Carbon Credit Investing: Get Up To Speed On This New Asset Class

by Corey Philip
January 22, 2022

Grammatically incorrect scratch noted below. And source links.


SInce KRBN ETF Launch 8/2020 it has returned 155%

Based on my math I estimate the global carbon markets to have a size of 573 billion (today in Jan 2022)

- What Are Carbon Credits

A carbon offset credit is a transferrable instrument certified by governments or independent certification bodies to represent an emission reduction of one metric tonne of CO2

Compliance Credis

  • Like a tax
  • Paris agreement

Voluntary Offsets

  • International Carbon Reduction and Offset Alliance

Who would invest? 

  • Higher ESG Rating
  • American Airlines

What’s Cool about this whole carbon creditthing

  • Besides that it creates a whole new market 
  • Is that it in a sense lets the market direct innovation  

Voluntary carbon markets: how they work, how they’re priced and who’s involved

(has a podcast)

“Some Carbon credits can be dodgy

https://www.edf.org/blog/2021/09/29/3-things-you-need-know-about-soaring-voluntary-carbon-market

“The voluntary market is on track to reach a record of $6.7 billion at the end of 2021

https://www.spglobal.com./platts/en/market-insights/blogs/energy-transition/061021-voluntary-carbon-markets-pricing-participants-trading-corsia-credits

Voluntary, companies buy an offset

Compliance; a cap on how much can be omitted.  Then auction them off. 

Becoming more scare faster then companies can reduce emissions

Create incentive to reduce carbon emission

The Carbon Credit Quality Initiative — a collaboration between EDF, the World Wildlife Fund and Oeko-Institut — is developing an independent, user-friendly scoring tool that will empower carbon credit buyers to identify high-quality credits while also pushing for high standards in the voluntary carbon market.

The Carbon Index

Indepth index info https://cdn.ihsmarkit.com/www/prot/pdf/0720/IHS-Markit-Global-Carbon-Index-Guide.pdf

IHS Markit Global Carbon Index Backtest

https://cdn.ihsmarkit.com/www/pdf/1020/Factsheet-GlobalCarbonIndex-hires.pdf

Demand For Carbon Credits

Paris agreement, limit global warming to 1.5c by 2100

Us left in 2017 under Donald trump, rejoined 2021 under Biden.

Us Market represeated by Russel 3000 Index will need to

The-global-carbon-market

Exhibit 6

 

In April 2021 White house set a goal of reaching net zero emissions by 2021

And bank of America reports found that the Carbon Offset market may need to gor fiftyfold to meet that gocal.

https://www.cnbc.com/2021/09/27/bank-of-america-carbon-offset-market-to-x-50-to-meet-net-zero-goals.html

European market, created just before 2008 and oversupplied.  Then economic activity drop and had a sideways market for 10 years

“Achieving net-zero energy emissions by 2050 will demand approximately 7.6 gigatons of carbon dioxide offsets or removal, it said.

Speculation Driving the Returns Of Carbon Credits?

The Carbon Index

Indepth index info https://cdn.ihsmarkit.com/www/prot/pdf/0720/IHS-Markit-Global-Carbon-Index-Guide.pdf

IHS Markit Global Carbon Index Backtest

https://cdn.ihsmarkit.com/www/pdf/1020/Factsheet-GlobalCarbonIndex-hires.pdf

How To Investing In Carbon Credit ETF’s 

$1,000,000

Compliance markets

Uses futures

ESG Impact

Diversivication

1.5bn in AUM

About the author

Corey Philip

Corey Philip is a small business owner / investor with a focus on home service businesses.

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