New KARB ETF opens door to global compliance carbon markets


New KARB ETF opens door to global compliance carbon markets


Carbon Fund Advisors Inc has launched the Carbon Strategy ETF (KARB) on the NYSE to provide investors with exposure to carbon markets.

KARB ETF is an actively managed thematic ETF that will invest in carbon credit futures contracts whose value is expected to increase over time.

It will enable investors to enter the global carbon markets. The global compliance carbon market is reportedly to have grown from €186 billion ($220 billion) in 2018 to €760 billion ($899 billion) in 2021.

The carbon credit futures contracts are commodity future contracts linked to the value of emission allowances, which are usually issued by governments to allow businesses and industries to emit a specified amount of greenhouse gases.

In countries that regulate emissions, a cap is placed on the overall annual greenhouse gas emissions produced by businesses, with the cap, or permitted emissions, decrease annually to achieve climate goals. 

Emissions allowances can be traded between buyers and sellers, resulting in a market price for CO2.

With KARB, investors are given the opportunity to invest directly into carbon allowance futures contracts that usually are hard to gain exposure to, as they are mostly available only to those registered in an emissions trading scheme.

“There is a growing global push to regulate and reduce greenhouse gas emissions in an effort to combat climate change…and emissions trading systems can be an effective tool for governments across the globe to achieve their climate goals,” said Tim Collins, founder and president of Carbon Fund Advisors.

“While active futures markets can provide investors with exposure to certain compliance carbon markets, investing directly in carbon allowance futures contracts can be challenging because of the difficulties associated with gaining access to derivative markets. KARB is a potential solution for that issue because it opens the door to invest in a portfolio of carbon allowance futures at a time when global carbon prices are forecast to rise as the world aims to achieve the goals of the Paris Agreement,” said Tim Collins.

Initially, KARB will hold futures contracts for carbon allowances in some of the most active carbon markets in North America and Europe, such as the European Union Allowances, California Carbon Allowances, US Regional Greenhouse Gas Initiative CO2 Allowances, and the United Kingdom Emissions Trading Scheme (UK ETS).

Prices for emitting carbon are expected to rise in the long term, as the world is working to reduce emissions and tackle climate change. That create opportunities for investors to profit from the dynamic carbon market while also advancing the decarbonization industry.

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