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Socially Conscious Investing: Carbon Reduction Investment Opportunities

Posted April 27, 2008

‘Carbon capture doesn’t just happen at power plants. We’re also looking at factories, metal smelting factories, rubber factories, chemical factories… So if you can find a smaller company who specializes in air quality control or emissions reduction, I think they’re really going to benefit…’ — Nick Hodge, editor of Alternative Energy Speculator

Baltimore – (TFN): The following was taken from the transcript of this week’s TFN Smart Trading video featuring Nick Hodge. Watch this video.

Laura Cadden: In recognition of Earth Day, we’ll focus on a topic of interest to the socially conscious — but with enough potential to intrigue all savvy investors and traders.

The continuing concern over our carbon footprint has ramped up lately, particularly in Europe where there is a fear of falling short of Kyoto protocol targets. In the UK, for example, the government has begun a direct mail campaign to its citizens to emphasize the need for energy efficiency in the home, even offering grants to elderly and needy tenants to assist with the cost of insulation.

In the U.S., the Environmental Protection Agency is looking at potential regulation of carbon emissions. And a Democrat in the White House would most likely accelerate the effort.

I’ve asked Alternative Energy Speculator’s, Nick Hodge, to offer his insight as to who benefits from the carbon reduction push. So Nick, qui bono. Who benefits?

Nick Hodge: Well, first off the entire world benefits from cleaner air and a cleaner environment, but if you want to get into monetary benefits, we’re talking about environmental consulting firms, carbon capture and sequestration (also known as carbon capture and storage or CSS) firms and obviously we have the renewal energy industry as a whole.

Laura Cadden: Tell me a little bit about CCS technology. Is it truly viable?

Nick Hodge: To be honest, when I first came across this technology I thought it was a way for dirty coal companies to cover up evaporations and attempt ot portray a clean image.

But the more I got to thinking about it and looking at the numbers, we have 40% of the world’s electricity coming from coal and that’s not going down significantly any time soon. So we’re going to have to clean up the dirty coal operations. One of the main ways to get that done, as the IEA has said recently, is with carbon capture.

Tired of reading? Watch the financial video.

Laura Cadden: What do you see is the down side for the Dow this year?

Nick Hodge: I’m calling for a Dow 10,000. You know, eight months ago, I was calling for Dow 12,400. It crashed under that significantly. The credit crisis is still unfolding, sub-prime is still unfolding, we’re still seeing global recession fears, we’re seeing crisis, we’re seeing banks fall apart, consumers stop spending money, foreclosures go through the roof, you name it. The Dow at 10,000 really isn’t out of the question. How we’re trading above 12,000 right now is beyond me.

Laura Cadden: So, how does the technology work — basically. Obviously it’s pretty complex.

Nick Hodge: Well, the best technology in the field right now is Mitsubishi heavy industry’s KMCVR technology. That, as with most other CCS technologies, are post-combustion, which means they harness the carbon emissions as they come out of the flue and they are either injected into geological formations, deep sea formations or used to stimulate dwindling oil wells.

Laura Cadden: So is Mitsubishi a good investment?

Nick Hodge: Mitsubishi is more of a value stock and of course carbon capture isn’t the main part of its business. So what I’m looking for are growth companies who are young and as the carbon markets develop, are going to see increased value in growth.

Laura Cadden: And are they along the same lines or are they more like pollution equipment?

Nick Hodge: Carbon capture doesn’t just happen at power plants. We’re also looking at factories, metal smelting factories, rubber factories, chemical factories and things like that. So if you can find a smaller company who specializes in air quality control or emissions reduction, I think they’re really going to benefit going forward from cleaning up these smaller operations as opposed to the large coal power plants.

Laura Cadden: And that’s with products like filters?

Nick Hodge: That’s exactly right. With things like filters and better HVAC units, hood fumes, which capture the fumes in chemical industries and all kinds of things like that that just generally reduce the amount of emissions coming out of a factory, whether they be carbon, sulphuric or nitrogen based.

Laura Cadden: Is this a stock you’re recommending to your readers that you could share with us?

Nick Hodge: I haven’t yet, but I will tell you about it now. The company is called Ceco Environmental (CECE:NasdaqGM). They just announced 30 new contracts worth well over two and a half billion so you can already see that the money is starting to flow their way. Beyond that they have some insider buying going on which last time that happened they nearly doubled in price. So now is a good time to take a look at that company.

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