The study reinforces the need for climate policies, such as those like cap and trade that would limit countries’ total emissions, to take into account the climate-changing emissions embodied in traded goods and services, the report says. The study also points to a growing opportunity for those companies developing carbon management platforms, such as San Francisco-based Carbonetworks, Germany’s SAP or Redwood City, Calif-based Hara, to track these outsourced emissions.

The report’s authors looked at published trade data from 2004 to build a global model of the flow of products across 57 industry sectors and 113 countries or regions. They then allocated carbon emissions to particular products and sources and from that were able to calculate the net emissions “imported” or “exported” by countries. The study concluded that about 23 percent, or 6.2 gigatons, of all carbon dioxide from fossil-fuel burning globally is emitted during the production of goods that are ultimately consumed in a different country.

The fact that many rich countries are net importers of carbon emissions won’t be a surprise to many, as so much production of machinery, electronics, apparel and textiles in recent years has shifted to developing countries like China. But the report, which was published Monday in the Proceedings of the National Academy of Sciences, adds scientific weight – and some specific figures – behind what was arguably already an intuitive trend.  

The U.S., for example, leads the pack as a net importer of emissions with about 699 metric tons, or 2.5 tons per person, of carbon dioxide per year. Japan is second at 284 tons per year. China, however, is the largest exporter of emissions with 1147 tons per year, while Russia is second at 286 tons per year. See the graph for a nice visual representation of these carbon flows.

But all this trading of carbon points to a complicated question: Who is responsible for emissions and how should the burden of mitigation be shared? These questions need to be considered as countries around the world move to limit total emissions, the authors said. Currently, national inventories of carbon, such as those by the UN Framework on Climate Change, only account for those emissions produced within countries, the report says.  

These issues have led some to call for taxes on the import of carbon-intensive goods, which advocates say would protect domestic industries from foreign rivals using dirtier, cheaper power and would prevent so-called carbon leakage, when carbon-intensive production moves offshore. Carbon import tax has gained momentum after the recent Copenhagen talks, at least in Europe.

The cross-border flow of carbon also offers an opportunity for the growing number of companies developing software to help their clients track the carbon emissions related to their businesses. These software developers have so far focused largely on helping companies calculate emissions directly related to their operations, such as the fuel consumed by their fleets or the electricity used at their facilities.

But the “next step” in the evolution of their products, says Forrester analyst Chris Mines, will be tracking supply chain emissions, like those related to goods imported from abroad or trucked across town. Big companies like Wal-Mart and Hewlett-Packard are now “pushing hard” to get their suppliers to provide data on the embodied energy of their products, Mines said, and software suppliers will “catch up.”

Michael Meehan, chief executive of startup Carbonetworks, told Earth2Tech his company’s carbon management platform is already being used by some clients – especially those looking to “protect their brand as an asset” – to track supply chain emissions. But he said doing it is “extremely difficult” partly because you need to protect against double counting. When a good is trucked across country, you need to decide who is apportioned those emissions, the transporter, the distributor or the company buying it, he said. But Meehan said this is the perfect kind of job for software from an outside vendor: “You can’t manage this stuff internally, there is just so much.”

The federal government – occupying nearly half a million buildings, operating more than 600,000 vehicles and employing more than 1.8 million civilians – spent more than $24.5 billion on electricity and fuel in 2008 and is the largest energy consumer in the U.S. economy. Federal departments and agencies will achieve emissions reductions by measuring their current energy and fuel use, becoming more energy efficient and shifting to clean energy sources like solar and wind, the statement said.

The announcement should be welcome news for the growing number of firms, such as Kleiner Perkins-backed Hara and German software giant SAP, developing products and services that help organizations track and manage their carbon emissions. Companies that help building owners reduce energy use through efficiency measures, as well as renewable energy developers, also stand to gain from the new federal mandate.

While the new target is limited to federal departments and agencies, private businesses are increasingly looking to track and understand their carbon emissions across their operations. Earlier this week, the Security and Exchange Commission issued guidelines on what publicly traded companies must disclose to investors about climate-related effects on their businesses. One issue they must consider is the potential risk to profits from environmental protection laws, such as those mandating a reduction in green house gas emissions.

In related news, the Obama administration  yesterday gave notice to the United Nations that the U.S. will aim for a 17 percent emissions cut by 2020 over 2005 levels. The Copenhagen Accord agreed by the U.S. and other countries at U.N. talks in December calls for governments to submit non-binding climate plans by the end of this month. But the final U.S. 2020 emissions goal depends on Congress passing a climate bill.

