Recently, Bloomberg Magazine ran a report titled “The Big Chill in Carbon Trading,” citing the fact that the emission caps established under the Kyoto Protocol are set to expire at the end of 2012. It points out that the value of carbon allowances in 2011 have dropped by about 47%.
Carbon trading was met with much excitement in the institutional world several years ago, but with this slowdown occurring, many have left the business altogether as it has been very difficult to make profits amidst turmoil in the European Union, which was expected to be a major source of activity in the carbon/emissions space.
Back in June of 2008, a carbon related exchange traded note was issued by Barclays, GRN (iPath Global Carbon ETN), and it is based on the Barclays Capital Global Carbon Index. This index aims to deliver the performance of the most liquid carbon related credit plans and includes both the European Union Emission Trading Scheme as well as the Kyoto Protocol’s Clean Development Mechanism.
GRN does not trade very much volume (1,189 shares on an average daily basis) and it has not attracted much investor interest as of yet ($1.2 million in AUM) but remains the only exchange traded product delivering exposure to the space.
Year to date, GRN has lost 58.36% and is down 60.22% since inception. As the European Union situation sorts itself out over the next several months and into 2012, GRN is likely worth watching to those who may find appeal and value in the space as a potential EU turnaround play.
iPath Global Carbon ETN
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