In what may be seen as a surprise to some market observes, President Donald Trump provided an assist Tuesday to alternative energy stocks and exchange traded funds after it was reported that the White House is exploring a carbon tax to bolster revenue.
The Guggenheim Solar ETF (NYSEArca: TAN) and the VanEck Vectors Solar Energy ETF (NYSEArca: KWT) traded slightly higher immediately following the news.
KWT tracks a group of global companies involved in photovoltaic and solar power, or the provision of solar power equipment/technologies and material or services to solar power equipment/technologies producers. TAN also follows global companies involved in the solar industry and the entire value chain.
Solar stocks slid last year as increased competition pushed prices lower while customers pushed off on purchases in hopes of further cheaper prices, especially with Chinese companies raising production. Still, there are some positive signs.
“President Trump’s administration is exploring the creation of two controversial new taxes — a value-added tax and a carbon tax — as part of a broad overhaul of the tax code, according to an administration official and one other person briefed on the process,” reports The Washington Post. “The value-added tax, which is popular in many other countries, would serve as a kind of national sales tax, one that consumers would pay when they make purchases and that businesses would pay for supplies, services and raw materials. A carbon tax would target the emissions of carbon dioxide and other greenhouses gases in the burning of gasoline, coal and other fossil fuels.”
Government subsidies helped green energy technology get its foot in the door, but lower costs will help the industry compete with fossil fuel. Economies of scale has been the top driver of falling prices – for example, the cost of solar power has plunged to 1/150th of its level since the 1970s and solar installation has surged 115,000-fold.
“A value-added tax and a carbon tax have long been favored tools among economists, including some on the right, to raise revenue in a way that supports economic growth. But the prospect of any new taxes has long drawn skepticism from Republicans,” according to The Washington Post.
For more information on the photovoltaic panel industry, visit our solar category.