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WisdomTree launches California Carbon Allowance ETP


WisdomTree has launched an ETP designed to allow European investors to gain exposure to the performance of California Carbon Allowances (CCA). The fully collateralised WisdomTree California Carbon ETP (WCCA) is listed on the London Stock Exchange and Borsa Italiana with a management expense ratio of 0.49 per cent, and will list on Börse Xetra.

WCCA seeks to reflect the movement in the price of ICE California Carbon Allowance Futures through the Solactive California Carbon Rolling Futures TR Index. WCCA is designed to complement the USD287 million WisdomTree Carbon (CARB), a fully collateralised ETP providing exposure to EU carbon allowances (EUA).

The firm explains that the California Carbon Allowances are issued by the California Air Resources Board as part of their Cap-and-Trade Emissions Trading System (ETS), a markets-based system aimed at mitigating climate change and reducing global greenhouse gas (GHG) emissions. The scheme is the first multi-sector Cap-and-Trade ETS in North America and seeks to help the State of California to achieve its target of reducing GHG emissions by 85 per cent below 1990 levels by 2045. A recent shift in policy aims to reduce GHGs by 48 per cent by 2030 from 1990s levels, which is markedly higher than the prior goal of 40 per cent and highlights the need to sharpen policy tools.

Nitesh Shah, Head of Commodities and Macroeconomic Research, WisdomTree, says: “The California Cap-and-Trade Program is a key element within the State’s plan to reduce GHG emissions and represents one of the largest multi sector emissions trading systems globally, covering roughly 80 per cent of Californian’s green-house gas emissions.  A portion of revenues obtained through CCA auctions are used to fund a range of environmentally friendly and climate change mitigating initiatives. California has laid out a path to cut emissions aggressively by 2045 and CCAs will play a larger role in the policy toolkit than ever before. The success of the European Union Allowances (EUA) ETS provides a great example of what happens when policy makers get serious about cutting emissions.”

Since beginning in 2013, the California Cap-and-Trade ETS has expanded by linking with the province of Quebec to cover emissions from both jurisdictions. The CCA market has been one of the fastest growing and is the second most liquid carbon allowance market globally, WisdomTree writes. In 2022, CCA futures traded around USD1.7 billion per month.

Alexis Marinof, Head of Europe, WisdomTree, says: “The process of reducing GHG emissions to net zero, is an increasingly important focus for policymakers around the world. There is more emphasis on climate change mitigation than ever before, but progress will be limited if investors and policymakers aren’t aligned and working together towards reaching climate targets. It is, therefore, imperative that investors have access to a wide spectrum of exposures. WCCA removes many of the barriers investors face when allocating to this asset class and builds on WisdomTree’s heritage of bringing hard-to-access exposures to investors through ETPs. We are building a range of differentiated and complementary ETPs that allow investors to participate in the energy transition through thematic equities, commodities, or carbon allowances.”

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