ETF Trends
ETF Trends

With the country’s attention focused on the ecological catastrophe in the Gulf, the U.S. Senate has finally started to once again address major energy legislation. Green-energy exchange traded fund (ETFs) may get a chance to shine as Congress tries to entice the sector with some basic incentives.

The main focus of the renewed energy legislation will be on the cap-and-trade proposal, also known by some as “cap and tax,” which provides a penalty on large producers of carbon dioxide emissions, writes Carol Kopp for Minyanville. Another major topic will likely cover tougher safety standards for oil drilling. [The Fate of Green ETFs as Legislation Moves Through Congress.]

Democrats argue that a comprehensive energy bill will entice massive private investments in clean-energy technologies, which include renewable alternatives, and also create more American jobs along the way.

Currently, between 6% and 18% of the global energy supply is derived from renewable sources, including sun, wind, water, geothermal, or biomass. European countries have implemented subsidies for the sector for years. But with all the problems in the eurozone at the moment, subsidies will likely be on the chopping bock, posing a risk to these ETFs, many of which have heavy weightings in Europe. [Socially Responsible ETFs: Look Under the Hood.]

Investors may play the green-energy sector with ETFs, but it should be noted that they are rather volatile at the moment – some have dropped 20% or more on news that European government support may be withdrawn.

For more information on this sector, visit our green ETFs category.

  • PowerShares WilderHill Clean Energy Portfolio (NYSEArca: PBW)
  • First Trust ISE Global Wind Energy (NYSEArca: FAN)
  • Claymore/MAC Global Solar Energy Index (NYSEArca: TAN)
  • Smart Grid Infrastructure Index Fund (NYSEArca: GRID)
  • PowerShares Global Clean Energy Portfolio (NYSEArca: PBD)
  • Market Vectors Global Alternative Energy (NYSEArca: GEX)

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.