Written by Marc Courtenay

Wednesday, 17 December 2008

Wall Street has figured out a way to make money on the carbon allowances and carbon offset programs. A clever exchange-traded-like fund has been born to capitalize on the opportunties.

On Monday this announcement was released:

"This morning, the first U.S. ETF-like product to provide access to the international carbon market, AirSharesT EU Carbon Allowances Fund (NYSE Arca: ASO), began trading on the NYSE. 

"The vehicle: AirSharesT is sponsored by XShares Advisors LLC, an industry leader in developing innovative exchange traded products.  Constructed as a commodity pool, AirSharesT seeks to provide results similar to the performance of a basket of four carbon credit futures contracts expiring December '09-'12.  These carbon credits (EUAs) are certified by the European Union, issued by the European Union Emissions Trading Scheme (EU ETS), and allow the holder to emit one metric ton of CO2. 

"AirSharesT can be bought by individuals or institutions. Unlike traditional commodities, individuals will not be required to set up a margin account to purchase the fund.   Because of the ETF-like construction, institutions will be able to consider AirSharesT as an equity.

"The carbon market: According to the World Bank, EUAs made up 78% of the value of the carbon credits traded on the open market in 2007.  The government-issued EUAs that compose AirSharesT trade on the European Climate Exchange (ECX) in London. 

"In 2007, trading volume on ECX represented 83% of the total trading value of the EU carbon market.  During the first nine months of 2008, the global carbon market grew 81% to $87 billion and is on track to clear $100 billion by year end, according to New Carbon Finance research released this October.  A May report by Point Carbon expects the global carbon market to grow to $3 trillion by 2020, assuming the U.S. develops a trading emissions program. "