Tuesday, August 07, 2007

Carbon Offset Investing

In June I wrote two posts, My Carbon Footprint” and “Personal Carbon Credits,” through which I tried to demonstrate the frustration in making a personal impact on carbon emissions. I suggested individuals create their own "carbon offsets" by making investments in companies that clean up pollution or create renewable energy sources.

General Electric Company (GE: NYSE) has gone one step further with its MyEarthRewards credit card. It is a credit card like any other, except the reward program for this card is paid as a carbon offset. The cash discount that would normally be applied to the card holder’s balance goes to investments in projects that reduce greenhouse gas emissions. Then the cardholder can balance his own carbon emissions much like a corporation buys offsets on the carbon exchanges.

Of course, like the organizations mentioned in my earlier posts, the card holder has to trust GE to make sound investment decisions. Less than a month after initiation, GE has no track record for its investments. So far GE only describes its partnership with
AES Corporation (AES: NYSE), a Virginia-based electrical utility. The GE website also lists the type of projects it might invest in such as methane gas capture, industrial gas destruction, renewable energy product (wind, biomass and solar), reforestation and energy efficiency solutions.

It may make more sense to simply invest in AES directly. After taking a precipitous drop in price in the last month, the stock is trading at 15-times estimated 2007 earnings from continuing operations. AES reported a net loss in the first quarter after an asset impairment charge on discontinued operations in Venezuela.

AES has made a firm commitment to renewable energy. Some of its other partners could be good investment alternatives. One of my favorites is
Altair Nanotechnology (ALTI: Nasdaq), which is developing advanced battery technologies. AES invested $3 million in Altair and has agreed to jointly develop energy storage solutions for use by AES in the electrical grid. Altair has yet to produce profits, but has multiple market opportunities for its nanomaterials technology.

Covanta Holdings Corp. (CVA: NYSE) recently bought two biomass generating units from AES. Already trading at 24 times earnings, the CVA shares may not have a lot more lift. Nonetheless, Covanta appears well positioned to become a major player in the waste-to-energy sector.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. ALTI is profiled with generally favorable comments in the Small Cap SEARCH newsletter published by Crystal Equity Research.

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