On the surface, it appears that cap and trade could be a boon for companies like NRG Energy (NYSE: NRG), NRG Yield (NYSE:NYLD), SunEdison (NYSE: SUNE), and SolarCity (NASDAQ: SCTY), who all own solar assets that could sell credits to fossil fuel generators. But for these projects to generate revenue from cap and trade, there has to be demand for those credits.
That's where the problem comes in, because the goal of cutting carbon emissions 25% by 2020 from 2005 levels isn't that much of a stretch. Emissions were down 16% in the electricity industry between 2005 and 2012, and trends like closing coal plants and more economical solar power will keep that trajectory headed lower.
In the video below, solar specialist Travis Hoium covers why he thinks cap and trade will have little to no impact on solar companies and why investors should pay more attention to costs, which will be the true driver of the industry.
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Travis Hoium manages an account that owns shares of NRG YIELD INC. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.