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Carbon ETN Soars Ahead of EU Backloading Plan


The carbon prices have plunged over the past couple of years, but the carbon-related exchange traded note is making a swift rebound ahead of the European Commission’s plan to cut the supply of permits.

The  iPath Global Carbon ETN (GRN) jumped 46.5% year-to-date and gained 54.1% over the past year. GRN tracks the the Barclays Capital Global Carbon Index, which follows the performance of the most liquid carbon related credit plans, including both the European Union Emission Trading Scheme and the Kyoto Protocol’s Clean Development Mechanism.

Carbon credits are a type of permit that allows a holder to emit one ton of carbon dioxide. The credits can be traded on international markets.

The European Commission is passing an emergency plan that includes delaying, or backloading, the sale of 900 million carbon permits in an attempt to help prices rebound from levels inconducive to stimulating investments in low-emission technology, reports Ewa Krukowska for Bloomberg.

“The auction platforms will publish the revised auction calendars in advance of the start of backloading,” the commission said. “At this stage of the preparations, the commission expects that backloading will be implemented as of mid-March.”

The cost of emitting a metric ton of carbon dioxide declined 80% since the 2008 high due the slowdown in production levels in the years following the global financial recession that created a glut in allowances.

Currently, ICE ECX Emissions futures are trading around $6.25 euros per metric ton, or $8.53 per metric ton.

“Today’s outcome in Parliament should provide confidence to market participants that the auction volume will be reduced significantly this year, thereby providing a supportive signal for EUA prices in 2014, targeting €6.5/t to €7/t,” Marcus Ferdinand, head of EU carbon analysis at Thomson Reuters Point Carbon, said in a BusinessGreen article.

Analysts, though, calculate that carbon prices need to rise to €40/t to €50/t, or $54.6/t to $68.2/t, before we see meaningful large scale low carbon investments.

iPath Global Carbon ETN

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