Calculating a carbon footprint and then matching those emissions to a carbon offset is a fiendishly difficult job. If you're in any doubt about that, just try out some of the wide number of free carbon footprint calculators on the internet and note how you'll probably get a different answer from each one.

So it's hardly surprising that there is move to quality going on with this service. And a listed company as big as Ecosecurities Group has a lot more to lose than a random consultant by getting it wrong.

They have just managed to land the advisory role on offsetting emissions from the Clinton Global Initiative Conference.

One of the banes of calculating offsets is to determine whether a particular offset - e.g. erecting a wind turbine, planting a tree, buying and inserting energy efficient light bulbs - would have happened anyway. The jargon is that it has to be proven to be "additional". And with carbon footprints, there are a great many variables - e.g. how do you drive your car, who is your power supplier and what fuel are they using at what time of the day? - that are all too often overlooked.

Footprints and offsets are far from a forensically accurate science. We can only see how this industry develops.

Received opinion seems to think so. Take a look at this piece on CNN yesterday "Sector Snap: Solar Stocks Rise" which said;

"Shares of alternative energy companies tend to rise when oil and gasoline prices climb, as investors seek to invest in companies which will benefit from government interest in other energy sources".

I think rushing into alternative energy when oil prices go up is just a bit too simplistic. Instead I would pay attention to some other metrics, each of which are quite sector-specific. Here are some of them listed below;

• Solar PV - keep an eye on silicon prices


• Hydropower - rainfall, the more there is, the cheaper the hydropower. The cost per kilowatt hour really does vary in price according to seasonal rainfall


• Wind - watch construction costs, steel costs, carbon fibre prices and average annual windspeeds.


• Energy Storage - lithium prices


• Carbon Trading - the most heavily traded carbon contracts are on the European Climate Exchange where prices are highest.


• Fuel Cells - Platinum prices

Of course, in a very broad sense, it's not wrong to say that if the price of oil goes up then interest and investment dollars will flow to alternative energy. Certainly, if the price of oil was where it was in 1999, just $10 a barrel, it's hard to see that we would not have had the boom we have been having in recent years.

All the same, I think it's more important to pay closer attention to the direct material and other cost inputs that are so important to the finished alternative energy production price.

Like anything else, if you want the truth, there's no alternative to a greater depth in knowledge. In other words, it always pays to delve a little bit deeper.

Nevada Geothermal has just done the geothermal equivalent of striking oil;

sinking a well that can produce geothermal fluid under its own pressure.

The detail is that Well 23-14 can produce " . . .at a post flash rate of 1865 gallons/minute (118 litres/sec) and a well head pressure of 78 psig (538kPa). A static temperature survey on September 16, 2007 showed a maximum downhole temperature of 374°F (190°C) ".

The Geothermal industry is starting to look like a proper industry on the verge of something big. In the USA, this is partly thanks to the extension of the production tax credit to geothermal power of 1.9 cents per kwh. Elsewhere around the world, Australia's opposition - big fans of geothermal - looks set to win the election and there is even very recent news that Goldman Sachs it taking a serious interest via Iceland.

So now AEI is also now tracking a not inconsiderable 11 geothermal stocks and I daresay this will expand over the next year or so quite a bit more.

It's all too easy to overlook the complexity of the solar pv industry and talk about it collectively. The manufacturing end of the Solar PV industry in particular has several levels, with generally speaking, the highest margins at the top. Those levels are;

i) Those that make polysilicon

ii) Those that cut wafers from the said silicon

iii) Those that make solar cells from the wafers

iv) Those that make solar modules from the solar cells

(Here's where I got the photo from by the way). Followers of this blog and of the solar industry in general will be well aware of the polysilicon supply crunch which is largely responsible for the non-fall in prices, so often predicted in recent years from increased production.

Well LDK Solar, a manufacturer of silicon wafers, has just come up with its own drastic answer to the polysilicon shortage, making it themselves. LDK expects to start production at 6,000 metric tons in the third quarter of 2008, rising to 15,000 tons in 2009 - a hell of a lot.

Meanwhile, China Sunergy, Chinese solar cell firm based in Nanjing, is so desperate for wafers that they are buying them from Taiwan. I say desperate because I suspect mainland Chinese officials would hate their high-tech industries to be seen to be dependent on Taiwan, for them a renegade province that should be under PRC control. If you want to know more about the Taiwanese solar industry, take a look at this excellent piece here.

The hard question though is how long will the silicon shortage last?

A few years ago, the optimists said 2008, today they say 2010. I'm going to stick my neck out and guess that it will be even longer than that - 2012. A lot more capacity needs to be created at the top end of the manufacturing chain and I don't see that - yet.

Climate Exchange Plc, the London-listed carbon trading exchange (with exchanges in London and Chicago), has just launched a new product with Deutsche Bank - Catastrophe Event-Linked Futures on the Chicago Climate Futures Exchange.

The man behind this is Dr Richard Sandor, who I interviewed last year. As well as being a top academic, he is a huge and entertaining personality which made my job very easy. This news of a new financial product from Climate Exchange made me think of the last question I asked him from that interview;

DL: "So what does the future hold for you; when emissions have been reduced to zero, we won’t need carbon trading, will we?"

RS "I don’t think this will happen quickly and I’m not particularly worried about it from a business point of view. But yes, the ideal situation is to put yourself out of business. It’s like if you work for a cancer foundation, you hope that one day, there’s no need for a cancer foundation because you’ve cured cancer. As an alternative, I believe in water and I think we know how we can save endangered species. We have a lot more work to do before we’ll run out of products to trade".

Amen to that last sentence in particular. Alternative energy could do with a lot more financial instruments. Right now we have stocks, funds, carbon and ETFs. And a futures contract was only recently developed for ethanol, so how about biodiesel, biogas and silicon?

