All over the world, governments have set aside money for the green energy sector to help get their economies on course, writes Charlie Thomas for FTAdviser. The combined allotment for “green money” in global stimulus packages may be more than $500 billion.

Earmarked funds are being spent on climate change-related investments, such as improvements to railway, grids and water infrastructure.

• The European Recovery Plan involves investments in energy, including offshore wind and carbon capture and storage.
• The American Recovery and Reinvestment Plan will improve renewables, building efficiency, low-carbon vehicles, mass transit, grids and water.
• In December, a climate change meeting in Copenhagen will try and bring more countries, such as China and India, into the environmental accord. Energy efficiency and alternatives will also be addressed. Even if a global agreement on key issues is not met, individual countries will likely continue on with their own projects.

Green technology is becoming popular, but investors should be wary of a possible “green” bubble that could form as a result of hype. (Read how to protect yourself from bubbles). This sector is more of an emerging technologies sector, and investors should note the possible high volatility and risks involved. Find out how to follow trends here.

For more information on green energy, visit our alternative energy category. Among the many ETFs to choose from in this sector include:

• Market Vectors Global Alternative Energy (NYSEArca: GEX): up 7.8% year-to-date

• iShares S&P Global Clean Energy Index Fund (NYSEArca: ICLN): up 7.4% year-to-date

• Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 12.7% year-to-date; FSLR is 10.8%

• iPath Global Carbon ETN (NYSEArca: GRN): down 5.1% year-to-date

• PowerShares Global Wind Energy (PWND): up 38.8% year-to-date

Max Chen contributed to this article.

Climate change legislation has everyone wondering what its passage could mean to them. Steve Gelsi for MarketWatch explains that the executive types will have to cope quickly with carbon cost, rules and benefits associated with their products and services, while consumers will be reminded of the carbon footprints their purchases made during production.

The American Clean Energy and Security Act aims to cut emissions from 2005 levels by 17% in 2020 and 83% by 2050.

Verification, trading platforms, and new technology are all presenting new challenges and opportunities for companies and entrepreneurs.

Wall Street firms are ramping up their brokerage operations in order to accommodate the new market for carbon offsets and investment tools that access them, such as the current note below:

• iPath Global Carbon ETN (GRN): down 5% year-to-date

The climate change legislation now under consideration in Congress is similar to successful efforts in the 1990s to curb sulfur dioxide emissions by capping them and trading an initial pool of nine million allowances. With the new legislation, the funding is much larger.

For more stories about carbon trading, visit our carbon category.

House lawmakers are busy scrutinizing a bill aimed at climate change and global warming, which could ultimately affect the way business is functioning in the United States. Jennifer Collins for MarketPlace says that utility companies are concerned about expenses involved in a cap-and-trade system, which would require utility companies to buy the right to pollute. Will these expenses then be passed down to the consumers?

In response, the Democrats are considering that 40% of permits can be given away to power producers, which is a fair argument for the struggling sectors. Regions dependent upon coal and utilities serving low-income populations, to be specific. The trade-off? Free permits mean the government makes less money – money that’s supposed to fund alternatives to fossil fuels.

This was the initial purpose of the cap-and-trade system, to supply the government with a steady and dependable revenue stream. The upside is that it may become less expensive for some companies to reduce their emissions below their required limit than others. These companies can turn around and sell their allowances to companies who aren’t as efficient, according to the Center for American Progress.

• Utilities Select Sector SPDR (XLU): down 11.7%year-to-date

• iPath Global Carbon ETN (GRN): down 13.3% year-to-date

Carbon-efficient ETNs have gained more attention as the new administration sets forth its plan for carbon cap-and-trade, a system of emission allowances that delegates how much carbon a company can emit during production. Certain companies pollute at different rates and at different times of the year, so the carbon credits range from one company to another, reports Don Dion for Seeking Alpha.

iPath Global Carbon ETN (GRN) is a note that represent carbon emissions allowances. As with any note, the issuer is presenting a risk that is dependent upon Barclays. The price of GRN could be affected by the credit rating of the issuing bank, Barclays—a concern that has become more acute in the last year as previously “impervious” banks slashed their value. GRN has had a rough go of gaining recognition and investors’ interest so far, but as interest in cap-and-trade grows in the United States, so could attention toward this product.

