Carbon emission credits on track for record year, WSJ reports
Prices up 31 percent this year making performance better than gold for 2020: report
Credits tied to carbon emissions are having a banner year despite a record drop in output from the power plants and steel mills that need them to operate.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| MS | MORGAN STANLEY | 179.76 | +2.78 | +1.57% |
The price of carbon credits, used by governments in Europe to curb greenhouse gases and traded by hedge funds and other investors, has risen 31% this year, putting it ahead of gold as one of the best performing commodity-linked assets. Intercontinental Exchange carbon futures traded Thursday for €32.08 a ton, equivalent to $39.08, just below their record highs hit earlier this month.
EXXON MOBIL PLEDGES TO REDUCE GREENHOUSE-GAS EMISSIONS OVER NEXT 5 YEARS: WSJ
Driving the latest rally is the recent decision by the European Union to cut greenhouse-gas emissions by at least 55% of 1990 levels by 2030. Traders are also expecting regulations on the burning of fossil fuels will be tightened to meet the new target, including reducing the number of carbon credits available.
Credits tied to carbon emissions are having a banner year despite a record drop in output from the power plants and steel mills that need them to operate. (Getty Images)
“It’s the pricing in of increased future ambition,” said Ariel Perez, senior carbon trader at commodities trading company Hartree Partners. “All that explicitly reduces supply and lower supply should lead to higher prices.”
Morgan Stanley upped its 2025 forecast for European carbon-credit prices in September to €76 from €44, meaning the bank expects current prices to more than double by the middle of the decade. The EU’s climate agenda has significant implications for the price of carbon credits, the bank said.
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The prospect of high returns has drawn established commodities players into the carbon market. Banks like Morgan Stanley and trading houses such as Andurand Capital and Trafigura have all entered or expanded their positions in the carbon market in recent months.
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