UBS Asset Management (UBS AM) has announced the launch of the UBS European Physical Carbon Exchange Traded Commodity (ETC), which provides exposure to the spot price of EU emissions allowances.
The firm writes that trading these allowances would otherwise entail the cost and inconvenience of opening a special registry account, while an ETC allows investors to access the EU carbon market via widely used stock exchanges.
“EU allowances are issued by the EU’s Emissions Trading System, which is the world’s most traded carbon market. Companies from certain regulated sectors must pay for allowances, which give the right to emit one tonne of carbon dioxide or equivalent greenhouse gases and are fined for non-compliance. The total number of allowances is capped and reduces annually in line with the EU’s climate target, ensuring that emissions decrease over time.
“The cap on the number of EU allowances means that while an investor owns one, it is withheld from industrial firms which could otherwise use it to pollute. Competition may also push up the price of carbon allowances, benefiting investors and further incentivising companies to transition to lower-emission production methods and/or energy sources. This ETC is tied to the EU’s Emissions Trading System, which is integral to the EU’s climate policy, however as an exchange traded commodity, it does not have any sustainability objectives or make any commitments regarding sustainability.”
André Mueller, Head of Client Coverage, UBS Asset Management says: “While absolute greenhouse gas cuts are needed, carbon markets support net-zero targets by encouraging businesses to reduce their emissions. The UBS European Physical Carbon ETC provides investors with exposure to the EU carbon market in a simple and accessible way.”
The new ETC is being listed on the London Stock Exchange, SIX Swiss Exchange and XETRA.
