The Obama Administration has announced that it’s investing $3.4 billion in order to fund this project. Through the plan, 100 private companies, utilities, cities and manufacturers will receive grants ranging from $400,000 to $200 million in order to build a smart energy grid, reports Lynn Sweet for The Chicago Sun-Times. So far, these awards are the largest Recovery Act awards ever made on one day. (Nine things that could affect alternative energy).

Analysis shows that by getting smart grid technology off the ground, it could reduce electricity use by at least 4% by 2030. This would result in savings of $20.4 billion for both businesses and consumers. (Does this mean alternative energy is not so alternative anymore?)

The Senate environment committee also released details of its climate change legislation, which includes the share of “emissions allowances,” which is revenue that comes from regulation of a cap-and-trade system – once it’s in place. The Senate has nearly tripled the share of allowances set aside by the House for transit, inter-city rail, and other efforts to trim transport-based emissions. Elana Schor for Streetsblog reports that the Senate measure would set aside more than 3% of allowances in the first two years of the cap-and-trade system for limiting pollution from the transportation sector.

For more stories about clean energy, visit our alternative energy category.

• First Trust NASDAQ Clean Edge Green Energy (Nasdaq: QCLN)
• iShares Dow Jones U.S. Utilities (NYSEArca: IDU)
• iShares S&P Global Infrastructure (NYSEArca: IGF)
• iShares S&P Global Clean Energy (NYSEArca: ICLN)
• PowerShares WilderHill Clean Energy (NYSEArca: PBW)
  
• PowerShares Global Clean Energy (NYSEArca: PBD)
• PowerShares Cleantech (NYSEArca: PZD)
• PowerShares Dynamic Utilities (NYSEArca: PUI)
• Utilities Select Sector (NYSEArca: XLU)
• Vanguard Utilities (NYSEArca: VPU)
• SPDR FTSE/Macquarie Global Infrastructure 100 (NYSEArca: GII)

According to Rebecca Lefton, Andrew Light and Daniel J. Weiss for American Progress, the International Climate Change Negotiations dispelled the myths and revealed the truths about how the world is responding to global climate change:

• Both China and India are planning for emissions reduction and low-carbon development. China is considering raising fuel economy standard for passenger cars to 42.2 mpg from current 36.7 mpg. China is also trying to reduce energy intensity, or energy consumption per unit of GDP, and increase generation of renewable energy. India is planning the most ambitious solar energy goal in the world and has taken steps toward quantifying greenhouse gas emissions.
• Both China and India have agreed to sign new climate agreement so long as it doesn’t inhibit economic growth. Both countries have ratified the Kyoto Protocol and have acknowledged “the scientific view that the increase in global average temperature above pre-industrial levels out not to exceed 2 degrees C.”
• Developing countries do not need to accept binding targets on gas emissions because they have different needs. A majority of global citizens live in poverty and should not be obligated to the same guidelines as developed countries. These developing countries will likely consider future caps.
• Measuring, reporting, and verifying emissions reductions will be accountable by developing and developed countries. China has developed fairly detailed range of quantifying energy and environmental policies. Whereas, developing countries are still improving measurement, reporting and verification capacities.
• Domestic climate legislation and investments in a clean energy economy will help the United States in the clean energy race by boosting job creation and the economy. The American Clean Energy Security (ACES) Act will generate 1.7 million jobs. The act has provisions to assist energy-intensive, trade-sensitive industries competing with firms from countries without reduction plans.
• The U.N. Climate Change Conference slated for December in Copenhagen is part of a process for structuring an international agreement. Upon its success, there will be a new treaty to replace the Kyoto Accord.
• Present mid-term emissions reductions proposals coupled with complementary measures will allow the United States to equal targets to those of other developed countries.
• The United States has already gone forward to reduce greenhouse gas pollution before any potential agreed upon worldwide commitment at the UNFCC meeting in December. Efforts in reducing emissions and investing in renewable energy at the state and federal level have already taken place.
• The E.U. Emissions Trading System has helped reduce pollution by 50 to 100 million metric tons of carbon dioxide per year. The program initially led to windfall profits from polluters, with price spikes for consumers, but revisions has made the program more successful.

