Substantive change may still be years away, but the U.S. Environmental Protection Agency's acknowledgment on April 17 that CO2 emissions are harmful to the planet marked a small win for clean energy investors.

The Verdict
The EPA issued findings that list carbon dioxide and five other greenhouse gases as potential threats to air pollution and, in turn, to public health. EPA Administrator Lisa Jackson noted that a solution to the problem will "create millions of green jobs" and end U.S. dependence on oil. (To learn more about this sector, read Clean Or Green Technology Investing.)

The findings are likely to spur some legislative activity in Congress in the coming months. President Obama plans to cap greenhouse gas emissions and impose hefty fees on polluters through the requirement of emission permits. Absent such legislation, the EPA could still act to curb greenhouse gas emissions under its powers vested from the Clean Air Act.

This turn of events could have a wide range of implications for investors as the new administration grapples to implement a comprehensive energy policy in the coming years. Change is not likely to come over night, but if the EPA findings are able to stimulate legislation, investment opportunities will result. (For further reading about investing in this sector, see Five Companies Leading The Green Charge.)

The Winners
If you are of the opinion that change will ultimately result from these developments, a few ETFs could come in handy. The PowerShares WilderHill Clean Energy Fund (NYSE:PBW) and the Market Vector Global Alternative Energy ETF (NYSE:GEX) both provide broad exposure to green energy.
These ETFs are in need of some love, though. In 2008, PBW and GEX experienced respective losses of 69.1% and 61.0%. By comparison, they have similar sector weightings although GEX offers more international exposure. Not inherently good or bad, GEX is weighted 58% in international equities.

The Losers
If clean energy legislation with any teeth eventually becomes reality, a clear loser would be the United States Oil Fund (NYSE: USO), which is designed to track the price of crude. USO may still have upside in the face of a shift to clean energy, but any potential will not be as great as in the scenario of a continued dependence upon oil.

The SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) and the Energy Select Sector SPDR Fund (NYSE: XLE) also would be victimized, given that these holdings consist of major integrated oil companies. To a lesser extent, the SPDR S&P Oil & Gas Equipment & Services ETF (NYSE:XES) would suffer from a shift away from oil, although such a trend could bring down input costs for refiners.

Final Thoughts
Whether or not you are a proponent of a shift to clean energy, it clearly appears that the EPA findings on CO2 emissions last week will add a sense of urgency to the cause. If you are bullish on this theme, there are several ways to play it. Clean energy ETFs such as PBW and GEX are readily available options for the individual investor. (Read Investopedia's Green Investing Feature to learn more.)

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Tickers in this Article: PBW, GEX, USO, XOP, XLE, XES

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