What’s Behind Westport Innovations Inc. (USA) (WPRT)’s Surging Stock

Finally, on Tuesday of last week, President Obama delivered a speech declaring his intention to use executive action to combat climate change, particularly carbon emissions. Natural gas is a much cleaner-burning fuel than gasoline or diesel — indeed, the shift from coal-fired power plants to natural gas-fired power plants is responsible for much of the reduction in U.S. carbon emissions over the past five years. In his speech, Obama mostly ignored emissions from vehicles and instead outlined a policy primarily focused on electrical generation, building, and infrastructure efficiency, and adapting to more severe weather. These policies, if enacted, won’t do much for Westport Innovations Inc. (USA) (NASDAQ:WPRT)’s engines (though Cummins Inc. (NYSE:CMI) Westport does provide some natural gas-powered electrical generation systems), the White House estimates that about 28% of American carbon emissions come from transportation, so any serious effort to reduce carbon emissions must eventually extend to controlling emissions from vehicles.

As a first step, Obama’s plan envisions raising fuel efficiency standards after 2018 for heavy-duty vehicles. If such a policy had teeth that made high-emissions vehicles more expensive to operate, through fines or the requirement to employ advanced emissions control technology, the economics for heavy-duty vehicle operators to make the transition to natural gas will become even more compelling.

Fool contributor Daniel Ferry owns shares of Westport Innovations and Cummins. The Motley Fool recommends and owns shares of Cummins, Paccar, and Westport Innovations.

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