Clean Energy ETFs Could Get Hit by Cuts

Includes: GEX, KWT, PBW, PWND
by: Tom Lydon

The House Appropriations Committee wants to cut clean energy funding by $900 million in fiscal 2011. That means some hurting could be in store for clean energy exchange traded funds (ETFs).

Originally, President Obama’s fiscal 2011 budget line item for “energy efficiency and renewable energy,” requested $2.36 billion. The $900 million reduction in clean energy spending would represent 37.5% of that budget request, reports Eric Rosenbaum for TheStreet.

Unfortunately, the clean energy budget cuts are tied to the size of the Federal deficit. The timing is unfortunate: solar and wind ETFs have been doing well of late after struggling for much of 2010.

Which ETFs feel pain and how much pain is still an open question. Funds with high levels of exposure to the United States, such as PowerShares WilderHill Clean Energy (NYSEArca: PBW), could be in for a hurting. PBW has nearly all of its assets allocated here.

Consider funds with lower allocations to the United States if this measure goes through and clean energy funding gets slashed. Examples would be Market Vectors Global Alternative Energy (NYSEArca: GEX), which gives 50% of its exposure to the United States. Market Vectors Solar Energy (NYSEArca: KWT) gives 50% of its exposure to China and Germany (and 30% to the United States), and PowerShares Global Wind Energy (NYSEArca: PWND) has high levels of exposure to developed Europe and Asia.

Tisha Guerrero contributed to this article.

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