I don't like to get into politics on this website, less still opine on them. Investors should be above all that. But in a detached way, you can't ignore the shift (and the opportunity) that will occur in Australian alternative energy policy, assuming Kevin Rudd wins the Australian General Election tomorrow - not entirely certain.

This is what he said in his final plea to voters in a newspaper today;

"Labor will immediately ratify the Kyoto Protocol and establish Australia’s first national emissions trading scheme to provide the framework to meet a carbon target of reducing our greenhouse gas emissions by 60 per cent on 2000 levels by 2050. We will implement a renewable energy target of 20 per cent by 2020. Our $500 million renewable energy fund will help develop and commercialise solar, wind, geothermal and wave power projects, in addition to our $500 million national clean coal fund. We will set up a desalination and urban water recycling fund".

Considering that Australia, a fast-growing developed economy, generates roughly 9% of it's electricity - mostly hydro - from renewables, this target will be tough going. The headline story here though will probably be the Kyoto Protocol and the impact Oz will have on carbon trading.

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?

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.

Camco International, has just bought BRADSHAW Consulting, a software business which helps companies in the UK and United States to find ways of reducing their carbon emissions, energy consumption and waste for up to £1.5m.

I'm all for computer software playing a bigger role in carbon accounting - if only because there might be less room for selective interpretation of what is a carbon-offset, as recent controversies attest whether over biofuels or tree-planting or something else.

Still, whilst you could theoretically keep track of all your emissions at the micro level, I still think there's one giant hole in carbon accounting; at the macro level. What about the energy input produced from bought-in goods?

That is to say, if a firm buys computers/electronics components online from www.anymanufacturer.com, have they any idea how many carbon emissions that took to build the at least 90% or so of components that were made in China or Taiwan?

Was that energy powered by coal, nuclear or hydropower?

Right now for those firms, these are impossible questions to answer. And for the forseeable future, rightly or wrongly, China has no intention of decoupling economic growth from rising carbon emissions. So whatever Western firms think they're doing at the micro level to reduce carbon emissions, their reductions will quickly get overtaken by China's record-breaking coal-fuelled economic growth.

Low Carbon Accelerator, the first AIM-listed private equity fund to invest in alternative energy companies, has already got quite an interesting spread of investments - 8 in total.

The one that really caught my eye was their £4.5 million investment in Proven Energy, a highly respected manufacturer and installer in small wind turbines, ranging in size from 2.5 kilowatts to 15 kilowatts. Proven wind turbines are deemed to be the most solid and reliable on the market, not least because they are "heavy metal" and therefore unlike conventional megawatt class turbines, can work in hurricane force winds. Obviously it helps the firm that they are based in Scotland, where the climate can be unforgiving and for many, electrification by the national grid is not a possibility.

But it's the urban application that fascinates me. Here's a Proven wind turbine I drive by quite regularly on the Wandsworth Roundabout in London.

I'm always drawn to look at it and I have to say, it is almost never not turning at quite a speed. I gather that BP are rolling back their solar programme for their petrol stations and using micro wind turbines where possible instead - the economics are simply much better. Small wind turbines have been bashed in the media quite a bit, but I still think that in cost, output and potential, they will still beat solar pv hands down, for some time to come.

Econergy International, has just finalised the purchase of of a 50% stake in two hydropower stations in Bolivia from Duke Energy International.

Econergy sees itself as a carbon credit generation firm. So they've got to be pleased about this. Hydropower, after all, after the enormous amounts of cement to build the dams, operates and creates vast amounts of carbon-free electricity.

Let's take a closer look at the price too - $20 million for a 50% stake 147 MW. That works out at $242,000 for each of the 73.5 megawatts. I have to say, that looks very cheap. Building a hydro plant from scratch today would typically cost $3 million per installed megawatt. Could the world's hydro assets be substantially undervalued?

On the face of it, Econergy appears to have closed a good deal.

Econergy International , a clean energy and carbon developer has just bought an 80% share in a Brazilian wind project.

An interesting facet of the deal which I admire is the 20-year agreement with Electrobras, Brazil's government owned electric company, who have agreed to purchase the electricity generated by the farm. A 20 year contract for a windfarm is a very good deal. Most of the time, it is only a 15 year Power Purchase Agreement, which quite often leads to only a few lean years of profits. A 20 year contract however lengthens the time horizon for the investment return and could allow government to more easily reduce the direct subsidies to windfarms.

Time rather than technology is the key to price competitive windpower today.

Ecosecurities is up nearly 10% on the day and Trading Emissions is up over 4%.

The reason why is that the EU is getting tough on carbon emissions for 2008-2012.

Yet the closing price of (European) carbon today is down at EUR 8.10.

This is further evidence of my view that the price of carbon is not actually all that important to alternative energy. It's just not high enough to matter. National government support systems are far more influential. But above all, the carbon price that really matters is the price of oil. No way would there have been the boom in alternative energy technologies since the beginning of the century if oil hadn't sextupled and more in price from $9 per barrel in late 1999 to around $60 today.

As this article here indirectly suggests, there is much to fear for carbon trading companies that had previously made the assumption that it was here to stay, rise in price and become more liquid.

This may well prove to be a bridge too far . . .

When Europe started its Emissions Trading Scheme, as a follow-on from the Kyoto clean development mechanism, it was assumed that a lot of the clean energy investment would take place in Europe. What no one anticipated was that virtually all of the clean offset investments took place in the developing world.

And so to China, where according to Camco International the Jinan Iron and Steel Group Corp of China has agreed to sell about 12.3 million metric tons of emission credits generated by a project to capture and use greenhouse gases from the steelworks.

At current European spot carbon prices (the world's highest at around EUR 9.40 per ton), that's worth about $146m.

Also, take a look at the spike in the price of Camco's stock on the 12 month chart that happened at the end of October. That's because of the publication of the Stern Review of the Economics of Climate Change on 30th October - which argued that the right price for carbon was $85 a ton, a good nine times higher than it is now. Highly improbable if you ask me, but you can see why investors would be encouraged to hold stocks that are involved in carbon trading.