One of the nasty side effects of quickly expanding economic growth is pollution. Throughout history, almost no country that has risen to be a major industrial power, has done so without creating widespread environmental damage. In the United States and the rest of the developed world, we have finally begun to take a serious look at the kind of damage that has been done since 1950s. In the rapidly growing emerging world, pollution problems are a constant threat, and in some up-and-coming major powers, like China, they have reached deadly proportions. Pollution mitigation will be an important factor in policies of various nations going forward. For investors, adding this overlooked cleantech sector could be a great long-term slam dunk for portfolios.

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A Growing Market
While most investors focus on renewable energy generation and efficiency, when looking at the cleantech sector, the often ignored pollution mitigation subsector could offer some of the best gains for investors.

The total global air pollution mitigation market was worth nearly $84 billion in 2007. Analysts predict that by 2012, this global market will be worth over $138 billion; resulting in compound annual growth rate of almost 11%. Similar results exist for the water pollution sector, with analysts predicting that trillions will need to spend on a variety of water infrastructure components, including sanitation needs. According to the United Nations, in developing countries, over 80% of untreated sewage returns into receiving bodies of water.

Asia alone will result in the bulk of this spending; contributing to 55% of this growth. In 2010, China released a landmark two-year study showing that pollution to its water ways was twice as severe as Beijing initially estimated, and less than 1% of its 560 million city dwellers breathe air considered safe by the European Union. According to the "Journal of Geophysical Research," sulfur dioxide and nitrogen oxides created by China's coal-fired power plants fall as acid rain on South Korea and Tokyo, and much of the particulate pollution over Los Angeles originates in China. Equally, India and a variety of nations in the Association of Southeast Asian Nations are facing comparable pollution issues.

In the developed world, the situation isn't rosy either. More than 46% of America's lakes and rivers are too polluted for fishing, swimming or aquatic life. Seven out of the top 10 countries for CO2 emissions, in 2010, where developed market nations. This is despite the fact that many of them have continued to embrace renewable energy sources.

A Mitigation Portfolio
Despite the lack of a real international climate policy, environmental laws have been getting stricter over the years, and more nations have adopted better pollution controls. For investors, this trend could be one of the real values in the cleantech sector. Both Market Vectors Environmental Services ETF (NYSE:EVX) and PowerShares Cleantech (NYSE:PZD) can be used as overarching plays on pollution controls and various cleantech ideals. However, there are plenty of ways to target exposure.

Water filtration and sanitation continues to be a paramount issue, and carbon filters are some of the most effective methods at removing chlorine, sediment and other volatile organic compounds from water. Calgon Carbon Corporation (NYSE:CCC) is one of the largest manufacturers of activated carbon and filtration systems in the world, and has been growing its market shares in China. In addition, both Pall (NYSE:PLL) and Nalco (NYSE:NLC) can be used as water filtration and sanitation plays.

Just under $42 billion will be invested in equipment to reduce air pollution over the next year; with nearly $3 billion of that going towards controls for coal plants. Small cap CECO Environmental Corp. (NASDAQ:CECE) designs and installs emission systems for a variety of industrial facilities. The company continues to gain business, and recently entered into the Indian market place. Investors may also be interested in CLARCOR (NYSE:CLC) which makes a variety of air filtration products including coal scrubbers and industrial applications.

The Bottom Line
As the world grapples with growing pollution and environmental concerns, the mitigation industry stands to profit. For investors, this often ignored subsector of cleantech could be the way to grow a portfolio. The previous stocks along with firms like Donaldson (NYSE:DCI) and Fuel-Tech (NASDAQ:FTEK) make ideal selections to play the trends. (For additional reading, take a look at Going Green With Exchange Traded Funds.)

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