Environmental Markets

by Debra Fiakas CFA Algae in the River Wate photo via BigStock My post “Algae Takes Flight” featured Algae-Tec (ALGXY:  OTC/PK),  Lufthansa’s new biofuel partner.  Algae-Tec has agreed to operate an algae-based biofuel plant in Europe to supply Lufthansa with jet fuel.  Lufthansa is footing the capital costs of the plant, which is to be located in Europe near a carbon source.  Algae thrive on carbon so industrial plants and power plants using fossil fuels make the best neighbors.  Lufthansa has agreed to purchase a...

Tom Konrad CFA I recently interviewed Richard Domaleski, CEO of World Energy Solutions (NASD:XWES).  World Energy is a comprehensive energy management services firm whose core offering is extremely price competitive energy sourcing (that is, finding an energy provider to supply all of a client's energy needs at the lowest possible cost.)  They achieve competitive sourcing using an electronic energy exchange designed to achieve much better price discovery in what is traditionally a very opaque market.  According to Domaleski, a recent KEMA study showed that only 7% of large commercial, industrial, and government customers are sourcing their...

From Small Fries to Big Shots? Part 1 of 2 by Bill Paul Feel like rolling the dice on some small alternative energy stocks that appear to have big-time potential? Just remember: sometimes you roll snake eyes. First up: World Energy Solutions Inc. (Symbol: XWES), which currently trades on NASDAQ for $3 and change per share. Worcester, MA-based World Energy Solutions operates online exchanges for energy and green commodities, including the one administered by Regional Greenhouse Gas Initiative Inc. (RGGI), the regulatory scheme under which 10 Northeastern and Middle Atlantic states "cap" their power plants' emissions by requiring...

The term environmental markets remains foreign to most investors (and environmentalists!), even though these markets represent, in my view, a very compelling investment story. Although we've discussed trading in carbon emissions in the past, I thought I would expand a bit and talk about environmental markets in general, and about good ways to play them. What's An Environmental Market? Environmental markets exist at the confluence of two movements: (a) A growing desire on the part of national and regional governments in several countries to both limit environmentally-damaging behavior and to promote the growth of alternative...

I just came across this article on potential problems with the emerging trade in carbon credits. The piece is not technical and I wouldn't say that it is particularly well-researched, but it does raise a key point - as the market for carbon emissions grows, the need for standardization and collaboration between governments and regulators will become ever more pressing. This could create problems. The carbon market is unique in that the commodity traded derives its value primarily from its ability to meet the requirements set by an environmental regulator. There is also a market for voluntary...

All the recent talk about Barack Obama creating a "Climate Czar" position in his administration begs the following question: will Obama dare to implement a nation-wide cap-and-trade system for greenhouse gases (GHGs) in the midst of an economic collapse? While the recent pullback in energy prices will certainly provide some cost relief to energy-intensive industries, which were getting squeezed by rising energy prices, this pullback pales in comparison to the challenges they face in other areas of their businesses right now, and slapping them with complex and potentially-costly new regulation could create significant political backlash. What's more, continued...

A senior NYMEX official told reporters Wednesday that the exchange was considering getting into the business of carbon emissions trading. Given the actual, but especially the potential, size of this market, it makes sense that established bourses would take a good hard look at it. This will probably not be seen as very good news by the folks at Climate Exchange plc . Of course, until NYMEX actually unveils anything substantial, this will remain nothing but chatter.

by Elaine Thompson Bloomberg New Energy Finance, in an executive summary of its New Energy Outlook 2017 report, predicts renewable energy sources will represent almost three-quarters of the $10.2 trillion the world will invest in new power-generating technology. Analysts outline several reasons for this increase in spending, such as the decreasing costs of wind and solar and consumers’ increasing interest in solar panels. Competition between power sources also continues to grow, with products like utility-scale batteries upsetting coal and natural gas’s roles in the marketplace. But more importantly, state-driven renewable portfolio standards pave the way for additional ventures in renewable energy technologies, particularly...

On November 27, I attended the National Renewable Energy Laboratory's (NREL) Fifth Energy Analysis Forum, hosted by NREL's Strategic Energy Analysis & Applications Center.  The forum focused on carbon policy design, the implications for Renewable Energy and Energy Efficiency.  As a stock analyst focused on that sector, I am extremely lucky to have NREL as a local resource: the quality and the level of the experts at NREL and the ones they bring in is probably not matched anywhere in the country, and conferences like these provide priceless insights into what these Energy Analysts are thinking.   Why should investors...

Whether you agree it's because of human activity or not (and, for the record, I do), there's no doubt that the weather has been a little wacky over the past few years, driving a range of events that have had very real repercussions on businesses and the economy. Hurricane Katrina is one obvious example, but there have also been other, more subtle cases. Many ski resort operators in North America, for instance, were beginning to believe that winter would never arrive on the eastern side of the continent. In the west, we're now being told that cold weather...

An interesting bit of follow-up on my article last week about exchanges and environmental markets. Both the NYMEX and the Chicago Climate Exchange (CCX) have partnered up, in the past 2 weeks, with specialty cleantech and alt energy index makers to launch derivatives products. On March 14, Chicago Climate Futures Exchange (CCFE), a wholly owned subsidiary of the CCX, and WilderShares LLC, announced (PDF document) a licensing agreement to launch a futures market based on the WilderHill Clean Energy Index . The ECO is also the underlying index for the Powershares WilderHill Clean Energy Portfolio ETF...

Most Americans now agree that something needs to be done to reduce our greenhouse gas emissions. Hopefully most Americans now appreciate that this is not a small, but even more so, not a simple problem. I am a big believer that the playing field for our low carbon future should start level, and the market should be structured to allow our major power and energy companies a chance to lead the way, instead of simply dishing out punishment for our combined historical choices. Carrots and sticks work well together, but sticks alone are not going to solve our...

To be sure, the near-term prospects for carbon emissions trading are bleak. Continued decline in industrial production across the world's major manufacturing economies will inevitably lower carbon emissions. The clearest indicator of this, short of directly measuring emissions, is a sharp decline in the price of various fossil energy commodities (i.e. oil, natural gas and coal) on the back of falling demand. Another important factor for carbon emissions trading is that the commodity in play - the regulatory right to emit a unit of carbon dioxide equivalent (CO2e) - derives its legitimacy entirely from a regulatory scheme...

In a May 8 post I opined that, although I believed that recent developments on the climate change file in the US would bode well for Climate Exchange plc (CXCHF.PK), I thought that the stock was overpriced and had had too great a run for its own good over the past 3 months. I therefore predicted that the next move the stock would make would be to the downside. Climate Exchange was trading at around $28 then, and today it is trading in the neighborhood of $36. I continue to believe that this stock is going way too...

Charles Morand On Monday morning, I received an e-copy of a new research note by BofA Merrill Lynch arguing that disclosure by publicly-listed companies on the issue of climate change was becoming increasingly "important". The note claimed: "e believe smart investors and companies will recognize the edge they can gain by understanding low carbon trends." I couldn't agree more with that statement. It was no coincidence that on that same day the Carbon Disclosure Project (CDP), a non-profit UK-based organization that surveys public companies each year on the state of their climate change awareness, was...