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Obama's Clean Energy Bet: Innovation or Just More Spending?

NEW YORK ( TheStreet) -- When it comes to clean energy funding, President Obama and the Republican deficit hawks in Congress can't seem to agree on much. There is a clear divide between the deficit hawks saying "spending is spending is spending" and the Obama administration, on the other hand, saying "spending is, in fact, innovation."

For investors, the political rhetoric is as influential as the clean energy logic, and it all can influence trading in clean energy stocks. Investors can't go straight from point A (a push from the Obama administration in favor of clean energy) to point B (guaranteed growth in a clean energy niche) and head to the bank with future profits. By all accounts, it's going to be a battle between the Obama administration and Congress over the budget request. On the other hand, for the deficit hawks to relegate the Obama administration's clean energy ambitions to a planned scrap heap of "wasteful" government spending can miss the forest for the carbon-sequestering trees.

There has been much action in relation to U.S. clean energy policy and the market implications in the past few weeks. The clean energy news flow reached its crescendo on Monday when President Obama introduced his new 2012 fiscal budget and requested $8 billion in clean energy spending. Solar, wind, electric car and lithium-ion battery makers, and industrial companies that focus on increasing the building efficiency in the commercial sector, would all be beneficiaries of President Obama's clean energy plan, partially to be funded by an elimination of tax breaks for oil and gas companies.

Lithium ion battery makers like A123 Systems (AONE) and Ener1 (HEV) would stand to benefit, in the long run, with the government encouraging an electric car hub and Obama's plan for one million electric cars on the road by 2015, even if they lack significant access to the passenger vehicle market today.

President Obama's budget calls for 9 gigawatts of clean energy projects on federal lands to be permitted by year-end 2011, a drive that would be in line with the efforts of U.S. solar project developers, like First Solar (FSLR - Get Report), MEMC Electronic Materials (WFR) and SunPower (SPWRA), though by no means an opportunity limited to them, any by no means a reason alone to invest in these stocks, given their volatile profile and historical reliance on a European market that remains in flux.

Companies that have seen been building efficiency business grow as commercial properties become more energy conscious, such as Hubbell (HUB.A - Get Report), Acuity Brands (AYI - Get Report), and Cooper Industries (CBE), would benefit from President Obama's building efficiency budget request.

There's also an argument being made that if electric cars are going to find legislative support, it might require a concession to the traditional energy lobby in the form of support for natural gas engine-powered vehicles. The Natural Gas Act, which failed to find a legislative platform last year, is the ultimate prize for natural gas transportation stocks like Westport Innovations (WPRT - Get Report), Clean Energy Fuels (CLNE - Get Report) and Fuel Systems Solutions (CLNE - Get Report). It would double the subsidy that expired at the end of 2010 for the purchase of natural gas vehicles, making the vehicles competitive with traditional diesel-powered fleet vehicle prices.

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