kiplinger connection
Climate Change • Green Business • The Economy

Climate Change: Regulation of greenhouse gas emissions is coming.
Green Business: Winners and losers.
The Economy: Housing market stays in the doldrums.

Climate Change
It’s all but a done deal.
Regulation of greenhouse gas emissions is coming. Some states are already moving to impose caps. By early in the next decade, the feds are likely to curb emissions as well.
Losers are obvious: Power plants. Automakers. Most users of electricity. But companies that look ahead, basing decisions on what is coming later, can minimize the pain.

So who’s likely to come out a winner?
Alternative energy firms, of course. The category spans quite a broad range: Those involved in power production from wind, solar, ethanol, geothermal, and biomass ... making the equipment, building the plants, and selling the green energy to end users.

There’ll be many other success stories.
The suppliers to the alt-energy firms: Zoltek and other manufacturers of composites used in wind turbine blades. Steel producers, who benefit from more demand for ethanol vats, pipelines, and turbines. AgriPower, BeUtilityFree, Landfills+, and others that sell systems for collecting methane to use in powering generators.
Suppliers to the nuclear industry: Allegheny Technologies, a maker of specialty metals such as titanium alloys used in these plants. Sulzer Pumps and other vendors of heavy-duty pumps for cooling systems.

Businesses aimed at cleaning up fossil fuel energy emissions: Those such as Foster-Miller and Pegasus Technologies, which make systems that remove airborne pollutants from coal plant emissions. And those such as E.ON U.S. and PPL Corp., which develop new coal-fired power plants that produce little or no pollution. Further down the road, services to move carbon dioxide to underground seams for storage should mean a boon for geology firms and for vendors of drilling equipment and steel pipes.

Products and services to manage energy supply and demand better: Everything from smart meters that display real-time use and price data to microelectronics that allow manufacturers to adjust use automatically. Information technology that lets grid managers trade power on the spot with multiple partners. Heat-and-power units that convert waste heat into electricity. Renewable energy brokers. Energy management consultants.
Winners run the gamut from big energy players such as Siemens and Johnson Controls to lesser-knowns such as Itron, Green Mountain Power, Areva, Elster Electricity, Comverge, and EnerNOC.

Green Business
Other sure winners in the push to curb global warming: Makers of all sorts of Earth-friendly building products ... from high-efficiency fluorescent bulbs to improved insulation. Plus substitutes not only for lumber and wood, but also for glass, concrete, and other materials whose production emits high levels of CO2.

Firms that help automakers meet rising fuel efficiency standards, which will hit 40 miles per gallon by 2015 or so, versus 27.5 mpg now. Automakers are likely to turn to firms such as BorgWarner and SKF for super-efficient steering and braking systems, drive trains, and turbochargers. Also to companies such as Magna International, which makes ultralight but strong steel. Others, such as ECD Ovonics, Ballard Power, and Apollo Energy, will profit from interest in fuel cells.

Will it take years for a thriving green market to develop?
Not at all. Some smart companies are already investing big bucks, not waiting for government regulators to lower the boom. Wal-Mart is budgeting $500 million a year for emissions-cutting measures. Bank of America, Exelon, Swiss Re, and Toyota have all pledged to lower their contributions to global warming over the next few years.
Uncle Sam is buying in. The country’s biggest energy user, the Defense Department, is inking deals for new photovoltaic arrays.
Ditto, many towns and cities. They’re turning to solar panels for traffic signals and other lighting plus buying office furniture, cleaning supplies, and other products made from renewable materials.

The economy
The housing market will stay in the doldrums well into next year.
The subprime mess has a very long tail. The number of loans facing interest rate changes has yet to peak in this risky mortgage class. It will stay high through fall of next year, keeping foreclosures ... and supply ... on the rise.
Leading home builders are downbeat, despite March’s surprise gain in housing starts. The figures are distorted by a surge in building in the Midwest after the snow and cold of February. Other regions showed significant slowdowns.
Inventory levels are worrisome. They’re at 8.1 months of supply for new homes, marking the highest level since January 1991, when the housing market was in a nasty decline.
Housing’s prolonged slump will pressure the economy next year, forcing other sectors to carry more of the load to support growth.

With Congress rejecting calls to bail out subprime borrowers ...
Some states are acting on their own to limit foreclosures. Ohio is selling $100 million in taxable bonds and will use the proceeds to refinance shaky adjustable mortgages into fixed-rate loans at 6.75%. The state’s cost: $3,300 per loan, well below the $80,000 that foreclosure and resale typically cost the homeowner, lender, and local government.
Other states are also looking to help beleaguered homeowners, including California, Colorado, Maryland, Massachusetts, Minnesota, Rhode Island, Virginia, Washington, and Wisconsin.

Congress will put the rating agencies in the hot seat soon, probing conflicts of interest and asking why Standard & Poor’s, Moody’s, and Fitch were slow to cut their ratings on subprime-backed securities.