Posted: Monday, June 2, 2014 11:41 AM ET
The heart of the plan is that states will be financially incentivized to reach periodic emissions targets. States can achieve reductions in many ways, from encouraging customer efficiency to installing electric car-charging stations. Still, there can be no doubt that the majority of the emissions will eventually have to come from a change in the way power is produced. Coal power, already out of favor, will look less attractive than ever. More and more, the balance will tip first toward natural gas and eventually towards solar and wind. The plan might even tip the scales back in favor of a few threatened nuclear power projects.
To say that these goals are achievable is an understatement—the economic advantages of natural gas are already lowering the nation's carbon dioxide emissions, and pushing the process forward is an eminently sensible investment. Economists, whether they care about the birds and bunnies or not, have long pointed to the economic advantages of a healthier population, and there is no doubt that coal burning plants are doing long-term respiratory damage to much of the population.
Even if a healthy population isn't your thing, the plan is necessary for our national energy security. Carbon based fuels are rapidly becoming depleted, and it will be far harder to switch our economy over to one based on renewable energy if we wait until we have no energy to do it with. Europe is way ahead of us; Germany, in particular, plans to be using 80% renewable energy by 2020. That Germany is also the most financially solvent of the world's large nations should tell us much about the wisdom of actively encouraging the transition to renewable power.
The losers here, of course, are the coal mining companies such as Peabody Energy (BTU) and Arch Coal (ACI), as well as coal heavy electric utilities such as American Electric Power (AEP). Winners are renewable-heavy utilities, such as Exelon (EXC) and NextEra (NEE). Expect to see these effects bleed into the stock prices slowly over the rest of the year, as knee-jerk reactions fade and the market realizes that yes, this is really happening, and yes, it means that king coal is about to lose its crown—very possibly along with the rest of its head.
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.
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