• PowerShares Wilderhill Clean Energy Portfolio Fund (NYSEArca: PBW): up 24.7% year-to-date

• Market Vectors Global Alternative Energy (NYSEArca: GEX): up 7.9% year-to-date

For more information on green energy, visit our alternative energy category.

Max Chen contributed to this article.

Investors still have to decide on which industries are best positioned to perform well in the recovery, remarks Matt Krantz for USA Today. Possibly the worst thing any investor could do is jump in after sectors that have already gained, continually chasing performance.

After betting on financials and tech companies, investors are now looking for actual economic growth in the second half of the year, especially in consumer discretionary companies that make big-ticket items such as automobiles and appliances. Krantz notes, however, that investors are applying prudent techniques when picking out future winning sectors:

History. Certain sectors and certain companies do better at certain points of an economic cycle. If the past repeats itself, solid performance could come out of consumer discretionary stocks, along with materials and industrial companies. These “cyclical” sectors could gain as demand for goods picks up. Later, energy stocks could gain as companies expand to cover all the demand.

• Consumer Direct Select Sector SPDR (NYSEArca: XLY): up 30% year-to date
• iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 55% year-to-date
• SPDR Select Sector Fund- Basic Industries (NYSEArca: XLB): up 43% year-to-date
• Energy Select Sector Energy Fund (NYSEArca: XLE): up 17.7% year-to-date

Cycles. Growth in revenue is still down and may continue to be so in the third quarter, but some businesses could show early growth. The businesses that will perform will be the ones to stop cost cutting and start expanding. This is one of the reasons why financials may continue to benefit as demand for loans increases.

• SPDR Financial Select Sector (NYSEArca: XLF): up 23.3% year-to-date

Diamonds in the rough. Some small banks and brokers may stand out by enticing customers who have become estranged from large financial firms. Modernization of bridges and roads will lead to a boom in the infrastructure industry. Government investment into green tech will also likely help the alternative energy industry. As more companies use the internet to conduct business, business that build internet networking systems may also become in demand.

• iShares S&P Global Infrastructure (NYSEArca: IGF): up 13.8% year-to-date
• PowerShares Wilderhill Clean Energy Portfolio Fund (NYSEArca: PBW): up 28.9% year-to-date
• iShares Networking Fund (NYSEArca: IGN): up 61.7% year-to-date

Not so good. Sectors dependent on consumers may not see previous cash flows for awhile yet. Businesses such as retailers, restaurants and casinos may also continue to struggle.

Watch the trends. There’s no such thing as a “sure thing” in the markets, otherwise no one would ever lose anything. We can all guess which sectors will perform and which won’t, but reality could bear out differently. Watch the trend lines to spot the true opportunities, and have a stop loss in place, as well.

Max Chen contributed to this article.

Specialty-sector ETFs, or “thematic” ETFs, have become a hit with investors, covering more than 40 unique themes in the market with more than $10 billion in assets under management, according to IndexUniverse.

While some consider thematic ETFs “gimmicky” and believe these forms of ETFs are only popular when the media is hyping the sector, they have their advantages and an investor should be aware that such options are available.

Specialty ETFs can help round out a portfolio and allow investors to take advantage of different segments of the market. To spot opportunities, watch the trend lines.

Alternative energy. Skyrocketing energy prices have brought more investor interest to all sorts of energy investments. The largest alternative energy ETF is PowerShares WilderHill Clean Energy Portfolio (NYSE Arca: PBW), currently up 23.4% year-to-date, with $743 million in assets under management. PBW is more focused on U.S.-listed companies.

Coal. The cheapest energy source of BTUs. Ever-increasing oil prices are encouraging the development of the coal. The largest coal ETF is Market Vectors Coal ETF (NYSE Arca: KOL), currently up 1.3.4% with $277 million in assets. KOL primarily includes mid-cap miners, weighted 49% in U.S. companies, 23% in China and 15% in Indonesia.