Besides calling for reduced emissions, the executive order signed last fall requires federal agencies to meet other sustainability goals. Those goals include a 26 percent improvement in water efficiency by 2020, a 50 percent recycling and waste diversion by 2015, and the implementation of a net-zero-energy building requirement by 2030. The government said agencies are already taking actions toward these goals. The Central Intelligence Agency, for example, has recently opened two LEED-certified buildings that reduce energy and water use over conventional construction, and the Environmental Protection Agency is upgrading its fleet over the next decade to hybrid-electric and plug-in vehicles.

Image courtesy of Wikipedia. Photo by Paul Morse for the White House.

The industry to generate and then verify carbon offsets has exploded in recent years largely because of the Kyoto treaty, which established national limits on emissions. The treaty allows regulated companies to purchase credits produced from these offset projects to meet a portion of their emissions-reductions targets set by the international program. More than 300 million credits, each representing the equivalent of one metric ton of carbon dioxide, have so far been generated, and these credits can then be traded on commodities markets. Shapiro says up to 2 billion new credits could be drawn from offset projects if a cap-and-trade program similar to the proposals now before Congress were to become reality.

Shapiro, who traveled to Brazil and Europe and interviewed a legion of experts to write this piece, argues that the system is fraught with pitfalls, from grossly inaccurate readings on the emissions reduced by projects to conflicts of interest from the third-party firms hired to “verify” offsets. A study published in the peer-reviewed journal Climate Policy reportedly found that just 60 percent of the projects it looked at actually provided evidence that they were reliable. Shapiro calls the market for credits produced by offset projects “an elaborate shell game, a disappearing act that nicely serves the immediate interests of the world’s governments but fails to meet the challenges of our looming environmental crisis.”

Other writers have taken their shots at the offset market, including those at BusinessWeek and the Financial Times. UK-based environmental journalist George Monbiot has likened the industry to selling indulgences and called offsets an excuse for business as usual. But Shapiro’s warning comes at a crucial time, as Congress is expected to start debating national climate legislation again later this year.

The offsets allowed under current cap-and-trade proposals in Congress would be far broader and complex than those now traded in Europe and created under the Kyoto regime, according to Shapiro. He points to provisions allowing offsets from reductions in greenhouse gas-intensive farming practices and the preservation of forests as two examples of new classes of “carbon promises” with measurement and accountability challenges.

In theory, allowing for the creation of credits from offsets has benefits – incentivizing businesses and individuals to invest in carbon-reducing projects that otherwise wouldn’t have occurred and transferring technology to poorer countries, say through a project that replaces kerosene lamps with solar-powered lights. But if a reliable system can’t be established to verify real offsets, then the idea should be phased out. A robust and effective cap-and-trade program could be implemented without offsets – large emitters bid each year for a gradually declining number of allowances, or credits, sold by the government and those that end up needing fewer than they bought can sell them to those that require more. Killing cap and trade because of the offset problem would be like cutting off an arm because of a broken finger.

Image courtesy The Library of Congress via Flickr.

Then there’s Silver Spring Networks, which just raised $100 million and looks like it’s getting to that stage where it’s too big to be acquired but will need more financing to compete in the smart grid infrastructure market. Silver Spring isn’t commenting on any IPO rumors, but it is clearly one of the best candidates in the greentech world. If these three — Solyndra, Silver Spring and Tesla — do go public in 2010, it’ll make investor Steve Westly look like a pretty solid market forecaster — he predicted in May that these three would go public by early 2010 and he’s already good for one out of the three.

Out of any of the venture capital investment sectors, greentech has the most bullish outlook in 2010 from a VC standpoint. According the National Venture Capital Association, more than half of a group of venture capitalists surveyed predicted that clean technology would see higher investment levels in 2010. According to a report by PricewaterhouseCoopers, venture capital investing in cleantech already rebounded sharply in the third quarter of 2009 to $898 million in 57 deals, up from $475 million in 49 deals in the second quarter of 2009.

The IPO market in general is also looking better to VCs. VCs surveyed by the NVCA are predicting “a mild improvement” in the number of venture-backed IPOs overall in 2010, with 74 percent of respondents saying they think there will be more than 20 IPOs in 2010. However, according to this Reuters article, greentech companies’ offerings represented only a small portion of the overall U.S. IPO market in 2009, ranking fifth by dollars raised in 2009 in the IPO market, and accountng for 8.5 percent of issuance by companies going public in 2009.

