Of course, it’s political window-dressing.
It gives President Barack Obama something concrete in hand to take to the global summit on climate change in Copenhagen.
But yesterday’s decision by the U.S. Environmental Protection Agency (EPA) to declare carbon dioxide a health hazard is also a real game changer. Now no matter what does or doesn’t get decided in Copenhagen, the U.S. has a carbon emissions policy.
Some business executives will cheer. What their companies have been arguing for is certainty. Tell us what the rules are so we know where to put our capital to work, said the companies that have broken with knee-jerk climate change opponent the U.S. Chamber of Commerce.
And those industries opposed to any kind of regulation of carbon emissions, which once had the option of trying to kill any legislation in the U.S. Congress, now face a stark choice: face relatively painful regulation by the EPA or hope to get a bill through the legislature that heads off the toughest part of the EPA rules. (I’m sure there will be legal challenges to the EPA rules but the court rulings so far have upheld the agency’s power to regulate carbon dioxide.) Or at least creates a chance to profit from the rules through a program of cap and trade that awards a juicy pot of trading credits to everybody from Jack’s pig farm to Jill’s steel mill.
Right now they’ve got a horrible deal, all stick and no carrot.
Here’s what the EPA has said it will do.
The first regulations, those that cover carbon emissions from cars and trucks beginning with the 2012 model year, will be finalized in March. These aren’t especially contentious since the industry signed off on them when they were first announced in May.
A second wave of regulations governing stationary sources such as factories and power plants could go into effect as soon as next spring. The rules would require stationary sources to begin using best available emissions control technology—the standard in the Clean Air Act–when they build new plants or expand existing facilities. The EPA has said that it will regulate only power plants and factories that produce 25,000 tons or more of CO2 a year.
Lisa Jackson, EPA administrator, has pretty clearly spelled out the route that business can pursue. Only Congress, she notes, has the power to set up a policy of incentives for limiting carbon emissions. EPA, however, she said, has an obligation to regulate carbon emissions whether or not Congress acts.
Copenhagen, if delegates are lucky will manage to produce a framework for a future glob al agreement on limiting carbon emissions and global climate change. Negotiating a binding treaty and then getting it ratified will be the work of years.
But as of Monday December 7, the U.S. has a national policy on controlling carbon emissions. It just remains uncertain what the final balance of carrots and sticks will be.
The most interesting companies for investors will be those who figure out most quickly how to win on the new playing field.
Jim,
I AM a scientist, and believe me there is no good science or plausable link between a TRACE GAS LIKE CO2 and global warming. This is coincedence only! The system is self regulating.
There are too many cosmological things such as Sun energy variation (Munder Minimums, etc.) the tilt of the earth on its axis, etc. that can easily explain what we are seeing.
The only real threat are the “models” that EXTRAPOLATE these bad assumptions into catastrophies in the future.
BTW, the carbon based power cycle is also self limiting due to supply.
Mark
Does anyone remember DDT? How about Chlorofluorocarbons? Does anyone know the science and the politics which led to their demise? Does anyone remember who made money from their demise? Does anyone know who gained power through their demise? The parallels to Carbon Dioxide are eerily familiar. Keep an open mind and look at who gains (money and power) and who loses (money and power) as Carbon Dioxide is regulated. As for me…the answer is clear.
DJ, my apologies if my snark earlier offended you. I should show more respect for other belief systems. 🙂
What a can of worms. Why does this reek of political bias? I think most of these experts need something to do other than grandstand.
viwi- it also takes 4 or 5 years to build an NG plant (a small one), so if all those nukes go down in a decade, how will we replace that 20% of our power, AND supply the 50-100% increase in demand that is looming? [I think most of the answer is that most of those N plants will live for a much longer lifespan, in fact.] Permitting goes for everyone- a mess, but no getting out of it, and yes a couple years or so, no matter who you are.
