WHEN your business is planting trees, you get used to an incremental pace of growth.
But on the back of the Gillard government's carbon tax plans, Andrew Grant is witnessing the type of spurt that simply isn't found in nature.
"I'm trying to find an adjective better than growing, but we are simply growing, literally and metaphorically," he said.
Mr Grant's CO2 Group was one of a cluster of ASX-listed companies to enjoy stunning share price improvements yesterday after the carbon tax announcement.
While the broader market suffered a poor day, CO2 Group which plants trees in western Victoria and sells carbon credits to polluting companies rose more than 8 per cent to 26.5 cents a share yesterday. They were worth just 16 cents a fortnight ago.
"By virtue of this nationwide policy it magnifies demand by 20 or 30 times overnight for the kind of things we do," Mr Grant said. "We've built the business and designed what we do around the expectation of yesterday, so it has been eight years in the making."
While the $23 carbon price gave investors a new level of certainty, Mr Grant said there were other details such as the $15 floor that had been set for the carbon price once the switch was made to emissions trading that were just as significant in luring investors.
The company already sells permits to 10 of the 500 large companies that will pay the carbon tax and with the other 490 needing to offset their emissions somehow, Mr Grant is confident a lot more growth for his company is ahead.
Peter Balsarini will be hoping to capture the same market through his company Carbon Conscious, which also plants trees and sells permits.
Carbon Conscious shares rose more than 9 per cent yesterday to 34 cents and are now triple the value they were fetching just a fortnight ago. Mr Balsarini reckons they could climb further once the legislation is actually passed, rather than merely promised. "When the legislation passes that will be another element of risk coming off the table," he said.
It will be several days before it becomes clear who exactly is behind the rush to renewables and clean stocks, but Mr Balsarini suspected some investors were seeking "a bit of a hedge to the carbon price".
"There may be some stocks that are impacted by the carbon price and finding something that is positively hedged is probably not a bad play for the investor because it helps to balance the portfolio," he said.
Indeed many large energy companies long ago lodged their money in clean-tech aspirants. Oil and gas producer Woodside is the fifth largest shareholder in Geodynamics, a small company trying to commercialise geothermal energy.
Origin Energy is also a big holder of the stock, which enjoyed a 25 per cent rise to its share price to 42 cents yesterday well above the 12 cents they were fetching a fortnight ago.
Though a market minnow at just 7.7 cents a share, fellow geothermal aspirant Kuth Energy enjoyed a 14.93 per cent share price rise yesterday. That rise is only dwarfed by the 23.53 per cent rise the shares enjoyed on Thursday, just hours before full details of the government's new renewable energy agency ARENA were announced.
Frequently Asked Questions about this Article…
Which ASX-listed carbon offset and renewable companies jumped after the Gillard government carbon tax announcement?
The article reports sharp share-price gains for a cluster of ASX-listed clean and offset companies: CO2 Group rose more than 8% to 26.5 cents a share (up from about 16 cents a fortnight earlier), Carbon Conscious climbed more than 9% to 34 cents (about triple its value two weeks earlier), geothermal developer Geodynamics enjoyed a 25% rise to 42 cents (well above 12 cents a fortnight ago), and Kuth Energy—a micro-cap at about 7.7 cents—had gains of 14.93% (and a 23.53% jump the previous Thursday).
How does a carbon tax boost demand for companies that plant trees and sell carbon credits?
Company founders quoted in the article say a national carbon price magnifies demand for carbon offsets. CO2 Group’s Andrew Grant said the policy could increase demand for their services 20 to 30 times overnight because polluters need permits or offsets to meet new obligations, and the company already sells permits to 10 of the 500 large firms that will pay the carbon tax.
What role did the announced $23 carbon price and the $15 floor play for investors in carbon credit businesses?
According to the article, the announced $23 carbon price provided investors with a new level of certainty, while the $15 floor set for the carbon price after a switch to emissions trading was highlighted as an equally significant detail that helped lure investors by reducing pricing uncertainty.
Could carbon offset and renewable stocks act as a hedge for investors worried about carbon-tax exposure?
Peter Balsarini in the article suggests some investors may buy renewables and offset stocks as a hedge against companies negatively affected by the carbon price. He notes choosing stocks that are 'positively hedged' to the carbon price can help balance a portfolio, particularly while policy and legislation are still settling.
Which major energy companies are backing clean-tech or geothermal firms mentioned in the article?
The article notes that large energy companies have taken positions in clean-tech plays: Woodside is the fifth-largest shareholder in geothermal developer Geodynamics, and Origin Energy is also a big holder of that stock, illustrating established energy players investing in renewable and geothermal aspirants.
How quickly did share prices move for these renewable and geothermal small caps after the carbon policy news?
Movements were rapid and large by small-cap standards: CO2 Group’s shares moved from about 16 cents to 26.5 cents within a fortnight, Carbon Conscious roughly tripled in value over two weeks to 34 cents, Geodynamics rose about 25% to 42 cents over the same period, and Kuth Energy recorded back-to-back big percentage gains (23.53% on Thursday and 14.93% the following day).
What is ARENA and did news about the new renewable energy agency affect these stocks?
ARENA is referenced as the government’s new renewable energy agency, and the article points out some stock moves—such as Kuth Energy’s sharp rises—occurred just hours before full details of ARENA were announced, suggesting market anticipation may have played a part in the run-up in renewables and clean-tech stocks.
What should everyday investors be mindful of when considering small-cap carbon-offset and renewable energy stocks after a policy announcement?
Based on the article’s coverage, investors should be aware of high volatility in small-cap renewables and offset stocks around major policy announcements, the importance of legislative certainty (with commentators noting that passage of laws removes risk), and the possibility that some buying may be driven by short-term hedging or anticipation rather than long-term fundamentals.
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