on TCO" as a key difference in its offering.

By Bob Bellemare
Managing Director and COO