If we WANTED to expand our nuclear capabilities- if we had the collective national will to do that- we would start today, as we will never be able to drop back that lost decade (some of us see that as three lost decades). If we adopted standardized designs and fast-tracked standardized permitting, the permitting/construction time would be about 7 years.
But, hey- we are talking about how to invest. I like NG as well as the next guy, and even NG electrical generation. I also like smart power distribution, and technology efficiences that can save zillions of MWatts in existing usage.
cjxland:
I like your thoughts, but Nuclear Power is not that easy. You need about 15 years to build a nuclear power station and 1-2 years to get all the required permits. If someone really wants to go nuclear, he had to start at least 10 years ago. Besides, most of the US nuclear power stations are living their last decade before they have to be retired for safety and other reasons.
So, let’s do a simple math. You have to start building now to replace 20% of the currently existing nuclear power and 60% of the currently existing coal/NG power plants. It is about 2 TW of the total power. 1000 nuclear power stations.
Personally, I am a big fan of solar power. But, I believe that the best temporal solution is NG, which is cleaner than coal. Given the current rate of the cost reduction of the solar power, in 10 years it will become the cheapest solution for our energy needs.
I agree with Jim, that smart power distribution systems, energy storage, and batteries are, most probably, sure bets in a long term. NG, once it passes current oversupply, is a good bet in a short term.
Jim- I failed to point out another couple whole segments of the nuclear industry invesment possibilities- infrastucture design and implementiation, and plant construction. The local faves are SHAW, GE, FLUOR, and the newly released Babcock and Wilcox. International heavies are Areva, Hitachi (with GE), and Toshiba(with Westinghouse.) This whole industry is a long-term investment, unfortunately, not suited to most hot-for-the-moment portfolios. You mentioned that you’d be looking at Shaw Group a few posts back- I’m looking forward to your analysis.
Hello Jim- I’d like to try to raise this discussion to the next level, too: where/how to invest whether climate change is real or not (but-perception IS reality).
I’m a geologist- not a “scientist”, but a guy who works for mining companies. I’ve spent most of my professional career either digging up or looking for [and finding] uranium- on the order of 35 years now. All of us in the mining industry understand that “global warming” is a non-issue; there have been a dozen or so ice ages in the last million years on our planet- and guess what happened after every one of them? Yep- things warmed up. Interestingly- guess what happened BEFORE every one of them? right again- warming. A million years is an eye-blink to geologists (and this old earth-ball we live on for the moment), so the argument over dinosaurs, 8 ft. long dragonflys, giant mosses, CO2 buildups or letdowns and this and that is not really relevant- altho these things existed and happened.
The point for us investors is how to make a buck on the “Global Warming” issue, not to waste our time and breath in specious arguments about whether or not it is real, or to what extent man contributes to the current situation.
I submit that one way to do this is investing in Nuclear Power. It is the ONLY electricity source that can provide base-load supply without “carbon footprint” at this time (and also when there are a few zillion green electro-cars running around, doubling orur electricity needs by 2030). There are Nuclear ETFs, there are utilities (try EXC- or if you really want to go green, try FPL- nuclear and alternative sources are their specialty). Uranium mining is in the toilet at the moment- I see that as mostly political payback: Mr. Obama and his colleagues making good to their dearest supporters- the “environmental” crowd…for now. But nuclear is gaining a wide following even in the Democrat camp, and even in the environmental camp. I believe we will all live to see the day that even the horror of all nuclear horrors- Yucca Mtn. – will be revitalized as a perfectly suitable and safe means of storing nuclear “wastes” until we can think of something better to do with them (guess where they are stored now?) Mr. Obama OWED Mr. Reid on that one- at least for the moment. There are many more interesting things we can do with those wastes, like recycle them (against the law, in this country, at the moment, but check on USEC). Uranium mining will eventually have to make a comeback here, and there are a multitude of uranium miners around right now, most of which are too ephemeral to consider; but a few, including Billiton and Cameco are real contenders, rather than players.
