A Carbon Credit Comeback Could Be in Store for 2024

The carbon credit market is more than ready to leave 2023 behind. That’s because market experts predict 2024 could be a comeback year. And that could open opportunities in specific ETFs that focus on the carbon credit market.

Governments have been keen on curbing greenwashing practices by companies looking to brand themselves as ESG-friendly. This may have spilled over into the carbon credit market. That’s because countries are trying to establish global standards on carbon trading, according to an Eco-Business article. The data on how the carbon credit market fared in 2023 hasn’t been compiled. That’s adding a dose of market uncertainty to begin the new year.

“We will have to wait for those reports to truly know [the extent of suppressed demand], but in terms of our projects and what we are hearing in the market, it has certainly had an impact [on carbon prices],” said Colin Moore, regional carbon advisor for Southeast Asia at the Wildlife Conservation Society.

However, there are indications that confidence in the carbon credit market is returning, especially from investors.

“Investment has flooded into upstream carbon project development and institutional investors have been engaged,” said Charles Bedford, founder and chief impact officer at Carbon Growth Partners, an international carbon investment management firm..

“2024 will see companies and countries moving aggressively back into carbon markets as the ambitious commitments they have made to each other, to the United Nations and through the Science-Based Targets Initiative (SBTi) collide with the reality of decarbonisation,” he added.

2 Carbon ETF Opportunities

With growth opportunities abound for the carbon credit market, two ETFs could stand to benefit. Those are the KraneShares Global Carbon Offset Strategy ETF (KSET) and the KraneShares Global Carbon Strategy ETF (KRBN).

KSET tracks the S&P GSCI Voluntary Carbon Liquidity Weighted Index. That index comprises global voluntary carbon futures that trade through the CME group. The fund offers global coverage of voluntary carbon markets by tracking carbon offset futures contracts. These include nature-based global emissions offsets (N-GEOs) as well as global emissions offsets (GEOs).

KRBN is benchmarked to the IHS Markit’s Global Carbon Index, which offers broad coverage of cap-and-trade carbon allowances by tracking the most-traded carbon credit futures contracts. This serves multiple purposes: hedging risk and going long the price of carbon, while supporting responsible investing. Currently, the index covers the major European and North American cap-and-trade programs: European Union Allowances (EUA), California Carbon Allowances (CCA), the Regional Greenhouse Gas Initiative (RGGI), and United Kingdom Allowances (UKA).

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