Will 2010 see greentech firms gathering a bigger percent of those IPO dollars? I think so, but it all depends on how strong the companies are. As Westly explained to us, his 2010 greentech IPO predictions were based on a company showing 10x growth in revenue between 2008 and 2009. Solyndra has generated revenues of $58.8 million for the nine months ended October 3, 2009, rising from revenues of $6 million for the fiscal year ended January 3, 2009.

So which firms beyond the three mentioned are seeing that type of growth in the greentech space? Greentech Media added smart grid firm Trilliant, solar thermal company BrightSource Energy, and LED maker Bridgelux to the potential IPO list after A123Systems went public. If you have any predictions add them to the comments.

At stake for greentech companies is how big or small their markets will be, how long until those markets pick up and how to determine the price on carbon, which is an integral key to many greentech firms. As Frost and Sullivan’s Renewable Energy Analyst Zeinegul Hassan put it in a research note this week, future investments in clean technology are “heavily dependent on the outcome of the 15th Conference of Parties,” commonly known as COP15.

Without aggressive action and agreement from governments on emissions reductions, “private companies will be timid in making large scale investments in clean technologies,” explained Hassan. The Combat Climate Change business group, which has members like BP, General Electric and Siemens, has expressed similar sentiment, explaining that without firm international action, the private sector will be hesitant to make major investments, as the landscape and time line for greentech markets could shift.

In a research note Deutsche Bank Research says that important decisions will be made at the talks for financial institutions, which will “play a key role” in fighting climate change, including establishing efficient carbon markets, and cap-and-trade systems. Of particular importance DB Research says is: reaching a consensus to limit the average global temperature increase to 2°C, articulating a series of intermediate targets for 2015, 2020 and 2030 to reach long term goals, ambitious emissions caps for developed countries, agreements to share technology development while keeping innovation incentives in place, delivering enough funding from developed nations for developing nations to mitigate and adapt to climate change, and decisions and funding for anti-deforestation methods.

A wealth of greentech entrepreneurs and innovators will be attending the events (Better Place’s Shai Agassi says “See You in Copenhagen”) in hopes that their presence will show how important the international decisions and agreements are to their industry. While entrepreneurs won’t necessarily be able to change the outcome of the talks, as Agassi put it in a video clip, their presence is important for helping create a high level of public awareness about the climate crisis and the green economy, and showing governments that the public stands behind action against climate change. “[T]he signal,” that “we’d like this thing [action on climate change] to happen,’ is critical. It’s amazing what a galvanized shared vision does to a political body,” Agassi said.

While many in Silicon Valley still eye the greentech industry warily — as a bubble that will pop as soon as the stimulus funds run out or the price of gas drops low enough — the industry actually became the largest venture sector last quarter in the U.S., eclipsing U.S. investment in biotech and IT. Yes, a lot of those plays had to do with government support for greentech, but in a dampened economy, that’s where the money often comes from.

Over the next two weeks, governments galvanized by public support, media, business, and NGOs will in essence be determining if the greentech industry will see another boom/bust type cycle, similar to the aftermath of the 1970’s energy crisis. If global leaders show weak posturing to emissions target reductions, it will send the impression that business can continue as usual. That would have dire consequences not only for the planet, but also for the potential of greentech markets.

Woelk told us that the deal will bring “terrific exposure” to his company’s analyzers, but the chief executive has bigger aspirations than the WMO’s program. He says the current methods used by governments (and companies) to calculate GHG emissions are often based on the amount of fuel consumed and can thus be inaccurate. Governments and companies could also be tempted to provide fraudulent data about their reductions, especially as carbon credit trading becomes a bigger and more lucrative business. Woelk think his sensors can help bring more transparency to carbon emissions calculations.

So Woelk has been shuttling to Washington, D.C., to argue his case to legislators (he’s talked to staffers of Sens. Boxer, Kerry and others) that if the U.S. is going to regulate carbon either through the Environmental Protection Agency, a cap and trade system, or some other means, then the country needs to have an accurate way of measuring changes in emissions. His idea: a nationwide network of 500 sites outfitted with Picarro sensors with a price tag of $300 million that could accurately measure in real time tiny changes in GHG emissions for the entire country.

