California is lining up to be the world leader in the transition to net-zero carbon emissions, and its cap-and-trade carbon allowance program stands to benefit from increased tightening on emissions.
The California Air Resources Board released an updated proposal last month that is the most comprehensive and ambitious climate plan to date globally, setting a goal of carbon neutrality by 2045. This includes creating a 100% clean energy grid, ramping up carbon removal and sequestration technologies and efforts, and investing $54 billion towards building a future independent of oil.
The Scoping Plan also includes plans to cut air pollution by 71%, cut all greenhouse gases by 85% by 2045, cutting fossil fuel use to less than 10% of what it currently is (this equates to a 94% drop in oil and 86% drop in all fossil fuel demand), saving $200 billion in healthcare spending due to pollution, and creating 4 million new jobs in the process.
“California is drastically cutting our dependence on fossil fuels and cleaning our air – this plan is a comprehensive roadmap to achieve a pollution-free future,” said Governor Newsom in the press release. “It’s the most ambitious set of climate goals of any jurisdiction in the world, and if adopted, it’ll spur an economic transformation akin to the industrial revolution.”
Investing in California’s Emissions Goals with KCCA
The KraneShares California Carbon Allowance ETF (KCCA) offers targeted exposure to the joint California and Quebec carbon allowance markets and will benefit from the aggressive push to reduce emissions as rapidly as possible.
KCCA is a fund that offers exposure to the California cap-and-trade carbon allowance program, one of the fastest-growing carbon allowance programs worldwide, and is benchmarked to the IHS Markit Carbon CCA Index. The CCA includes up to 15% of the cap-and-trade credits from Quebec’s market.
The index measures a portfolio of futures contracts on carbon credits issued by the CCA and only includes futures with a maturity in December in the next year or two while using a wholly-owned subsidiary in the Cayman Islands to prevent investors from needing a K-1 for tax purposes.
The fund may also invest in emission allowances issued under another cap-and-trade system, futures contracts that aren’t carbon credit futures, options on futures contracts, swap contracts and other investment companies, and notes that aren’t necessarily exchange traded.
KCCA carries an expense ratio of 0.78%.
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