Coal ETF Won't Benefit From Plant for Now, But It Could from Global Demand | ETF Trends

News that could affect the coal-focused exchange traded fund (ETF) involves the FutureGen project, in which the carbon dioxide emissions from coal power plants will be re-directed away from the atmosphere.

Coal-fired power plants are one of the biggest energy producers worldwide and coal is more abundant than oil and is far cheaper. The drawback is that the Bush Administration pulled the plug on pursuing the plan in which a commercial-scale coal fire plant would emit no CO2 into the atmosphere, a gas that contributes to global warming.

Andrew C. Revkin for The New York Times reports that the plan was been put off when the budget doubled from the original $1.8 billion. More than 70% of the original bill was reworked and eventually the administration completely re-vamped the project. New plans, approvals, designs, budget hassles and construction could take years.

The Market Vectors Coal (KOL) ETF won’t see a drop in returns because the plant was put on hold, however, it can’t benefit from going forth with FutureGen’s idea, at least not at this time. A switch from oil to coal may not be far off, but more research must be conducted.

Meanwhile, David Khani, FBR managing director and energy analyst, appeared on CNBC’s Squawk Box yesterday to talk about the commodity. The video can be viewed here. Khani says that regardless of what happens in the United States, coal demand abroad is outpacing the supply – so much that 20% of Indian coal-fired plants are currently without coal.

The Dow Jones U.S. Coal Index illustrates how the price if coal has shot up in recent weeks.


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.