So far scientists have been the main supporters of Picarro’s gas analyzers. Lawrence Berkeley National Lab, the National Oceanic and Atmospheric Administration, Penn State University and other research outfits have been using Picarro’s technology in their labs and out in the field. The device, a 58-pound box of sensors that’s about the size of a desktop PC, fires laser beams into the air to determine concentrations of carbon dioxide and other gases by measuring the changes in wavelength signals.

While technology has existed in labs for decades to make these measurements, Woelk says Picarro’s achievement is that they’ve stuffed all this measuring capability into a highly portable device that requires very little maintenance. “You don’t need PhD’s to run these instruments,” Woelk said.

While other systems have to be re-calibrated by technical experts as often as once a day, clients have reported to Woelk that they’re able to let Picarro’s gas analyzer go untouched for up to six months. That translates into big savings for users over competing technology, Woelk said. Other companies developing gas-analyzing technology include LI-COR Biosciences, Agilent Technologies, and Thermo Scientific.

But Picarro’s largest long-term opportunity could come from companies operating refineries or managing landfills that are required under cap and trade or some other rule to monitor and reduce their emissions. Picarro’s technology could measure emissions in the downwind plume. “If you start to apply a value to those assets, in this case emissions, than fundamentally you will want an accurate measurement of those assets,” Woelk said.  So far, however, Picarro, which was founded in 1998 and is profitable, hasn’t inked any deals with companies. But Woelk expects that to change once the “simplicity, low cost and high return becomes apparent” compared with other options.

What is this smoking gun unearthed by the Journal? It’s that the White House is currently reviewing the Environmental Protection Agency’s April finding that carbon dioxide is a dangerous pollutant, and thus subject to regulation under the Clean Air Act. The Journal says that because the Obama administration is taking steps to exempt small emitters such as hospitals and bakeries from the regulation (by raising the pollution level at which the EPA is required to step in), we now have evidence that the White House is aware that limits on greenhouse gas emissions will hurt the economy. The Journal asks, “If the green future is going to be so bright, why does the White House want to exempt so many businesses from its glories?” Well, because it understands smart policy.

Regulation of greenhouse gas emissions is most efficient when directed upstream, such as at power plants or refineries, through which fossil fuels enter the economy. The idea is to go after the big polluters, which give you the most bang for your buck, and thus minimize administrative and bureaucratic costs because fewer companies interact directly with the system. This is the approach behind the House’s proposal for a cap-and-trade system in its version of the climate and energy bill that’s still working its way through the Senate. The House’s Waxman-Markey bill would cap only the largest emitters (responsible for greater than 25,000 tons of carbon dioxide equivalent per year) but would still cover about 85 percent of all domestic emissions.

The assessment of emission limits by the Journal’s editorial board is plainly near-sighted, ignoring how policies that untether the economy from fossil fuels could deliver benefits to households and businesses over the long term. By encouraging the more efficient use of energy, businesses of all sorts would gain from new technologies that help them produce more from less. By switching over to domestically produced renewable sources of energy, U.S. consumers could avoid the periodic price spikes we now experience with oil.

The op-ed ignores these factors. It also fails to acknowledge the potential revenue from sales of emissions allowances, a chunk of which the Obama administration wants to be invested in energy-efficiency projects. These types of projects can save consumers about $3 for every $1 invested, according to the nonprofit policy group Environment Northeast. Under the Waxman-Markey bill, electric and natural gas distributors would be given emission allowances for free in the early years of the program but would be forced to spend much of that revenue on efficiency projects, helping to reduce energy demand, emissions and utility bills for households and businesses. System wide effects of reduced energy consumption over time could also help drop wholesale energy prices and peak demand — not to mention improving the reliability of the power grid.

Perhaps the biggest oversight in the Journal editorial is the failure to mention the long-term consequences of climate change. One of the most comprehensive analyses of the economics of climate change to date — the Stern Review, which was commissioned by the UK government — found the lower-bound estimate for the cost of no action was the equivalent of losing 5 percent of global GDP per year. If that’s not bad for business, what is?

Such oversights wouldn’t be so angering if they were confined to this one article. But the Journal’s editorial team has made a habit of one-sided commentary on efforts by the Obama administration and legislators to reign in emissions and promote alternatives to fossil fuels. It’s one thing to scrutinize policy proposals and point out inadequacies and failures — the editorial board is entitled to an opinion — but it’s another to be so blinded by ideology that you draw illogical conclusions and ignore significant benefits. In the end, readers, and ultimately society, lose when such influential opinions are based on tainted analysis.