• iPath Global Carbon ETN (GRN): down 17%  year-to-date

AirShares EU Carbon Allowances Fund (ASO) has a 0.85% management fee and is just shy of $4 million in assets.

• AirShares EU Carbon Allowances Fund (ASO): down 15.9% year-to-date

There are sure to be many more products that track this market and the latest index from S&P is proof. S&P U.S. Carbon Efficient Index was introduced in March, and the new index could eventually lead to an exchange traded product.

Emissions among industries covered by the E.U. system fell between 4-6% during 2008 compared with increases of roughly 1% in the two previous years, according to analysts. However, much of the falling numbers have to do with the economic slump and the fall in production, reports James Kanter for The New York Times. Even so, the decline shows that some businesses are becoming cleaner directly because of the system.

The European Commission said it would not comment on the figures before the end of May because the data was incomplete and would need to be carefully analyzed. Although the system is criticized, a significant number of power utilities had switched to relatively cleaner natural gas during the first half of 2008 because carbon trading had driven up the price of burning coal.

Meanwhile, the E.U. has said it would cut emissions by about 30% if developed countries, including the United States, took steps to reduce emissions that are roughly similar to European efforts. The EU makes up about 70% of the global carbon trading market.

Carbon trading aims to reduce pollution using a market-based approach of providing economic incentives to companies that reduce their emissions beyond their target. In this system, also referred to as cap and trade, a government or other regulatory authority sets a cap on the amount of pollutants that can be emitted and distributes allowances, or credits, that represent the right to emit a specific amount. Companies that do not meet the cap buy credits from companies that emit below their specified amounts. The group as a whole meet the set environmental goal at least cost to society.

• iPath Global Carbon ETN (GRN): down 18.1% year-to-date

The latest climate plan proposed by the Obama administration seeks to reduce pollution by setting a limit on carbon emissions and allowing businesses and groups to buy allowances, although exact details have not been released, reports Tom LoBianco for The Washington Times. The $646 billion estimate in costs is now being called “conservative.”

The goal is that any excesses in revenues would be passed along to businesses, consumers and most of all, the middle class tax cuts; $120 billion would be invested in renewable energy projects. Many in Congress have expressed concern against levying increased fees on businesses while the economy is still faltering.

One area that could benefit from such a plan is ETFs that focus on the cap-and-trade system. As demand for these carbon allowances go up, these funds could see some reward.

• iPath Global Carbon ETN (GRN): down 28.2% over three months

Global warming, melting ice caps, rising carbon dioxide levels are all happening and our leaders are taking note of it. President Barack Obama has already given his blessing to restrict greenhouse-gas emissions from cars, according to The Economist.

The European Union has also acknowledged the need for a global carbon-trading scheme and it has offered to cut its own emissions by 30% below 1990 levels, if such a scheme were arranged.

The use of clean-energy investments is seen as a form of economic stimulus that both the E.U. and President Obama are now utilizing. The E.U. has calculated that the world would need $224 billion a year to keep emissions at bay. A research group, New Energy Finance, estimates that the price tag should be at $515 billion a year.

A cost-benefit analysis model will need to be formed to provide us with an efficient way to invest in clean-tech. One way would be to use a carbon-trading scheme, or carbon tax, which would, hopefully, motivate entrepreneurs to find out the cheapest way to cut emissions and save money. Investors can use ETFs that focus on alternative energy.

• iPath Global Carbon ETN (GRN):down 27.4% in the last month

• Van Eck Global Alternative Energy Fund (GEX): down 18.3% in the last month

• PowerShares Cleantech Portfolio (PZD):down 14.9% in the last month

Cap on Emissions. This new energy bill will focus on curbing carbon emissions, states Tom LoBianco for The Washington Times. In addition to President Barack Obama’s stimulus plan to double renewable energy, the United Nations is expected to meet in the coming weeks to discuss worldwide limits on carbon emissions.

