KRBN offers unique exposure to the global carbon credit market, providing portfolio diversification and a hedge against rising carbon costs for industrial assets. Key drivers for higher carbon prices include stricter EU emissions targets, US electricity demand growth, and tightening allowance supply across major markets. Despite recent price declines, I believe we've reached an inflection point, with economic recovery and policy tightening likely to drive carbon prices higher.
U.S. trade policy continues to wreak havoc on global markets, impacting a range of asset classes. Carbon allowances experienced drawdowns leading up to the rollback of country-specific tariffs, with uneven impacts to different regions.
Washington state's carbon market cleared a notable hurdle in November, receiving significant support from voters for its continuation. The KraneShares Global Carbon Strategy ETF (KRBN) now invests in Washington's regulated carbon allowance market, the only fund to do so.
Last month KraneShares announced the launch of its flagship carbon strategy on European exchanges. European investors can now access the KraneShares Global Carbon Strategy ETC (KRBN) on Italian and German Exchanges.
The birthplace of coal power generation announced the end of an era as it shut down its last remaining coal plant. The U.K. is the first G7 member to phase out of coal reliance in a world transitioning to net-zero carbon.
This year continues to prove a challenging one for global carbon markets in the short-term. However, recent price action in UK carbon allowance market, alongside investment fund support, make the market worth consideration moving into fall months.
Investors looking for opportunity and diversification beyond traditional allocations would do well to consider carbon allowances. Carbon allowance investing offers a diversified return stream for portfolios from traditional stocks and bonds with notable returns over time.
Michael McCrae is leading Kitco's coverage of the mining sector. McCrae, who has both an MBA and CMA, knows how to build digital media properties.
Global decarbonization is driving demand for carbon credits, creating a new market for investors. KraneShares Global Carbon ETF provides easy access to carbon allowance futures contracts in Europe and North America. KRBN's unique portfolio includes EUA, CCA, and RGGI futures, offering a different return profile than traditional investments.
Subdued performance in the first few months of the year from major regulated carbon markets globally reflect the challenging macro environment. However, as the European carbon market turned around in May, it lifted the KraneShares Global Carbon Strategy ETF (KRBN).