Now, with new climate policies and regulations coming down the pike — the EPA plans to spend $5 million next year developing a methodology for carbon offsets under the cap-and-trade system being negotiated in Congress — the ground on which carbon offsets stand is shifting significantly. Tech rivals Google and Yahoo have mapped out two different visions for how to navigate it.

For Yahoo, carbon offsets are out. The company announced last week that it will stop buying offsets for its operations, opting instead to focus on energy efficiency — decreasing the “average electricity consumption and greenhouse gas emissions” from the company’s data centers, as Yahoo co-founder David Filo explains on the company blog. “We believe creating highly-efficient data centers will have a greater long-term, direct impact on the environment and gives us the best opportunity to play a leadership role in addressing climate change.”

Google, meanwhile, plans to stick with offsets as part of a larger portfolio of renewable energy and efficiency improvements — despite the fact that it took until May of this year for the company to finish buying the credits for the energy it used way back in 2007. As Celeste LeCompte explains on GigaOM Pro (subscription required), that’s largely because tracing carbon offsets back to particular projects and verifying that they actually reduce emissions — and how much — is tricky business. Google Green Energy Czar Bill Weihl noted on the company blog back in May that the lack of regulation for carbon offsets leaves a lot of grunt work for green-minded companies to figure out if their purchases really trigger emission reductions that wouldn’t happen otherwise, or what’s often called “additionality”:

Current standards for offsets require a significant amount of work to evaluate the quality of each offset project and ensure that projects go beyond “business as usual.” Stronger additionality standards — that are more stringent, clear, and objective — would also make it simpler for corporations like Google to use offsets as part of an overall strategy to neutralize emissions.

Companies that follow the lead of Yahoo, with its plan to ditch offsets altogether (at least for the time being) and buckle down on internal efficiency improvements, or Google, with its efforts to police its own offset purchases no matter how long it takes while also working to slash its energy use, may be able to avoid the pitfalls of another tech company that has been among the most aggressive in pursuing carbon neutrality: Dell. It’s no secret that in addition to energy efficiency improvements, the company has been buying offsets based on renewable energy projects to reach that status. But late last year it was revealed, thanks to some in-depth reporting by the Wall Street Journal, that the company was “claiming carbon neutrality mostly by purchasing environmental credits.” Furthermore, some of the offsets were for projects that would have gone through anyway — illustrating the need for those so-called additionality standards.

This is where regulators are poised to take a larger role, setting rules for what kinds of projects can be marketed as carbon offsets. Until now, startups have been stepping in to fill much of the knowledge gap, and going forward, they’ll likely be able to find a role helping companies sort through the new regulations. As Dan Kalafatas, COO and president of 2-year-old offset broker 3Degrees, explained to us on the day of his company’s launch, “Our customers are in the business of coffee or computers,” not carbon.

This article also appeared on BusinessWeek.com.

In other words, climate change is evolving from a scientific and public policy issue to a business concern. “Until recently, the impact of climate change on the deal market was barely on the radar of most businesses,” PricewaterhouseCoopers said in the report released Tuesday. “However, national policy action on greenhouse gas emissions is requiring companies in virtually every industry to think about the impacts on energy and climate policies on their business.”

That’s good news for those developing and selling products to help businesses go green and comply with ever-changing energy and climate regulations. And PricewaterhouseCoopers expects climate change to become increasingly important to investors and to companies’ valuations.

In the report, the firm recommends that companies prepare for higher energy costs and consider their climate-change-related risks, including any greenhouse gas emissions that might end up costing money in the event of a federal carbon cap-and-trade program or other carbon legislation. “Regardless of the ultimate policy design, the fact remains: When greenhouse gases are regulated at the federal level, the cost of carbon will have a measurable impact on business transactions,” the report states. “In this context, companies can no longer sit on the sidelines of the climate-change discussion.”

Companies should also get ready to disclose their climate-change risks to investors, the report suggests. Nearly half of the businesses on Standard & Poor’s 500 index already are reporting greenhouse-gas emissions to their investors in some way, and a number of investors, state officials and environmental groups have petitioned the Securities and Exchange Commission to require public companies to disclose their financial risks from climate change. But companies are far from ready to adequately meet reporting requirements; according to another report from the not-for-profit Investor Responsibility Research Center Institute and research company Trucost, a good 66 percent of companies on the S&P 500 do not publish adequate data on direct greenhouse gas emissions from operations and “could therefore be unprepared for mandatory reporting requirements.”