Certainly D1 Oils plc think so. Their plan is to exploit Europe's high demand for biofuel by producing oil from jatropha seeds. They (rightly, in my view) doubt that Europe's rapeseed and waste oil can plug the gap. And they have also managed to attract the interest of oil giant BP. As this article says, jatropha is so tough, it can " . . . grow in tropical and subtropical wastelands . . . deserts, garbage dumps and rock piles, where food crops wouldn't stand a chance. Moreover, it's a low-maintenance shrub, needing about 600 mm of water, but which can survive three years of drought by dropping its leaves".

Ok, but it's always worth examining the sceptical side of any investment story. And this piece here Jatropha: Too much hype on little known plant from the Philippines does a pretty good job. It questions, citing experts, how quickly after plantation commercialization can be achieved, the yield in kilos per hectare and oil content in percent in Philippine conditions.

Still, with D1 BP's joint venture getting set to plant one million hectares and an estimated 300,000 hectares per year thereafter, we'll find out soon enough how effective Jatropha really is.

Ecosecurities Group, expects to make net profits of 191 million euros ($261.5 million) by 2012 on sales it has already agreed. That's the good news. The bad news is that The firm made a pretax loss of 12 million euros in the first six months, up from 8.4 million over the same period last year.

Ecosecurities is in the business of carbon offsets - a complex and sometimes disputed method of reducing carbon emissions.

Finavera Renewables, has cannily produced a video for Youtube about their AquaBuOY - so here it is.

You can see quickly how it all works and the voiceover is slightly camp - a bit like Hal from 2001. But joking apart, how far are we really away from the mass deployment of wavepower?

Certainly, some people are very optimistic, forecasting a fall in cost similar to the trajectory of wind power. Yet the reason wind power fell so fast was much less to do with economies of scale and much more to do with (much like the aircraft industry) a technological shift from wood to metal to carbon composites in the turbine blades, which meant they were strong enough to be built much, much, bigger, hugely reducing the installed cost per kilowatt. There are now commercially available 5 mw machines. 20 years ago, the largest was only strong enough to generate approx. 40 kw.

That's why I don't buy into the mass production story for wavepower. There is no similar shift/technological breakthrough in materials deployed around the corner. Sure, it will grow fast from a very low base. But in the years to come, I don't see it being anywhere near as cheap as windpower, in spite of some of its innate advantages - a more predictable load factor, modular scaleability and lower planning hurdles. At an estimated $6000 per installed kilowatt, it still costs too much.

One of a handful of giant Western Oil Majors - BP - (and still a mere fraction of the size and reserves of Saudi Aramco) is taking a punt on biofuels, in a new joint venture with D1 Oils.

According to their website, D1 Oils, sees itself emerging as a biodiesel leader in;

* Agronomy - the science, planting and production of inedible vegetable oils.

* Refining - the designing, building, owning, operating and marketing of biodiesel refineries.

* Trading - the sourcing, transport and trading of seeds and seedlings, seedcake, crude vegetable oils and biodiesel.

I've thought for some time that as biofuels became a bigger and more profitable player, "Big Oil" would start to take an interest to hedge their bets against the risk of volatile oil prices and of course, their declining reserves. It seems that now this is starting to happen. BP like many traditional oil firms, was embarking on a path to get rid of the excess petrodollar cash in dividends. I sense though that in this period of sustained higher oil prices, this will not continue ad infinitum - the urge to hold onto the cash and diversify out of the core business is just too great.

As I wrote here, this problem for shareholders, known as "free cash flow dispersion" can and does create other headaches. All the same, BP could claim to be a pioneering oil firm in investing in alternative energy. They after all got heavily into the solar business some years ago and more recently in 2006 with Clipper Windpower.

Would that Saudi Aramco ever do the same !

Iranian President Mahmoud Ahmadinejad claimed Sunday his country has met a key target for its nuclear program and more than 3,000 active centrifuges to enrich uranium. Meanwhile, President Bush is turning up the heat, as well he might. It is after all, very difficult to negotiate with someone - Iran - who wants something you don't want them to have - nuclear weapons.

And speculation continues to grow that President Bush, egged on by the Vice-President, is planning a military confrontation, sooner rather than later. Leaving aside the human tragedy of any war, there is a school of thought emerging that a war with Iran would be a fillip to alternative energy stocks, because it will send the oil price through the roof. Is there strength to this argument?

Obviously, for a start, it depends a great deal on how effective the military strike is. If the Iranians were able to launch a successful counter-attack (and one is all they'd get), they just might close down the Straits of Hormuz. A far worse scenario would be if the Iranians choose to "red cell", or attack first themselves, overwhelm a few capital ships with a barrage of cheap anti-ship missiles and sink a tanker or two.

Yet far too many words have been expended on everything going wrong and the assumption that America's policymakers would sit on their hands while the world went into an "oil shock recession". That's why alternative energy investors should pay close attention to a 4 month-long war game, organised by the Heritage Foundation, that not only modelled worst-case circumstances in a war with Iran. It also came up with policy responses and using the same model, tested their effectiveness in combatting a high-oil price. One of those policy responses stands out;

Ending tariffs on ethanol - to encourage eth­anol imports and reduce retail biofuel prices.

The Brazilians have wanted this for some time, and outside of the Midwest and for shareholders in US ethanol stocks, it's hardly an unpopular move. Critically though, combined with a raft of other measures, the group's policy recom­mendations eliminated virtually all of the negative outcomes from higher oil prices.

So there we go; if there's going to be a war, there's at least a chance that it will be short, overwhelming and just might, after the first couple of weeks, even send the oil price down. Don't forget that Middle East tension is already priced in to the price of oil. Still, many people thought a drop in oil prices was possible after the war with Iraq in 2003 . . .