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The Day After
Reflections on the carbon market liquidation
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The emerging marginal buyer of carbon
Carbon markets will gradually evolve to a state in which liabilities, and not fundamentals drive prices. To see how this could evolve you only need to look at the growth in investment products seeking to manage a specific liability for investors - whether that is retirement, risk management, ESG criteria,
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Option market headwinds
Every ships captain will know that a sudden change in wind direction can be enough to cause their vessel to crash into the rocks. The options market can also result in rapid, changeable and powerful gusts of a different kind, creating havoc in financial markets.
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Collateral damage
“You may not be interested in war, but war is interested in you.” ―Leon Trotsky The horrors of war are a tragedy for the innocent, caught up in the crossfire. Nevertheless, as investors it is important to consider what the potential fallout from the crisis is for the EU carbon
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What impact would a recession have on the EU carbon market?
As fears grow that economic activity could slow sharply in the face of inflationary pressures, its natural to ask what impact a recession will have on the world’s largest carbon market. There have been three notable economic events during the history of the EU ETS: The Great Financial Crisis
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Short selling is a poor hedge against carbon risk
Investment institutions and asset allocators are under pressure to align their portfolios with net-zero targets. In addition to security selection and the use of carbon allowances and credits, a third way to reach net-zero targets has been gaining attention - short selling carbon intensive stocks. In a submission document to
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Carbon credits ≠ carbon allowances
Probably best not to invest in a fund that doesn't know the difference
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Owning up to carbon
Why mandatory climate disclosure requirements could drive demand for emission allowances
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Parched: How California's drought impacts the carbon market
“When the well is dry, we know the worth of water.” ―Benjamin Franklin California’s emissions trading scheme (ETS) accounts for roughly 85% of all emissions in the state and covers large electric power plants including power imports, large industrial plants, and natural gas and petroleum distributors. One of the
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In the trigger zone
What proposed changes to Article 29a mean for EU carbon prices
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Option market tailwinds
Carbon price near levels where gamma hedging begins
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Technology-based carbon removal credits crucial if net-zero targets are to be met
The vast majority of 1.5°C-aligned scenarios require at least some carbon removal. For example, the 2018 IPCC 1.5°C report states that “all pathways that limit global warming to 1.5°C with limited or no overshoot project the use of carbon dioxide removal.” The IPCC report