XCO2 - VanEck Global Carbon Credits ETF (Synthetic)

[Sean K]

New ETF launching soon: Access global carbon markets

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Change the future. Growth opportunities exist as more countries move toward carbon markets and the transition to net zero, and existing carbon markets continue to evolve in order to incentivise changes in production and consumption patterns toward decarbonisation.

In 2021, the top three carbon futures markets grew 165% by trading volume and traded US$683 billion futures market value.

More than 190 countries have committed to the Paris Agreement’s net zero emissions by 2050 and limiting global temperature rises this century to be well below 2 degrees Celsius.

To achieve this goal, it is estimated that the carbon price needs to be between US$40 to US$80 per tCO2e. Right now, only about 4% of global emissions are covered by a carbon price at and above this range.

Growth opportunities exist as more countries move toward carbon markets and the transition to net zero, and existing carbon markets continue to evolve in order to incentivise changes in production and consumption patterns toward decarbonisation.


I have been looking for a Carbon Credit stock, or ETF, for a while and this may fit the bill.

I'm interested because I can't see how big businesses and government are going to meet their emissions targets for 2030-2050 with the current technology and plans in place. The only way they might get there is to offset emissions by buying credits.

Getting in early to these things while we try to make emissions targets might be a good bet.

 

[Smurf1976]

The only way they might get there is to offset emissions by buying credits.

Making a strictly economic (non-political) comment here but in order for one party to buy credits, someone else has to be selling them.

That's another possibility investment - find out where the money's going.

 

[InsvestoBoy]

I am always searching for uncorrelated asset classes so have been following this as well.

My current issues:
1. The correlation to industrial commodities and equities is pretty high. Take a look at GRN or KRBN on US markets.
2. The expense fee for the existing US offerings is pretty high! 0.8%...usually ASX offerings are higher fees.
3. The underlying exposure is not to the credits themselves, but rather to futures on the credits. Futures roll will be an issue whenever the curve is in contango. Additionally, your investment hypothesis will not play out via this instrument if the futures market is already pricing it in!

Right now I would say these offerings are all just expensive trading sardines.

 

[Sean K]

This launches tomorrow.

I have no idea how it will go.

 

[Sean K]

This thing is supposed to track the ICE Global Futures Index. Web site here.

Looks like it's going to open at about $19.50. No idea how it's been priced.

 

[Sean K]

The ICE Index has averaged over 25% return, so there must be something to it.

 

[Dona Ferentes]

Looks like it's going to open at about $19.50. No idea how it's been priced.

I'd think there is $20 of aggregate components (exposure to the ICE EUA, ICE CCA, ICE RGGI and ICE UKA futures contracts) at time of establishment.. These generally are priced on a round number. Rip out a few establishment costs and wollah

 

[frugal.rock]

wollah

voila ?

EOD one.

 

[Dona Ferentes]

Voilà, even

 

[frugal.rock]

Steven's

 

[Dona Ferentes]

Ka-ching

 

[Sean K]

Up a couple of % on it's second day to $20.09. I've decided to roll the dice and see what this thing does. Going against my basic principles of understanding what I'm investing in, so I'm rolling the dice blindfolded. Parachute donned.

 

[frugal.rock]

Ba-bling

EOD 2

 

[qldfrog]

Ba-bling

EOD 2

View attachment 148048

There is a much older version of that on the US market, we could assume this one will mirror the US one, but with currency exposure.obviously, thw later is a major point when the aud can fall 1.5% overnight as it did last night

 

[Sean K]

Seems to be very little interest in this from the market at this stage, unless punters are just buying at market. Really low volumes. zzzzzzzzz

 

[qldfrog]

Seems to be very little interest in this from the market at this stage, unless punters are just buying at market. Really low volumes. zzzzzzzzz


View attachment 148279

Strange, while i understand people not investing in shares with recession fear etc, Carbon cost is not related to economy,crates etc and is a purely artificial and legislative market.so the current environment should not affect this ETF demand?
Unless people interested in that domain are already playing its US equivalent ,with a different currency exposure and more tradibility?

 

[qldfrog]

For full disclosure, i did bought some of the US version a while back but sold all a few months ago..

 

[bluekelah]

Western gov will go through a reset pretty soon and carbon credits will be a thing of the past.

 

[Sean K]

Western gov will go through a reset pretty soon and carbon credits will be a thing of the past.

There's been some negativity in the press recently on CCs but I can't see them going out of fashion any time soon. Perhaps some more regulation and oversight of what they're doing on the ground. What sort of 'reset' are you talking about?

In The Oz:

 

[bluekelah]

Reset as in a monetary reset, reset in the financial and global trading system and/or government resets. This will segment global markets and disrupt global energy trading.

If more and more countries face energy crisis, they will be eventually forced to abandon their expensive CC schemes. Its all dependent on gov policy as well as international agreements to make a market.

Lets see how long USA can last with their green energy movement and rapidly dwindling oil supplies