Investing in a Carbon-Traded World

[Bush Trader]

I am posting this new thread to open up a discussion on some strategies or preferred stocks with the context of the possibility of global carbon trading. I have been thinking about this topic for some time and we are already begining to see changes in markets, bio-fuels and uranium in my belief are only a precursor to what might happen. We are all aware of the tax benefits for R&D in “green energy”, however tax benefits don’t necessarily equal profits or the potential for dividends. Carbon Trading may be the next boom after (or at the same time) commodities, especially if hedge funds have an eventual hand in things.

I realise there is a parallel thread that has been started in relation to preferred stocks for global warming, however whether or not you believe in global warming, the fact that carbon trading will become potentially something that is bought, sold and speculated on will potentially change the way we look at markets.

Wind farms will become like miners a product to sell to sell into the grid, Agro-forestry companies may not only be harvesting timber, and they might also have credits to trade. On which companies will potential government imposed purchase of carbon credits have the largest negative impact?


Well this article (attached), although long, gives some great insights into the background and future direction behind the “green, clean, user pays dream” that is carbon trading.

Looking forward to your comments and stock suggestions


Cheers

 

[billhill]

I was actually going to buy babcock and brown wind partners today in light of the issues you discussed and particually the announcement by the states to introduce a carbon trading sceme, however i got home to late to place an order. Will have to do it monday. Basically as i understand what the states were talking about is a system whereby energy producer take on the carbon cost while other carbon intesive industries get a repreive until 2020.

So what will a carbon tax do. It will make carbon producing energy more expensive and alternatives more cost effective. It should also stimulate investment in renewable technologies. So which shares are the best. Well renewable RnD companies are likely to do ok but just like any tech stocks there is much speculation and risk. As the most promising technologies are overseas i would prefer american or european stocks compared to what australia has to offer.

With less risk are companies that can generate carbon credits to sell. As far as i know there are only 3 sole renewable energy generation companies listed in australia, BBW, VIR and ENE. Of these my favorite is BBW because it has backing from BNB which gives it better opportunities to aquire assets, It is the only with significant australian assets, wind is the most cost effective renewable and its expanded at a rate of about 27% over the last couple of years. The timber companies also may be able to generate credits so are probably worth keeping aneye on.