What better way to celebrate St. Patrick's Day than by going green?

That must've been the idea lurking in the back of the minds of the decision makers over at the New York Mercantile Exchange (NYMEX). Today, they're unleashing a new trading platform called the Green Exchange.

The exchange is a joint venture between NYMEX, Evolution Markets, Morgan Stanley and Merrill Lynch, among others. The idea is to trade carbon credit contracts and futures in a world where the greenhouse gas is increasingly becoming commoditized.

If you've been keeping up on my carbon market chronicling, you know that the U.S. already has a small emissions-trading market. It's called the Chicago Climate Exchange, but its stature will be dwarfed when this new market is unveiled.

The Green Exchange and the Extended Reach of Carbon Emissions

Beyond merely buying and selling contracts for greenhouse gases, there are myriad other opportunities to profit from the carbon market.

Just take a look at what some of the financial heavyweights have done lately:

• Citigroup has pledged $50 billion for green initiatives over the next ten years
• Bank of America has made a similar $20 billion commitment
• Citi, JPMorgan Chase and Morgan Stanley are now taking carbon emissions into consideration when deciding whether or not to finance new dirty power plants

These guys know that carbon now has a price--one that is expected to rise drastically--and they're doing everything they can to profit from it and hedge against it.

They also know that clean energy (and cleaner energy) are leading the fight against caustic emissions. And as the cost of carbon goes up--both economically and ecologically--countries, states and companies will be forced to invest in and purchase clean technologies.

But in addition to spurring spending on clean technologies, the advent of the Green Exchange provides some symbolic meaning as well. First off, it reverses the former U.S. position of abstaining or even denouncing any sort of emission caps or cap-and-trade system.

Secondly, it hints at the future of climate initiatives in the U.S. In fact, if the frontrunner among several Congressional climate change bills is passed, New Energy Finance estimates the American market for emissions could reach $1 trillion by 2020.

Profiting Without Trading Carbon

The most important thing to realize in view of these recent carbon market developments is that you don't actually have to trade carbon contracts to profit from the trend.

You see, generating carbon credits requires heavy investment in technologies that reduce emissions. That means a ramp-up in solar, wind and geothermal projects and the like.

But it also means cleaning up the emissions of dirtier sectors like coal- and natural gas-fired power plants, industrial plants and transportation.

So it's possible to invest in the companies that provide these solutions as a way to leverage the exploding carbon market.

A recent Environmental Protection Agency (EPA) announcement provides a prime example. Last week, the EPA announced strong new pollution controls on the nation's locomotives, ships and passenger ferries.

And while some of the projects resulting from that decision could potentially harvest and sell carbon credits, a few companies are also going to profit handsomely from the billions it will cost to clean up the nation's trains and vessels.

Wouldn't it be nice to know what companies will be getting those contracts and invest in them before the run-up in stock price?

That's exactly the aim of my new service, Alternative Energy Speculator--to seek out emerging clean-tech companies as well as stop-gap technologies.

While the ultimate goal is a transition to a low-carbon economy, we're willing to take a profit on the steps being used to get there, like cleaning up the coal industry or using natural gas in lieu of other dirtier fuels.

We're also willing to take on higher risk than most--hence the "speculator." But of course higher risk means higher reward. And that's exactly what I plan on delivering.

I encourage you to follow this link to read more about Alternative Energy Speculator. The portfolio already has some big winners in it. And I plan on adding more very soon.

Until next time,

Nick

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