After the failure of Obamacare repeal and replacement plan, his first legislative move, Donald Trump has shifted focus to his other campaign promises. The President signed an executive order to roll back the Clean Power Plan – Obama's signature climate policy to curb carbon emissions to 32% below 2005 levels by 2030 at coal-fired power plants.
The move would lift the ban on coal leasing on federal lands, scrap regulations to curb methane emissions from oil and gas production, and reconsider the "social cost" of carbon emissions in all regulatory actions. In addition, the order marks an end to the Obama-era rule of restricting fracking on public lands and White House guidance on incorporating climate change into federal projects (read: Trump Unveils First Budget Blueprint: ETFs to Gain or Lose).
This is Trump’s boldest step yet and marks a significant push to cut environmental regulation that will make America energy independent. It is being viewed as the start to “a new era in American energy and production, and job creation” and is likely to lead to "unbelievable" American prosperity.
The move would benefit companies relying on dirty fuel like coal while it is expected to hit the clean energy space. Below, we have highlighted the winners and losers from the rollback of the Clean Power Plan:
Coal ETF – A Major Winner
VanEck Vectors Coal ETF
This ETF is the major beneficiary of Trump’s energy independent policy. It targets the coal industry and tracks the MVIS Global Coal Index. Holding 28 securities in the basket, the fund is pretty well spread across each component with none holding more than 8.12% share. It has a Chinese focus accounting for more than one-fourth of the portfolio while Australia, the U.S. and Canada round off the next three. The fund has amassed $111.4 million in its asset base and trades in average daily volume of about 184,000 shares. Expense ratio comes in at 0.59%. KOL gained 12.8% since the start of the year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: Can Coal ETFs Pick Up Steam in 2017?).
Clean Energy ETFs at Risk
PowerShares WilderHill Clean Energy Portfolio PBW
This product provides exposure to U.S. companies engaged in the business of advancement of cleaner energy and conservation. It follows the WilderHill Clean Energy Index and holds about 37 stocks in its basket with none holding more than 4.4% of the total assets. The fund has amassed $87.8 million in its asset base and sees moderate volume of nearly 95,000 shares a day. Expense ratio came in at 0.70%. PBW has gained 7.3% so far in the year.
First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN
This fund provides exposure to U.S. clean energy companies across a wide range of industries, including solar power, biofuels, advanced batteries, as well as the installation of new technological systems. It tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $55 million. It charges 60 bps in fees per year while volume is light at nearly 12,000 shares. In total, the product holds 38 securities with each holding less than 9% share in its basket. QCLN returned 7.8% in the year-to-date time frame and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook (read: Future of Clean Energy ETFs in Trump Era).
PowerShares WilderHill Progressive Energy Portfolio PUW
This fund offers exposure to 42 companies focused on alternative energy, better efficiency, emission reduction, new energy activity, greener utilities, innovative materials and energy storage. It follows the WilderHill Progressive Energy Index and has a well-diversified portfolio with none holding more than 3.8% share. It is often overlooked by investors as evident from its AUM of $24.1 million and average daily volume of 3,000 shares. PUW charges 70 bps in annual fees and has shed 0.6% in the year-to-date time frame. It has a Zacks ETF Rank of 3 with a High risk outlook.
A Note of Caution!
The amendment of the Clean Power Plan and other regulations will likely take years to complete and face legal challenges from environmental groups and Democratic-leaning states such as California and New York. Environmental groups have vowed to fight against Trump’s climate actions, as they fear the rolling back of Obama climate change plan will put the U.S. at a competitive disadvantage to other countries that are embracing cleaner energy sources.
Further, Trump’s climate plan has put the health of Americans and the future of the planet at risk, given that the Clean Power Plan was aimed to protect public health by avoiding 3,600 premature deaths from air-pollution exposure, 1,700 heart attacks, 90,000 asthma attacks, and 300,000 missed work and school days annually.
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