Nuclear. Once operational, nuclear power is seen as the cheapest kind of energy, but the industry is still grappling with the issue of nuclear waste. The largest nuclear ETF is Market Vectors Nuclear Energy ETF (NYSE Arca: NLR),  currently up 21.7% year-to-date, with $166 million in assets. NLR has a 40% allocation to uranium miners, with other weightings in power generation and plant construction firms.

Commodities. ETFs are an easy way for a commodity trader to access this area of the market. The largest hard asset commodity ETF is Market Vectors Agribusiness ETF (NYSEArca: MOO), currently up 40% year-to-date, with $1.5 billion in assets. Other areas include water resources, steel, timber and broad-based commodities.

Infrastructure. Infrastructure covers companies involved in construction and repair of roads and bridges, building and maintaining power grids, telecommunication networks and sewage systems. Worldwide stimulus funds have been steadily injecting more money into the sector. The largest infrastructure ETF is iShares S&P Global Infrastructure Index Fund (NYSE Arca: IGF), currently up 12.9% year-to-date, with $267 million in assets.

Transportation. There’s no denying the economic impact of transport systems. The Claymore/Delta Global Shipping ETF (NYSE Arca: SEA) is currently up 25.9% year-to-date, with more than $70 million in assets. SEA is a good indicator for economic activity and commodities demand.

Green. The green sector provides environmentally-friendly technology for an evolving society. The largest green ETF is PowerShares Cleantech Portfolio (NYSE Arca: PZD), currently up 29.8% year-to-date, with $145 million in assets. PZD tracks the performance of companies whose products improve productivity while reducing consumption of natural resources.

Other. Or “miscellaneous” category that includes gaming, luxury items and Chinese real estate to name a few. The largest ETF in this area would have to be Market Vectors Gaming ETF (NYSE Arca: BJK), currently up 46.7% year-to-date, with $108 million in assets. BJK tracks global gaming companies.

Max Chen contributed to this article.

In a poor economy, consumers are cutting back, landfill volumes have dropped, sales of appliances like air conditioners have fallen, and Americans are turning to public transportation and recycling goods, reports Rebekah Kebede for Reuters. Frugality has resulted in a reduction in pollution, it has also diminished investment in green technology.

Some investors, such as T. Boone Pickens who scaled back on his wind farm project, are pulling back from financing major clean energy ventures. In the United States, wind-power development is expected to drop for the first time since 2004.

When green gathers steam, there are some points to keep in mind. Don’t be suckered into investing in companies claiming to be green since it is easy to proclaim their “greenness,” especially if they don’t trade on a regulated stock exchange, remarks Matt Krantz for USA Today.

• iShares S&P Global Clean Energy Index (ICLN): up 10.7% year-to-date

• First Trust NASDAQ Clean Edge Green Engy (QCLN): up 32.4% year-to-date

• PowerShares Cleantech (PZD): up 22.5% year-to-date

• PowerShares WilderHill Clean Energy (PBW): up 24% year-to-date

However, be aware of the risks involved in investing in this sector. Investing in green energy does not directly help the environment. Krantz also warns that you can potentially lose money by investing in green companies, because it is more along the lines of speculation since there isn’t enough in-depth academic analysis of the value of green investments.

For more information on green investments, visit our green category.

Max Chen contributed to this article.

And it’s not just here. The efforts span across borders, in developing nations such as China. R.M. Schneiderman for The NewYork Times reports that the jobs involved in cleantech, such as solar panel production and manufacturing, are local jobs that create work within the community. Keith Johnson for The Wall Street Journal reports that the Chinese government will boost subsidies for solar power in a bid to juice the development of about 500 megawatts of solar energy in the next two or three years.

The Chinese focus on renewable energy has focused on wind power, but the push has turned toward solar power. The digression of solar power development is dependent upon government support, so subsidy plans are in the making. As a result, solar ETFs are moving higher today.

On our own turf, alternative energy sources come from sunlight, wind, rain, tides and geothermal energy and produce energy. The U.S. government is strongly supporting the use of renewable energy through legislation and is hoping to eventually commercialize these power sources as mainstream energy for the public’s use, reports Ron DeLegge for ETF Guide.

