Carbon Cap and Trade

Written By Nick Hodge

Posted January 23, 2009

They’re already shaking in their carbon-filled boots. And that’s good financial news for you.

Major utilities are quivering in fear and anticipation of the energy and environmental rules ahead—not even a week into the Obama Presidency. It’ll cost them billions to keep pace with new clean energy mandates and pollution limitations.

And every dollar they spend on renewable energy, emission reduction, and related infrastructure can boost your bottom line. If you play it right, you can be sitting pretty, even as energy costs skyrocket post-recession.

Here’s what I mean…

Carbon Trading: Being Mandated at a Utility Near You

Ameren Corporation (NYSE: AEE), the near-$7 billion utility and member of the S&P 500, has begun voluntarily purchasing carbon allowances.

Nobody made them do it. And they’re not bound by any law.

Yet the company is shelling out dough to scoop up carbon credits available here on U.S. exchanges.

It seems odd, until you get a nugget of inside information. But when it all becomes clear, the profit opportunities should be more than enough to widen your eyes.

You see, President Obama has planned to limit the amount of carbon and other greenhouse gases that U.S. companies can put into the air. It was part of his primary stump speech. It was part of the national election campaign. It made it on to the agenda of, the president’s transition website. Now, it’s on the agenda at for all the coal-burning utilities to behold, the fifth bullet of the Obama-Biden comprehensive New Energy for America Plan:

Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.

Domestic companies are taking no risks. They’re certain carbon regulation is coming at a federal level.

Cap and Trade: Coal’s Nightmare, Cleantech’s Comeback

In order to prepare for the coming carbon caps, utilities that burn coal are blindly buying carbon credits now, while they’re still cheap, hoping they can use them later when limits are put in place.

They don’t know if they can use them later. But they’re so scared they’re buying them anyway.

Take Ameren, for example. They spew 70 million metric tons of carbon dioxide into the air every year. An 80% reduction means they’d only be allowed to emit 14 million metric tons annually, leaving them with a carbon risk of 56 million metric tons.

When a national carbon cap-and-trade program is implemented, carbon credits worth one metric ton are forecast to cost $25 each. At that price, Ameren has a $1.4 billion carbon liability… annually (56 million x $25).

Now imagine all the utilities that pollute as much as Ameren. We’re looking at a guaranteed multi-billion market.

Listen, getting your own piece of it is easy. The market is growing quickly!

Consider this: despite the looming recession, the global carbon market grew 84% in 2008 to reach $118 billion. It’s forecast to reach $150 billion this year.

The Regional Greenhouse Gas Initiative (RGGI), one of our domestic carbon exchanges and the place Ameren went to buy credits they may not even be able to use, had its second carbon auction last December. Even though it’s a voluntary program, the auction sold more than 31.5 million credits for $106.5 million.

What’s more, the bulk of those carbon credits are generated from cleantech projects. So while carbon credits are the last step in the value chain, you can profit higher up by investing in the companies responsible for initially generating the credits, namely major players in solar, wind, and related infrastructure.

Cleantech businesses and analysts have been saying for years… that making carbon emissions a liability with a firm price tag is really the only thing preventing widespread renewable cost viability. That moment is very near, and when it happens…

Cleantech Stocks Will Be the New Energy Kings

When the price of generating electricity via coal rises drastically due to cap-and-trade programs, the country—and the world, in many cases—will have to turn to renewables to meet future energy demand.

In addition to promising to limit carbon emissions, Obama has pledged numerous other initiatives that make cleantech a sure investment bet for years to come. He’s also assured:

  • 5 million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future.

  • We’ll eliminate foreign oil imports in 10 years

  • Putting 1 million Plug-In Hybrid cars — cars that can get up to 150 miles per gallon — on the road by 2015… cars that we will work to make sure are built here in America.

  • That 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025.

Sitting this market event out could be the worst investment decision you ever make.

The breadth of the companies involved in the cleantech sector is too great to get into here. But a good way to gain initial exposure is through highly popularized exchange traded funds.

Here are a few of the most well-known cleantech ETFs:

  • Market Vectors Global Alternative Energy (NYSE: GEX)

  • PowerShares WilderHill Clean Energy (AMEX: PBW)

  • PowerShares Cleantech (NYSE: PZD)

  • First Trust NASDAQ Clean Edge US Liquid (NASDAQ: QCLN)

Each of those funds holds numerous companies that will be instrumental in the cleantech buildout, and will offer nice long-term gains as it happens.

But for even more lucrative gains, consider investing in individual companies. This takes a bit more research, but the gains are much higher and can be taken much more quickly.

That’s what thousands of smart investors are already doing with the Alternative Energy Speculator—using my research and recommendations to profit from the cleantech boom.

In this new report, I outline the coming investment opportunities being spearheaded by the new administration. It describes the how the energy problem is being tackled by the new president, and how his actions can translate directly into profits for you.

It’s a must-read if you plan on investing in energy anytime in the next few years.

Call it like you see it,

nick hodge


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