Climate change is likely to gain more weight in evaluating acquisitions, too, especially in heavy-emitting industries such as power generation, chemicals, industrial products and automobile manufacturing. In fact, it already is playing a role in mergers. PricewaterhouseCoopers pointed to German power company E.ON’s purchase of wind developer Airtricity’s U.S. assets for $1.4 billion in 2007, as well as Porsche’s decision to take the majority stake in Volkswagen last year to help it develop more efficient vehicles (and offset its higher-emission vehicles with the more efficient VW line).

Overall, companies that develop “sound” climate-change strategies and reporting capabilities stand to gain the most, the report says. Of course, if the evolution occurs as Pricewaterhouse Coopers predicts, cleantech companies that can help other businesses do this will also benefit.

As we explained back in November, when Planet Metrics raised $2.3 million from Draper Fisher Jurvetson, the software helps companies assess energy and carbon use in their business and identify “hot spots” (see screenshot above) — or areas where the biggest emissions reductions can be made. The system connects to other business enterprise software, and taps into several deep databases of information about life-cycle environmental impacts of ingredients, transportation methods and more.

The software also allows companies to run detailed what-if scenarios (see screenshot below) that can identify potential product design or vendor sourcing changes that could help it save energy, carbon and money. That’s a boon for companies that are looking to do more than just report their carbon footprint information.

As companies increasingly seek to tie their sustainability goals to other operational goals, Planet Metrics’ software may be just what they’re looking for. Method says it’s using Planet Metrics’ Rapid Carbon Modeling software to keep tabs on the carbon in its supply chain and to help it identify better ways to develop and manufacture its Cradle-to-Cradle certified products.

Planet Metrics isn’t the only startup gearing up. Kleiner Perkins-backed carbon management software firm Hara recently launched as well, garnering press from dozens of media outlets (including us) and delivering a service that will go head-to-head with Planet Metrics.

Beyond the startups, Planet Metrics will also face competition from plenty of the traditional enterprise software companies, which the firm had previously been keeping at arm’s length. Andy Leventhal, CEO of Planet Metrics, told us back in November that the company would integrate its software with other business intelligence software, but cautiously: “We have a very comprehensive plan — we don’t just want to jump into a relationship with an Oracle or SAP,” he told us then.

It’s no wonder that both younger and more well-established firms are moving in: As businesses begin to sweat over impending carbon regulation, the market for carbon management software and consulting services is already estimated to be worth about $3.6 billion.

That’s bad news for the lagging companies, as they’ll be in a tough spot once the regulations hit and international markets get big enough to put them at a competitive disadvantage. Oil and power companies made up the bulk of the biggest carbon emitters. (The top five were Exxon, Chevron, AEP, The Southern Co. and ConocoPhillips.)

But it’s good news for the carbon and energy management software companies that have emerged as of late. Just yesterday, 18-month-old sustainable software-as-a-service startup Hara launched a tool to give companies and cities the ability to manage their natural resource inputs and outputs, with backing from venture capital firm Kleiner Perkins.

Competing venture capital firms have invested in carbon management startups as well. Draper Fisher Jurvetson backed Burlingame, Calif.-based Planet Metrics with $2.3 million in Series A funding, while NGEN invested in Carbonetworks, and Novak Biddle Venture Partners and Kinetic Ventures invested in Clear Standards (recently bought by SAP). Software giants like SAP and Oracle are rushing to launch their own tools to capture this growing market, too.

How big is the carbon market created just by companies on the S&P 500? The report found that if a carbon price of $28.24 were applied to each metric ton of CO2 emitted by companies in the S&P, as well as their first-tier suppliers, the carbon costs would total more than $92.8 billion.

Hara CEO Amit Chatterjee tells us that Hara’s software-as-a-service product gives companies and municipalities the ability to itemize and track all of the inputs (water, electricity, chemicals) and outputs (the product, greenhouse gases, wastewater) that make up the business processes. By identifying both the inputs and outputs, Chatterjee says, Hara can then suggest how to optimize the overall system, enabling the customer to save substantial money and reduce waste. Many other carbon and energy management software tools focus exclusively on just carbon and electricity, and leave out the last step of prescribing ways that the company can tweak its business to become more efficient.