Thus far, the main roadblocks to the plans are falling natural gas prices and empty credit markets, as the start-up and smaller companies need capital to move forward. The less expensive fossil fuels and oil becomes, the less interest there is in alternative energy power sources.

However, the job creation aspect of renewable power sources is great, but is it enough to support cleantech efforts? Although many of the tasks involved in production can be done by machine, the human labor is actually less expensive.

Just a few of the growing number of ETFs that focus on various aspects of renewable energy:

• PowerShares Wilderhill Clean Energy Portfolio Fund (PBW): up 14.5% year-to-date

• Claymore/MAC Global Solar Energy (TAN): up 4.2% year-to-date

• First Trust ISE Global Wind Energy (FAN): up 18.8% year-to-date

For more stories about alternative energy, visit our alternative energy category.

Around $250 billion was spent for new power capacity in 2008 and for the first time, the majority of the money went toward clean energy, a report by the United Nations Environment Program has found. According to James Katner for The New York Times, renewable sources accounted for 56% of investment dollars globally, worth $140 billion, while investment in fossil fuel technologies was $110 billion.

Much of the fossil fuel spending centered on new coal plants in China. Large hydropower projects, wind, solar and geothermal were covered by the report. Power plants generally have along life span, so it will be some time until renewable energy dominates the power grid. Right now, renewable energy accounts for about 6.2% of the total power sector capacity in 2008, which means there’s a lot of room left for growth.

The largest stimulus to green energy could be an agreement among nations at a meeting in Copenhagen in Denmark in December, aimed at creating a successor treaty to the Kyoto Protocol.

• PowerShares WilderHill Clean Energy (PBW): up 19.3% year-to-date

• PowerShares Global Clean Energy (PBD): up 21.6% year-to-date

• iShares S&P Global Clean Energy Index (ICLN): up 11.6% year-to-date

The plan does help tackle the feud between automakers and statehouses over emission standards. Automakers get one single standard and the states get their emission standards honored. New vehicles would be 30% cleaner and more fuel-efficient by the end of the program.

Which ETFs have the potential to benefit from this plan, and which ETFs might be on the losing side? (But remember: these aren’t predictions, and we’re still watching the trend lines to see what actually transpires once this plan is fully in effect in 2016).

On the Potentially Negative Side…

If we reduce our dependence on oil and don’t need as much of it to keep our cars operating, that may naturally create less demand and possibly keep prices down.

• United States Oil (USO): down 1.2% year-to-date

The same goes for gas – more fuel efficiency, fewer fill-ups, less gas needed. Will it equate to lower prices?

• United States Gasoline (UGA): up 52.2% year-to-date

On the Potentially Positive Side…

Overall, the environment should be a winner with this plan. Cleaner air, fewer emissions and some kind of help toward solving the problem of global warming. For that reason, environmentally focused ETFs could reap the rewards, as well, as the movement toward cleaner energy and conservation gathers interest.

• PowerShares Wilderhill Clean Energy (PBW): up 5.6% year-to-date

Consumers could win, too. While these cars could cost up to $1,300 more, greater fuel efficiency could ultimately translate into more money in their pockets over time. That could mean more disposable income and greater spending on discretionary items.

• Vanguard Consumer Discretionary (VCR): up 11.2% year-to-date

Platinum could benefit, too. After all, it’s a primary ingredient in catalytic converters, which are devices designed to reduce the toxicity of emissions. Of course, while the catalytic converter will still be a component of the new cars, there’s no way to clean carbon dioxide out of a car’s exhaust. The only way to reduce that is to reduce the amount of fuel burned, says Bay News 9.

• E-TRACS UBS Long Platinum ETN (PTM): up 17.8% year-to-date

The U.S. auto industry could benefit from this new push, too, if they create the right kind of vehicles in a cost-effective way.

Be sure to note the differences between ETFs and ETNs.

The cocoa ETN iPath DJ AIG Cocoa TR Sub-Idx ETN (NIB), currently down 13.6% year-to-date, tries to track the returns available through unleveraged investment in the futures contracts on the commodity from the index along with the rate of interest that could be earned on cash collateral invested in certain Treasury Bills. Cocoa demand has been down, with futures recently losing 3.9% as early speculative buying disappeared, reports Tom Sellen for The Wall Street Journal. Cocoa now goes for $2,353 a metric ton.

