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article imageThe Next Bull's Green

By Angelique van Engelen     Sep 27, 2008 in Business
Admittedly, it's a bit obscene to talk of a new bull market now that Wall Street is heavily in need of a trillion dollar bailout. But perhaps it makes sense to do it anyway because it's very likely that the next bull's going to be colored brightly green.
Green investing is set to become easier as new markets are emerging and platforms dedicated to the general grey economy’s pollution problems begin to take off in earnest. “A whole new multibillion-dollar green economy will rise--and with it the kind of massive financial opportunity that could get not only America but also Wall Street back on its feet”, writes to Glenn Hurowitz in a report entitled “The Next Bull Market” in The Nation.
So what are the major ingredients of this green colored bull likely to be? I filed a report for Triple Pundit about this earlier today. These are the main points of that report.
A good area to start off with is the renewable energy sector. Wind power is doing great, but forest conservation and solar power are also hotting up at tremendous speeds. In the last 8 years the wind power sector has sky rocketed. Growth of over 335%. The solar industry has experienced even more phenomenal growth -579%- but is a lot more tricky to play. Analysts predict the double digit growth party in both sectors to continue for at least the foreseeable future.
Green investing is markedly different from the normal stocks on Wall Street. But that’s in many ways its saving grace. The markets are considered with such disdain at the moment that even the staunchest anti environmentalist is willing to try something completely different, even if it’s everything they’d previously thought of as clumsy stuff for losers.
For instance, the wind energy sector is predicted to grow 215% between 2007 and 2012, from 84,934 MW to 267,837 MW.”Now this is information that can give your portfolio a boost. In an industry that’s doubling in size every four years or less, there are surely more than a few companies worthy of investment operating within it”, says Grace Cheng. She subsequently analyzes global top performers after assessing that China's the world's largest market, followed by the US in a report here.
Less hot as yet but definitely one to keep a track of because of its sheer size is the US’ biggest cap and trade market. The Regional Greenhouse Gas Initiative is auctioning off the very first multi state permits for carbon dioxide emissions of companies.
Over 200 companies participate in the 10 state scheme and it’s the first exchange that’s going to reflect what future Federal mandatory schemes will look like. Participants are mostly energy generation companies but also many companies speculating that it’s a good idea to buy certificates for the right to pollute in a future government program.
The very first auction put the valuation of a ton of CO2 at just over $1.86 and 12 million certificates were traded. For every ton of CO2 one allowance was issued. Real numbers have been put on the levels of pollution that are going to have to be eradicated as a result of this cap and trade initiative.
If the goings on in Europe are by any means indicative of the future awaiting the RGGI, many hurdles have yet to be taken. I reported more extensively about this on Triple Pundit, but you'll get it that the upshot of it all is that there's going to be price volatility because of it.
So, you might as, why even bother with this? The short answer simply is opportunity. The price of carbon might initially be incredibly low but analysts are talking of a $5 price a ton after the first phase already. What’s more, the market might very well develop in much the same way as the European Trading System did, which kicked off in 2003. Analysts there are talking up the price of carbon to double digit numbers by the end of 2009.
Less slow solutions to fill up a green portfolio could also be to study opportunities in the employment sector. The Center for American Progress only recently reported on the economic dimensions of the thousands and thousands of people that are going to be employed in the green sector. It has interesting observations on the impact of this notably on the shift of the economy because of the new jobs' replacement of those lost due to the high oil price and the housing troubles.
Check out the full report here.
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