Carbon emissions trading: how to profit from the price of pollution

Carbon-emission allowances are still an esoteric market, but one that looks set to grow. This new fund could help you cash in.

Cooling towers
Big emitters will have to pay higher prices or invest in cleaner technology
(Image credit: © Getty Images/iStockphoto)

Most economists seem to believe that economy-wide carbon pricing – such as the EU’s Emissions Trading System (ETS) – will be needed to shift our energy use to renewable sources and tackle climate change. If the scope of schemes like these continues to grow, it will push up the price of carbon-emission allowances – thereby helping to bring about change, but also creating an opportunity for investors.

So it’s notable that the first UK-listed exchange traded product to give investors access to this market arrived at the end of August. The WisdomTree Carbon ETP (LSE: CARB) tracks the ICE Carbon Emission Allowances (EUA) futures contract, which is the most liquid exchange-traded carbon futures contract globally. To understand what’s going on with this unusual product, let’s see how carbon pricing works.

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.