CCA Program May See Expansion | ETF Trends

The California Carbon Allowances (CCA) cap-and-trade program may be expanding its market coverage.

On Wednesday, the state of Washington’s Department of Ecology announced intent to discuss linking the CCA program with Washington’s carbon allowance initiatives. Currently, the CCA contains the carbon allowance programs for both California and Quebec.

“California, Québec and Washington share a common interest in drastically reducing greenhouse gas emissions in response to the global threat to well-being and prosperity posed by climate change. This threat demands significant and immediate collaborative action,” the announcement noted.

Washington’s carbon cap-and-invest market started back on January 1, 2023. Since then, the market has shown robust results, with a recent carbon allowance auction settling for $25.76 per metric ton.

Adding Washington’s market to the existing CCA offerings would be a boon to an already successful program. Back in February, Politico noted that California’s last carbon allowance auction sold permits at $41.76 per ton, contributing $1.31 billion for the state.

See more: KCCA Capitalizes on Robust CCA Interest

With the CCA market showing strength and the possibility of expansion, investors may want to strike while the iron’s hot. Investing in carbon allowances can provide valuable diversification to a portfolio while avoiding correlation to other traditional asset classes. The KraneShares California Carbon Allowance ETF (KCCA) can provide investors exposure to the CCA program.

Potential Wider Index

KCCA is passively managed and has a net expense ratio of 0.81%. The fund is benchmarked to the IHS Markit Carbon CCA Index. This index tracks highly traded CCA futures contracts, providing exposure to both California and Quebec’s markets. It could see expansion if Washington’s market enters the fold.

The fund has shown strong yearly growth, rising 30.37% over the last 12 months. KCCA currently has roughly $265 million in assets under management.

KraneShares operates 26 ETFs listed in the United States, representing a total AUM of $7.2 billion. Its largest fund, the KraneShares CSI China Internet ETF (KWEB), holds roughly $5.5 billion in assets under management.

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