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What Stock Investors Should Do About Global Warming

Or consider solar. Just four years ago, solar was all the rage, the answer to global warming. Administrations globally were subsidizing the heck out of solar firms, and to many they likely appeared to be can't-miss investments. They were the future!

Except they weren't -- not yet, anyway. As typically happens when governments subsidize an industry, the market got out of whack. Supply became overabundant, but demand stayed low. It turned out people didn't have much interest in inefficient, often unreliable power sources. What solar panels firms did sell fetched bargain-basement prices, thanks to subsidies and supply gluts, killing margins. Then, when governments started pulling the plug on their investments, some firms went belly-up. Investors who went hog-wild for solar likely lost out.

What policies should investors consider today? Australia's carbon tax is one -- though perhaps not for long, since new Prime Minister Tony Abbott has pledged to kill it. Hydraulic fracturing bans and approvals are another. Natural gas is generally cleaner to burn than coal, so it should be a winner as the global warming battle intensifies, but environmental concerns over the extraction process are holding it up. Companies with access to areas with drillable shale deposits probably fare best (though may not be surefire winners right now, depending on natural gas prices in a given area). Nuclear providers, too, could get a lift if anti-nuke sentiment continues easing and more new plants are green-lit.

Global warming isn't unique in its ability to impact upon stocks through related policies. Any number of issues can inspire legislative change, and those changes can create opportunities in some areas and risks in others.

Policies matter for stocks, and that's something investors should always remember.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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