Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close

U.S. Senate: Pass an Alternative Energy Bill with Carbon Caps Now

By Jim Fink on July 16, 2010

Print Friendly

 

We are grossly over dependent on oil for our energy needs, in part because the oil companies have chosen not to invest their massive profits in the domestic production of clean and renewable alternative fuels that would make our nation more secure and reduce the risks of environmental disasters. 

The United States has less than 3% of the world’s oil reserves, yet consumes approximately 25% of the world’s oil production.  This grave imbalance means we send hundreds of billions of dollars overseas to pay for oil every year instead of investing in clean energy jobs at home.

– Senate Majority Leader Harry Reid

The only way the transition to clean energy will ultimately succeed is if the private sector is fully invested in this future — if capital comes off the sidelines and the ingenuity of our entrepreneurs is unleashed. And the only way to do that is by finally putting a price on carbon pollution.   

 — President Barack Obama

The New York Times is reporting that President Obama and Senate Democrats have capitulated to energy special interests and will seek a scaled-down energy bill that doesn’t impose a carbon cap-and-trade regulatory system on the U.S. economy.  At most, the Senate bill, which is scheduled to be introduced the week of July 26th, will impose carbon emission limits on public utilities. 

This is completely UNACCEPTABLE.

Economy-Wide Carbon Cap is Needed

Public utilities produce only one-third of the nation’s carbon emissions.  Limiting the cap to utilities means that two-thirds of carbon emissions remain unrestricted. How does that solve anything? We need a cap that applies to transportation, industrial, commercial, and residential sources as well. It’s simply unfair to impose all of our environmental regulations on public utilities and let the rest of the economy get a free pass.

Crude oil is a dirty fuel. Not as dirty as coal, but much dirtier than natural gas.  Just look at the environmental devastation the BP oil spill is wreaking on the Gulf of Mexico and the southeast U.S. shoreline. Forty percent of the country’s seafood supply comes from Louisiana and food safety is in severe jeopardy from the oil spill. The National Oceanic and Atmospheric Administration (NOAA) is now saying that the environmental damage from the BP oil spill is probably permanent. My college classmate Dan Froomkin is reporting that the damage is so bad that the NOAA is hiding critical data on the scope of the oil spill from the American public. This cover up has to stop.

U.S. Addiction to Foreign Oil Must End

Oregon Senator Jeff Merkley has a great plan for reducing America’s dependence on crude oil. He notes that oil dependency poses national security risks for our country:

Of all the oil used in America each day, 57 percent is imported, and 70 percent of these imports come from outside North America. In total, the United States sends $1 billion a day overseas to fuel our oil habit.

The four countries outside of North America that export the most oil to the United States . . . too often do not share our interests and are too unstable to safely make up such a large portion of our energy supply.

U.S. Money is Supporting Dangerous Foreign Governments

According to the U.S. Energy Information Administration (EIA), the four hostile and/or unstable countries outside of North America that Merkley is referring to are Saudi Arabia, Nigeria, Venezuela, and Angola. Each of these countries is troublesome from a national security standpoint:

  1. Saudi Arabia —  ground zero of Islamic fundamentalism and hatred of Western culture
  2. Nigeria – 35th out of 53 African countries in governance quality (higher is worse), 130th out of 180 countries in corruption, and a growing source of terrorist activity
  3. Venezuelamost corrupt country in Latin America, links to terrorism
  4. Angola – 42nd out of 53 African countries in governance quality, 162nd out of 180 countries in corruption

Senator Merkley’s plan for energy independence would eliminate the need for 96% of foreign oil imports and has a three-prong focus: (1) promoting electric cars and requiring higher vehicle fuel efficiency standards; (2) switching freight traffic from gas-guzzling trucks to trains; and (3) developing alternative transportation fuels, such as cellulosic ethanol and natural gas.

Alternative Energy Investment Opportunities

Investment opportunities that match the themes in Senator Merkley’s plan for U.S. oil independence include:

  • Electric cars: Tesla Motors (NasdaqGS: TSLA) and BYD Co. (Other OTC: BYDDF.PK). A private company that looks like a great investment once it goes public is Palo Alto, California’s Better Place.
  • Railroads: Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), Union Pacific (NYSE: UNP), Norfolk Southern (NYSE: NSC), and CSX (NYSE: CSX).
  • Fuel Efficiency: You’ll have to wait for EcoMotors International to go public. But Microsoft’s (NasdaqGS: MSFT) Bill Gates and Sun Microsystems founder Vinod Khosla are investing now.
  • Clean Energy ETFs: PowerShares WilderHill Clean Energy (NYSE: PBW) and a number of less liquid “alternatives” (pun intended): PBD, QCLN, ICLN, PZD, and GEX.

President Obama isn’t waiting for additional funding from an energy bill to promote alternative energy. He is using already-appropriated economic stimulus money to push electric cars, wind power on Cape Cod and the rest of the Atlantic seaboard, solar power, and not-so-clean nuclear energy.

Serious Private Sector Investment in Alternative Energy is Crucial

But government subsidies are not enough. As Obama said in his June 2nd Carnegie Mellon speech, a commitment from the private sector is required for alternative energy to become economically viable. Similarly, Elliott Gue, editor of The Energy Strategist investment service, recently wrote in Alternative Energy: Don’t Believe the Hype that alternative energy stocks are “sells” until investment expands beyond fickle government subsidies:

In the European Union (EU) — as in the rest of the world — renewable energy stocks amount to a play on government largesse and subsidies. Accordingly, the sector likely will be hit hard by the ongoing sovereign debt turmoil in the EU and European governments’ fiscal-austerity measures.

Don’t buy the hype surrounding alternative energy; this sector faces severe headwinds that will only intensify as EU nations prune budgets. I’m researching potential short plays for The Energy Strategist, my energy-focused newsletter.

Elliott is so negative on alternative energy that in his short-term trading service, Stocks on the Run, he recently told co-editor Yiannis Mostrous — in their highly-entertaining monthly repartee — “Trust me: The best way to profit from green energy is by going short.” He then proceeded to recommend that subscribers short a prominent solar energy firm. Which one? You’ll have to give Stocks on the Run a test drive for only $5 per month to find out.

Bottom line, alternative energy will never take off unless the private sector joins the government and invests serious amounts of money in it. Lip service and token investments are not enough. The only way to get the private sector to commit to alternative energy is through a cap-and-trade system that puts a cost on the dirty carbon spewed into the atmosphere. Without cap-and-trade, the fossil fuels will remain cheaper than alternatives, polluters will not internalize the true cost of their destructive activities, our dangerous dependence on foreign oil will continue, and planet Earth faces a global warming disaster on a scale seen in the awesome Vietnam-era movies Soylent Green and Silent Running.

U.S. Senate Must Be Pushed to Do the Right Thing

The Senate should follow the example set by the House of Representatives last year when it passed a strong cap-and-trade provision in H.R. Bill No. 2454. Let’s all listen to formerly-handsome movie star Robert Redford and ensure that the U.S. Senate passes a strong energy bill NOW. Contact your Senators today before it’s too late. The planet – and your alternative energy investments – will thank you.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • Use Social Connect
  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.