Examining the Cap-and-Trade Bill-


One of the most controversial and hot-button topics in Washington over the last year has been the cap-and-trade bill. The last few decades have seen a great awakening of American consciousness to the need for a greener planet. After years of wild excess and reckless consumption, even the average American consumer is beginning to realize that we must care for our resources. Regardless of whether an individual believes fully in the merits of global warming, no one can intelligently argue against the need to care for Mother Earth.With  environmental awareness becoming more widespread, it is now beginning to find a strong presence on Capitol Hill, as Washington lawmakers begin introducing, debating, and passing bills that promise to protect and sustain our environment for generations to come. The cap-and-trade bill is one such development in Washington. Basically, the cap-and-trade bill seeks to cut down drastically on the amount of carbon emissions companies are able to release into the atmosphere. The method of regulating these companies is as follows. Each year a company will be allotted a certain number of credits that will dictate how many carbon emissions it can legally release into the atmosphere. The number of credits a company receives will be based on the size and industry of the company. These credits can then be traded or sold to other companies. For example, let’s assume that company A has 10 credits for the year, but they run a very clean operation and they project to only use 6. Company B has 10 credits as well, but they have not developed systems to control carbon emissions; thus, they use all 10 of their credits in 6 months. Now they will have to buy company A’s remaining 4 credits, and if they need more, they will have to find more companies selling credits. This will cost company B a lot of money.

Therefore, the cap-and-trade bill awards companies that are taking proactive steps to cut down on carbon emissions, and it punishes companies that are not. The fundamental thought behind the bill is that large corporations are driven by profit incentive. If you place a profit incentive in front of them in relation to operating in an environmentally-friendly manner, you greatly increase the probability of a company fully cooperating. You hit them where it hurts! (which is, of course, the company pocketbook) Now, the cap-and-trade bill will make for very interesting developments in the nuclear energy and renewable energy industry because some companies are far ahead of the game in terms of operating in an environmentally-friendly manner, and other companies are far behind the curve. As the bill is passed and enacted, the companies that are already operating in a green manner will be able to continue to invest its capital in the direction of business expansion, while companies behind the curve will have to direct large amounts of capital toward restructuring business operations in order to cut down on carbon emissions. Thus, the bill will be great for some companies, and not so great for others. Excelon is an example of a company already ahead of the curve. The cap-and-trade bill will be very good for its growth because, similar to other companies ahead of the curve, it will be able to sell many of its credits while simultaneously continuing to expand its business operations. The cap-and-trade bill has already passed the House of Representatives, and now it will be picked up for debate in the Senate this fall. There is big money involved in the final version of the bill as it currently stands. Currently, there is an $18 billion loan guarantee in the cap-and-trade bill for companies in the nuclear power and renewable energy industries. These government contracts are expected to be very lucrative for a number of companies. If the bill is passed with this loan guarantee in place, it would be wise for investors to track which companies are able to position themselves to land these projects because it will most likely drive a company’s stock up quite nicely. Many companies in the nuclear power industry also have a heavy international presence, which means their bottom line each year is very exposed to volatile moves in the currency market. A Forex broker can oftentimes provide more information on how companies hedge against this volatility in order to protect company profits.