Kraneshares European Carbon Allowance ETF

KEUA tracks a liquidity-weighted EUA carbon credit futures index.

KEUA tracks an index of EUA carbon credit futures. The index holds futures that mature in December of the next one or two years.

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There was a growing unease on Wall Street last week, caused by disappointing corporate updates from major banks, reigniting concerns about persistent inflation and the likelihood of sustained elevated interest rates.

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Kraneshares California Carbon Allowance ETF

The three primary heat-trapping greenhouse gases increased last year, underscoring the urgent work ahead to curtail emissions. Regulated carbon allowance markets play a critical role in the journey to net zero, providing investors with opportunity.

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2024 has not been a particularly kind year for European carbon allowance (EUA) prices. Earlier this week, the European Commission noted that in 2023, Carbon emissions under the EU's emissions trading system dropped by a record 15.5%.

Don't Give Up on EUAs

The United Nations World Meteorological Organization (WMO) issued a “red alert” warning for the climate crisis after 2023's record-breaking year. This year looks to smash even more climate records and underscores the need for aggressive response, investment, and action.

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Despite a rocky first quarter for the world's two largest regulated carbon markets, the outlook for the year remains positive. Investors currently have a rare opportunity to gain exposure to carbon markets at reduced prices.

A Constructive Year for 2 Largest Carbon Markets

New emerging global indicators are giving analysts hope that the carbon market will see a comeback this year. The European Union Allowances (EUA) carbon allowance program has encountered early headwinds in 2024.

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The 2024 macro outlook in the U.S. remains muddled, with persistent inflation seemingly at odds with strong economic data. AI hype and Fed interest rates dominate headlines as well as markets this year.

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So far, 2024 has not been an ideal year for European carbon prices, but hope may be on the horizon. Last week, European prices posted the first week-on-week gain of the year, trading upwards of €58/tonne in some instances.

EUA Rally Signals Possible Carbon Comeback

Due to weakness in the EU allowance (EUA) market, carbon allowance investing has scuffled in early 2024. However, some market observers believe that lethargy will abate.

Carbon Credit Investing Ready for Its Close-Up

The latest economic data shows inflation remains stubborn, suggesting investors may want to maintain exposure to an inflation hedge. Consumer prices increased 3.1% in the year through January.

Inflation Hedge Remains Critical Component in Portfolios

Regulated carbon markets vary in their outlooks this year. California continues to benefit from strong fundamentals, while the European Union faces ongoing diminished economic activity and a bearish forecast.

Why 2024 Is the Year to Buy European Carbon

The KraneShares European Carbon Allowance Strategy ETF (KEUA) may be a compelling offering as demand for EUAs is supposed to pick up later in the year. Demand for EUAs is expected to increase during the second half of the year as macroeconomic conditions improve, according to KraneShares.

KraneShares Expects Demand for EUAs to Increase in Second Half

Climate-related investing has garnered more attention in recent years. So a growing number of advisors and investors have gained familiarity with the carbon credits market.

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KraneShares' California carbon ETF has the potential to offer diversified returns. The KraneShares California Carbon Allowance ETF (KCCA) provides targeted exposure to the California Carbon Allowances (CCA) cap-and-trade carbon allowance program.

Use KraneShares California Carbon ETF for Diversified Returns

As advisors look for ways to diversify client portfolios, carbon ETFs may be a solution. Carbon ETFs provide potential portfolio diversification due to the global carbon futures markets' historically low correlation to other asset classes.

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Myriad topics in the sustainable investing realm garnered attention this year. It's fair to say the carbon credits market was part of that group.

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As investments in carbon markets become increasingly popular, investors must understand the difference between carbon offsets and carbon credits. Understanding Carbon Credits   A carbon credit is also known as a carbon allowance.

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Many investors may unintentionally be shorting carbon. Investors likely own many companies that are required to buy carbon credits or choose to make commitments to buy carbon offsets.

Investors May Be Unintentionally Shorting Carbon

Many investors cringe at the thought of more government involvement in various industries and sectors. But in some market segments, government assistance and support has the potential to generate favorable outcomes.

Governments Play Vital Role in Carbon Investing

Investments in carbon markets can offer attractive and uncorrelated performance potential as well as direct climate impact. Compliance carbon allowances are an emerging asset class that has recently garnered significant attention with its strong performance.

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The European Union Emissions Trading Scheme (EU ETS) saw challenges in November, but macroeconomic factors could help the market recover. Front-year contract prices fell by over 10% in November, according to KraneShares, driven by short selling due to a gloomy macroeconomic outlook.

EU ETS Could Rally on Improving Macroeconomic Factors

Exposure to carbon as an asset class has gained in popularity in recent years, making it essential for investors to understand how to enhance the risk/return fundamentals of their investments.

Diversified Carbon Exposure Enhances Risk/Return Fundamentals

More than 195 nations will meet in Dubai this week for the annual United Nations Climate Change Conference, known as COP28. The United Arab Emirates is hosting this year's two-week summit, scheduled to run from November 30 to December 12.

Carbon Market Updates to Expect at COP28 This Week

California's cap-and-trade program regulator, the Air Resources Board (CARB), presented price models for the first time last week. This is a significant milestone for the space, marking the first time CARB has ever released its own price projections for the cap-and-trade program, according to KraneShares.

California's Cap-and-Trade Program Regulator Releases Price Models for First Time

KraneShares' California carbon allowance ETF is rallying this week. The KraneShares California Carbon Allowance ETF (KCCA) Is up 3.7% in the past week, lifting its year-to-date total return to 27%.

News for Kraneshares European Carbon Allowance ETF ETF (KEUA)