World Is Melting. Research indicates that now is the time to make this transition. Ice is dissipating at an alarming rate, indicating that temperatures around the globe are on the rise. In 25 of the past 28 years, more ice has been lost than gained, with the last year of growth being reported in 1998, states Jeremy Van Loon of Bloomberg.

A Solution. If and when this bill passes, it will help the world alleviate the problem of the Earth being on fire by continuing to put a cap. Its always a good thing to be environmentally friendly, especially when thinking about future generations. Funds that track the price of carbon allowances are:

iPath Global Carbon ETN (GRN): down 24.4% over the last month

AirShares EU Carbon Allowances (ASO): down 26% over the last month

]]> http://www.etftrends.com/2009/01/why-global-warming-could-feed-etfs.html/feed/ 0 http://www.etftrends.com/2009/01/feeling-exotic-here-are-7-such-etfs.html http://www.etftrends.com/2009/01/feeling-exotic-here-are-7-such-etfs.html#comments Thu, 08 Jan 2009 14:00:54 +0000 Max Chen http://www.etftrends.com/?p=7200 Exchange traded funds (ETFs) are expanding with novel options that will perhaps entice the weary investor or enthrall the risk-seeker in the markets.

By using ETFs, investors may diversify their portfolios with ETFs that track national indexes or broad baskets of well-known local stocks in emerging-market countries, iShares Emerging Markets Index Fund (EEM), writes Kirk Shinkle for U.S. News & World Report. It is noted that investors should check the holdings of such funds, as they may favor specific countries or sectors.

For those with a high risk tolerance, investors could use country funds, such as China’s iShares FTSE/Xinhua China 25 (FXI), to get in on the long-term action for a fast-growing economy or for short-term trades depending on market-moving news. There are many countires with their related ETFs trading, but among the few hopefuls that we may one day see in the ETF world include Argentina, Colombia, Egypt, Peru and the Philippines.

Funds that track world currencies such as the Russian ruble, CurrencyShares Russian Ruble Trust (XRU), and the Mexican peso, CurrencyShares Peso (FXM), are already at play.

Risky “frontier” markets, Claymore/BNY Mellon Frontier Markets (FRN), are also being traded with ETFs tracking stocks in the Middle East, WisdomTree Middle East Dividend Fund (GULF), and Africa, Market Vectors Africa (AFK).

Some funds track the trading of carbon allowances, like the iPath Global Carbon ETN (GRN).

New ETFs in the works may one day also provide for trading credit default swaps and even a fund tracking the direction of home prices.

Intrepid investors may also consider ETFs from Direxion that offer 3-times leverage on indexes and sectors. These ETFs are best for short-term trades since volitility can wipe away returns over time. It should be noted that these ETFs are not for the novice and faint-of-heart.

Whether you’re an exotic type of investor or you trend more toward the plain vanilla funds, always be sure to watch the trend lines to see what’s moving. Use the 50-day or 200-day moving averages as your guide for both entry and exit.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

XShares Advisors

AirShares EU Carbon Allowances Fund (ASO) is a new ETF that tracks the European Union Allowances (EUAs) for carbon emissions that are generally produced during the manufacturing process. According to XShares, the EU ETS is a cap-and-trade program that provides financial incentive for signatory countries of the Kyoto Protocol to reduce their carbon emissions.

This fund is technically a commodity pool, however. It seeks to provide results similar to the performance of a basket of four cabon credit futures contracts, expiring from December 2009 to 2012, says 24-7 Wall Street.

The new ETF is listed on the NYSE Arca, and follows on the heels of the recently dissolved HealthShares ETF family. Along with the dissolution of HealthShares, XShares also closed their real estate funds, Adelante Shares. Unfavorable timing and the wrong business cycle could be to blame for the reason these funds never quite got off the ground.

AirShares could be the providers’ answer, as environmental issues will be of more concern with the new administration ready to take office in January 2009. This ETF joins an exchange traded note (ETN), the iPath Global Carbon ETN (GRN) which tracks global carbon emissions credits. GRN is down 40% since its July 8 inception.