Chatterjee says for an average midsize company, its “Environmental and Energy Management” software tracks about 1,000 objects (like a truck or a machine) with an accompanying 26,000 lines of data. Chatterjee says the pricing of the software is based on how many objects are tracked, but the software can deliver a customer like a city a return on investment in 3 to 12 months. While Hara is just “launching,” it has more than a dozen customers signed up, including the Coca Cola Co. and the city of Palo Alto, Calif.

There are three types of organizations that will really benefit from Hara’s tool: power companies (oil, natural gas, etc.) that are spending millions on energy, companies with deep supply chains like a Dell or a Wal-Mart, and public sectors that are looking to meet and implement mandates.

All options are customers with reasonably deep pockets. So the green VCs at Kleiner Perkins were clearly impressed — Chatterjee says pitching Kleiner partner Al Gore was “great” — and Hara has raised a $6 million Series A round, including funds from the firm. Chatterjee, a serial entrepreneur, met the Kleiner folks, like partner Ray Lane, at previous web startups, and spent some time at enterprise software company SAP (which he says he was recruited to by SAP exec and now Better Place founder Shai Agassi).

In the same way that venture capitalists are turning to the smart grid (Why VCs Heart Smart Grid: It’s IT) as a familiar territory for cleantech investors with a background in infotech, venture capitalists are increasingly funding companies that are building software to manage carbon, energy and resources. Clear Standards (bought by SAP recently) raised $4 million from Novak Biddle Venture Partners and Kinetic Ventures back in November 2008. Burlingame, Calif.-based Planet Metrics raised $2.3 million in Series A funding from Draper Fisher Jurvetson. And Carbonetworks, an older player selling software and services to help companies reduce their carbon footprint, raised $5 million in funding from NGEN in the middle of last year.

Besides the adoption of technology, like high-insulating window and walls or energy-efficient lighting, the report makes five principle recommendations. They include: strengthening building codes and energy labeling for more transparency; using subsidies and price signals to incentivize energy-efficient investments; encouraging a more integrated design approach among building professionals; enabling the workforce to save energy; and fostering an energy-aware culture.

The report’s authors said they took a “bottom-up, market-driven approach” to understanding the barriers to lower energy use. Some of the more interesting targets include: for investors, to use energy efficiency analysis to enhance traditional decision-making; for suppliers and manufacturers, to develop marketing campaigns that promote a building’s total energy performance rather than single components; and for architects, to design buildings that can be more easily retrofitted with new technologies as they’re developed in the future.

This isn’t the first study to stress how important changes in the building sector are when it comes to achieving global climate change goals. Buildings consume more energy — and contribute to more greenhouse gasses — than industry or transportation, accounting for about 40 percent of the world’s energy use. The topic has become so uncontroversial that this morning the conservative Wall Street Journal, rarely prone to support eco-causes, published a special section on the “green house of the future,” complete with flowery language that could have been pulled from a 1970s hippie manifesto on eco-living.

According to the study, many energy efficiency projects are economically feasible at today’s energy costs. A $150 billion annual investment in building energy efficiency in the six markets studied (U.S., EU, Japan, China, India and Brazil) would reduce carbon footprints by 40 percent with a five-year discounted payback, the study found. Doubling that investment could achieve a payback within five and 10 years and would reduce the footprint another 12 percent. But achieving a higher reduction target, such as the 77 percent called for by the Intergovernmental Panel on Climate Change, could not be justified on economic grounds at today’s energy prices and would require other steps, such as subsidies.

When it comes to carbon and energy data, the purchases we make and the resources we use constitute our de facto “profiles” in real-world networks such as utility grids, roadways, financial systems and business supply chains. Energy and carbon management tools integrate information about our total energy use from these profiles in an effort to cut our carbon footprints. As smart technologies provide ever more data for these profiles, a Facebook Connect-like approach that uses federation, rather than aggregation, may be best-positioned to make energy and carbon management tools more effective, without sacrificing user privacy.

The current generation of consumer-facing web tools for carbon footprinting and energy analysis largely take the aggregation approach. Users can input their personal information, or it can be automatically pulled in, from a variety of accounts — utility bills and credit cards, for example — and organized into a single interface. As FriendFeed is to social networks, so these systems are to your energy data.

WattzOn, for example, aggregates information — some entered manually, some automatically gathered from select utilities (it hopes to soon have credit card partners as well) — analyzes the information and spits out graphs and social comparisons. Other services, like Planet Metrics and Eps Corp., take data from business systems software, sensors, and supply chains to analyze a business’s carbon impacts in a single interface.

