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| gettyimagesbank |
By Anna J. Park
As the price of carbon emission permits soared recently, related exchange-traded funds (ETF) logged double-digit growth this month. The price of carbon emission permits hah plunged earlier this year, following an energy shortage triggered by Russia's invasion of Ukraine in February.
Yet, the carbon price has recovered over the course of the year so far.In particular, the EU's carbon price hit its all-time high Friday, as Emission Trading System (ETS) credits neared 100 euros, even surpassing the previous high of 98.49 euros recorded before the Russia-Ukraine war. UK Allowance, a carbon emissions tradable within the UK Emissions Trading System (UK ETS) also rose to its all-time high earlier this month.
Part of the carbon price surge has been attributed to the U.S. government's passage of its Inflation Reduction Act (IRA) earlier this month. The bill states a 40 percent carbon reduction goal by 2030, boosting carbon emission permit prices around the world.
However, market experts are calling for caution on the part of investors, as the carbon price is susceptible to a range of external variables, such as droughts, shortage of natural gas or other economic recessional factors. Also, the recent price surge of emission permits could be corrected in the near future.
In fact, ETFs related to carbon emissions were some of the top-performing ETFs in both U.S. and European markets in mid-August. In the third week of August, most major carbon credit-related ETFs, including the Horizons Carbon Credits ETF and the Ninepoint Carbon Credit ETF in the U.S., logged a weekly gain of 8.44 percent and 7.42 percent, respectively.
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