With the advent of the Kyoto Accord on February 16th and the European Union’s Emissions Trading Scheme (EU ETS) on January 1st, and the growth of regional cap and trade markets in North America for emissions, software makers are beginning to take interest in the green trading and associated risk management market for software.Already established vendors such as SunGard Energy Systems have announced emissions trading systems to support the EU ETS and many other established energy trading, transaction and risk management software vendors are eyeing the market, too. In fact, some of them already cater for emissions trading to some degree and claim clients using those capabilities.
However, over the last 3 to 5 years a new category of software and vendors has emerged offering environmental compliance solutions to energy and other companies with emissions or effluent and other environmental issues. Several vendors in this category of software have already established themselves and provide suites of software that monitor, model and report emissions of various types to the a number of regulatory agencies. These solutions such as that offered by VisionMonitor Software, while focused on compliance assurance, have gradually broadened
their functional footprints to incorporate functionality such as incident reporting, workflow support and alerting for example. And yes, emissions trading too.
AND THE WINNER IS . . .
So who will win? Will the emphasis be on trading emissions as a part of a broader portfolio of energy and energy-related commodities and associated market risk management, or will it be on compliance assurance and
broader environmental risk management?
Certainly both software categories will find themselves with new and strange competitors as green trading and cap and trade schemes gain in popularity and usage.To some extent who wins will depend on the evolution
of these markets.The traditional trading and risk management solutions are best suited to ‘traders’ particularly those with a financial aspect to their trading strategies. The compliance assurance solutions will fit asset-heavy
energy companies that want to optimize their assets while ensuring that they manage their environmental risks, exposures and reporting needs.
A FASCINATING CLASH
With the growing importance of socially responsible investors and pressure from environmentally sensitive shareholders combined with the need for even North American enterprises operating overseas to comply
with European and other emissions schemes and regulations, this could be a fascinating clash of two software categories.We have no doubt that green trading is set to take off through 2005 and beyond and that environmental
risk management is now set to become a board-level issue. Meanwhile, both groups of vendors are looking for new opportunities to license software and see this as the next big market. It should be fun!