Here's Why Green Legislation Shouldn't Be Part of Your Solar-Investing Thesis

Legislation that would tax carbon production and return that tax to Americans is exciting -- but politically unfeasible in the current climate. Two investing experts explain why it's too early to make these legislative items part of your investment thesis for solar stocks. 

A full transcript follows the video.

This video was recorded on Dec. 20, 2018.

Nick Sciple: We have another regulatory question from our listener Brendan, who send us an email at [email protected]. He's asking about House Bill 7173, it's the Energy Innovation & Carbon Dividend Act. What the bill is going to do is put a price on carbon and distribute it to American households. Similar legislation has been passed in Canada and would give a carbon dividend as a result of the fees they're charging there. He asked, "Now that we're seeing that a price on carbon appears to be getting closer, are there any investing takeaways or things to take note of in the energy space as a result of this bill and things like it? And, are there any impacts from it with regards to the Green New Deal that has been discussed over the past year?"

What are your thoughts on this piece of legislation, Jason, and what impact it may have on energy, particularly solar energy?

Jason Hall: If you look out a decade from now, maybe it's more likely that we see some of these carbon tax, carbon incentives happen in the U.S. that you're starting to see in Europe and recently in Canada. But, to be as blunt as possible, this this a non-starter. It's not going to happen under the current White House administration. It's not going to happen with a split Congress. A lot of this is about political points as we move toward 2020 and the next presidential election. Just to be pragmatic and look at this as what it is, it's political posturing to a certain extent. Whether or not it's good legislation, I don't think we should even get into that on the show.

For investors, it's just noise in the background. It's not really worth thinking about in terms of the near-term, in terms of investing in solar. If you think about the typical supply side, demand-side parts of the business, think about the companies that have the best balance sheets to ride out those cyclical shifts. And take a grain of salt with any projections about solar demand any one given year, because there are other material regulatory things, as we saw with China and with the U.S. over 2018, that can change things in the blink of an eye. But I don't think this is legislation that's even going to get to a vote in the next two years.

Sciple: I agree with you, Jason. If this becomes a big sticking point for 2020 and a candidate gets elected on the backing of this kind of program, maybe it'll have a significant impact. But in the near-term, we're not going to see anything concrete come out of this legislation.

Hall: If it were to get to a point where it was actually codified, obviously it would be a tailwind for any carbon-reducing, carbon-neutral, solar, wind, any of those power sources, it would be good. But I think we're far politically away from it even being considered, I'm not even considering it as part of any thesis I have for any renewable or carbon investment at this point.