Paralysis by analysis

As stricter carbon emissions regulations emerge, making businesses and utilities responsible for their own carbon impacts, the smart grid — and other smart infrastructure projects — will bring more sophisticated monitoring and analysis tools to market.

IBM’s Smarter Planet initiative, for example, will provide detailed data sets about resource flows of traffic management, shipping and supply chain, water systems, and the power grid. Cisco has also begun to move into data-generating smart tools for the green building market, while GE is taking its data-dependent smart appliances from deep, dark, corporate labs to the local hardware store. As the data from these tools piles up, federation tools may help make this data actionable. That means utilities, cleantech startups and their large IT providers are facing a data explosion that will make juggling social media accounts look easy.

In the case of smart traffic management, which aims to reduce congestion and, by extension, fuel use, such systems could take a variety of approaches: installing surveillance cameras or sensors to create “smart parking” systems, or perhaps a peer-to-peer traffic management system that distributes traffic information and alternative routes to individual drivers. In either case, that’s a lot of detailed information to handle. But what’s important is how the system is operating as a whole — not what any one person is doing. That means smart systems are likely to rely on a federated system of management that uses “device-to-device” communication.

A need-to-know basis

Federation offers systems access only to the information they need to perform a specific task, such as identifying a roadway with less congestion or an empty parking spot. Imagine it as something akin to single-login services like Facebook Connect or OpenID: a secure tool for maintaining your identity across energy-using devices, without divulging other sensitive information to systems that need to access that device. Rich Lechner, IBM’s V-P of energy and environment, says such an approach will help ease privacy concerns about such systems.

Whirlpool engineer Gale Horst pointed out in an interview for our Smart Energy Home report last fall that smart appliances could easily be set up to make decisions based on information from the grid without giving control of that device to the utility, and without sending information about what decisions were made back upstream — just the energy-saving results. This kind of system would require a federated approach. The utility, the device maker and the consumer would all have access to different information relevant for their own needs, without sharing sensitive information from another party.

Even off the smart grid, federation is a hot topic in security circles these days. The New York Times’ Bits Blog last week noted Microsoft’s efforts to use federated systems to protect road warriors’ data. But once again, this points to the need for open standards on the smart grid. Better integration across different systems will help smooth security issues, and open standards can help provide robust security protocols.

This article also appeared on BusinessWeek.com.

He outlined how Microsoft is empowering its employees to think about environmental impact: An employee-suggested switch from Styrofoam cups to compostable dishware cut Microsoft’s annual waste stream by 50 percent. On the IT side, Bernard said Microsoft is focusing on the 2 percent of the world’s energy consumed by data centers and bringing Moore’s Law to them. Utilization of servers is one aspect of that, as well as offering IT professionals metrics to measure their progress with energy consumption. Bernard said only 15 percent of IT staffers have even seen their utility bills.

Taking the role of IT beyond data centers and into building management will also improve efficiency of buildings by about 30 percent Bernard said. About 37 percent of greenhouse gases come from buildings — something the Obama administration is hoping to address. In addition to bigger role for IT, Bernard talked about Microsoft’s efforts to help scientists gather data from a wide variety of sources and mash that up into a usable set of numbers so scientists can study larger issues, such as the widescale affects of climate change on water systems.

Revising concepts of car ownership and power isn’t something a startup can do on its own. The concept requires revamping legacy industries and incentivizing consumer change, said a panel of auto innovators at Green:Net today. So basically, they are promising to change the world but asking for a whole lot of help and handouts and cooperation to do so. Technological innovation is only a small slice of their proposed reality.

“We’re talking about two industries that have never had to work together before — that’s the auto industry and the utilities, the grid operators,” said Rolf Schreiber, RechargeIT Engineer from Google. Panelists agreed that standardization is of utmost importance. Plug-in stations need to be interoperable. Customers of one company need to be able to roam onto another’s grid. Electrical interfaces need to sync. Utilities need to make charging cheap and efficient.

“Let’s make the vehicles talk,” said Sven Thesen of Better Place. “Standards work is not complex; it’s tedious and has to be done. The big picture is the technology is there; we don’t need to reinvent, we just need to put it in a different order. We’re talking about slow-moving old industries where change comes slowly.”

The panelists also had one more tiny request — international governmental help. They want federal loans and guarantees on batteries, subsidies for plug-in stations and regulations as added motivation.

It’s a lot to ask, yes. But folks at this conference are thinking big.