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Posted: 04 November 2021
The launch of the world’s first exchange-traded product (ETP) backed by physical EU carbon allowances (EUAs) is taking place on the London Stock Exchange today.
SparkChange Physical Carbon EUA ETC (Ticker: CO2) provides investors with an easier way to invest in physical EU carbon allowances, or “permits to pollute” that the EU Commission forces industrial emitters to obtain to cap the level of pollution in Europe.
As polluters and investors compete for a supply of EUAs, investors will be able to reduce the amount of EUAs in the marketplace available to polluters. This is likely to have the effect of increasing scarcity and upward price pressure until they are too expensive for polluters, incentivising the polluters to switch away from using dirty fossil fuels to cleaner energy. This gives investors not only an opportunity to participate in one the top performing commodities of recent years[1], but in a ground-breaking product that can actively contribute to decarbonisation. Past performance is no guarantee of future performance. Capital at risk.
SparkChange Physical Carbon EUA ETC (Ticker: CO2) is backed by physical allowances and thus tracks the price of EUAs (excluding fees).
EUAs are increasing in scarcity value, contributing to upward price pressure
The EU Commission automatically reduces the issue of future allowances each year in order to decrease emissions over time, with the potential to create upward price pressure and drive scarcity value. Under EU law, holding EUAs for 12 months triggers additional permits being cancelled in future years adding to further scarcity and removing EUAs from polluters. EUAs valuations have risen more than 192%[2] in the last 3 years on the back of market reforms and are one of the top performing commodities of recent years[3]. Past performance is no guarantee of future performance. Your capital is at risk.
[1] https://www.wsj.com/articles/carbon-price-boom-attracts-investors-to-emissions-trading-market-11622722936
[2] Source: Bloomberg as of 30.09.2021
[3] https://www.wsj.com/articles/carbon-price-boom-attracts-investors-to-emissions-trading-market-11622722936
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