And what would it really hurt, after all, if we were to put a few bucks into windmills and solar cells, even tho we KNOW the science behind this is baloney- if they double or triple over the next few years?
We can argue the yes or no on climate change forever- none of us will ever know if we are right or wrong. I do agree with the gents that pointed out that most of the antis in this argument were also adamant about ozone and acid rain being “voodoo science”- not to mention seatbelts, crash helmets for motorcyclists (and bicyclists) and second-hand cigarette smoke.
And- oh, by the way: the earth is REALLY only 4400 years old, not 8000. This has been proven, time and again. But- how do we invest in that science to make a buck or two?
Thanks Jim- a fine brew-haha you’ve gotten us into here! (pass me one of those moss beers please.)
What to invest in next ?
The Carbon-credit market. If cap and trade become a reality as expected, the rise in prices will be government-mandated.
Can’t go wrong. . .
It seems this great debate is based on Political Leanings and Philosophy rather than what unbiased people(if there is anyone) really beleive. I suppose it isn’t possible, but wouldn’t it be refreshing to seek what is best for the country, and not what is best for our personal agendas? It seems that everyone has an agenda these days and doesn’t give a damn about whats best for the majority. Does that sound Polyannish? I am only criticizing some,certainly not all of the comments. Sorry, GC
Back to investing..
So how can we profit from this?
Will coal be taxed. or capped, so its not as inexpensive a fuel source as it is now? (Jim did sell a coal stock out of the dividends portfolio)
Will demand for natural gas grow (cleaner fuel) so that natural gas plays will be the way to go by 2015? Jim’s talking oil plays, but maybe a tax on CO2 will change that timeline and the oil shortage occurs in 2025 instead of 2015?
Will solar power companies be subsidized (or at least more in demand) that we should be buying the smart solar producers soon? (are they all in China?)
Will the higher CO2 in the atmosphere in fact make farmers more productive so food costs will go down? (and give us more/cheaper raw materials for biofuel?)
Will bigger bugs mean we should by chemical companies?
Will American factories cut back on hiring because they had planned to use plants that may now be more expensive to operate under the new CO2 emission guidelines?
All this is a long way of saying we should be focused on the last line of Jim’s article: “The most interesting companies for investors will be those who figure out most quickly how to win on the new playing field.”
Jim
Thanks for the new divie play in the other post.. will use the divies to reduce my carbon footprint… house needs insulation and the windows are cold and rattle when the dinosaurs ran past..
cheers, F
Wherever you stand on the climate change debate, the most important thing is finding a way to profit from it.
BR rrrrr it’s cold outside where I live.
Winter came a month early !
It’s that cursid global warming !
Last winter, we had 7 feet of snow in 20 days !
Soo much the walls in my house cracked ! I heard them pop..
If the envio crack pots had any brains, they would consentrate on polution, over consumption of natural resources, over population, and the destruction of our farm land.
Or the degridation of our oceans, and man made chemicals in the food chain.
Everyone on the planet could get behind that !
DJBarber: And don’t forget the 6-foot long cockroaches and all the beer (very green and no hnops, I admit) that you could brew from 40 foot tall club mosses.
fascinating discussion.
greenhouse gases make up less than 1% of our atmosphere. if they were not present, earth would be a ball of ice. so they are important in small quantities. and it seems inescapable that if you change their percentages you must expect some change in their effect on climate. the real question is how much change, and over what kind of time span.
from an investing perspective, it appears that climate change will be accepted as fact, and it would behoove an investor to incorporate that into an investment strategy.
what is your time horizon? are you merely seeking to enhance your own existence? are you concerned about your offspring? how many generations into the future are you attempting to provide for? is the long-term future of our environment worth consideration?
jim jubak is a rare bird in the world of investing in that he’s cognizant of what he calls externalities. i think his time horizon is a bit longer than that of the average investor. it makes him a valuable read.