The cotton ETN iPath DJ AIG Cotton TR Sub-Idx ETN (BAL), currently up 15% year-to-date, seeks to reflect returns available through unleveraged investment in the futures contracts on the physical commodity from the index as well as the rate of interest that is potentially earned on cash collateral invested in certain Treasury Bills. According to Forrest Laws at the Farm Press, the cotton market is “biding its time” and futures are steadily climbing and could hit the high 60-cent range by December. Growers are worried about excessive rain in the Cotton Belt, which has delayed planting.

The coffee ETN iPath DJ AIG Coffee TR Sub-Idx ETN (JO), currently up 15% year-to-date, tries to mirror the returns available through unleveraged investment in the futures contracts on the commodity from the index along with the rate of interest that may be earned on collateral invested in specific Treasury Bills. Coffee prices could face a price spike and demand is on the rise, the Press Association says. Bad weather has led to a shortage of Colombian Arabica.

The carbon market ETN AirShares EU Carbon Allowances (ASO), currently down 4.4% year-to-date, intends to reflect the performance of a basket of exchange-traded futures contracts for European Union Allowances, which is an entitlement to produce 1 metric tonne of carbon dioxide that is transferable in accordance to the European Union Greenhouse Gas Emissions Trading Scheme.

On Wednesday, Republicans in the U.S. House of Representatives pushed to include nuclear power and “clean coal” as alternative energy resources used for electricity, reports Richard Cowan for The Washington Post. Democrats are gunning for renewable sources in wind and solar power.

Provisions still being negotiated include: Permits that may be given to oil refiners. A $17 billion fund for R&D of alternative fuels. Better trade protection for U.S. companies that would have to compete against foreign firms not compliant to carbon-emission rules. Cap and trade bill that may cause higher energy prices.

The PowerShares WilderHill Clean Energy (PBW), currently up 4% year-to-date, seeks to track the WilderHiill Clean Energy Index, which delivers capital appreciation through selection of companies focused on green and renewable energy sources and clen energy technologies.

The energy and climate bill circulating in the House of Representatives may include a scaled-back renewable power target of 15% by 2020, writes Ben Geman for The New York Times. This will require utilities to supply power from wind, solar and biomass sources.

The draft limits sources for biomass harvesting. Municipal solid waste will be counted among sources of renewable energy. Energy efficiency resource standard (EERS) are no longer included.

Max Chen contributed to this article.

The task of quantifying savings is almost, if not completely, impossible. The price tag of a new grid is elusive, and estimates that do exist can range from $100 billion to $2 trillion, explains Jenny Gold for NPR. The focus of the problem is that the grid is made up of many little parts, which would be built and managed by different sectors of the energy industry.

Each new system (such as power lines, smart technology and new sources of power) can add hundreds of billions of additional dollars to a total cost estimate. The bottom line is that the upgraded grid will be expensive and cost billions. Then there’s the specter of public opposition because of the costs being passed down to the consumer, as well as political loopholes.

But one step consumers can take is installing a digital smart meter in your home, which costs  $250. As such meters catch on, it can give utilities a better idea of their consumers’ needs and help fund improvements.

The payoff down the line would less dependence on coal, and potential costs would be mitigated for the long term. Here is a grid to take a look at the nations’ systems as it stands today and visualize the potential for improvement. (You can click the other tabs on that map to see solar and wind capacity.)

The purpose of the grid is to enable our systems to take in wind and solar power readily, which would reduce the number of roving blackouts substantially, according to Jeff Brady for NPR.

As this movement toward a more efficient grid catches on, there are numerous ways to play it with ETFs, including:

• Claymore Global Solar Energy ETF (TAN): down 4.9% year-to-date

• First Trust ISE Wind Energy Index Fund (FAN): up 4.6% year-to-date

• PowerShares WilderHill Clean Energy Portfolio ETF (PBW): up 5.2% year-to-date