Animal Spirits Podcast Talk Your Book: Investing in Carbon Allowances
Dec 13, 2021
In this discussion, Luke Oliver, Managing Director at CraneShares with expertise in carbon markets, dives into the lucrative potential of carbon allowances. He explains the intricate dynamics of carbon pricing and how it drives climate action, emphasizing the role of government policies. Luke reveals insights on how institutional investors are increasingly attracted to carbon investments, balancing ESG goals with financial returns. The conversation also touches on the implications for heavy industries facing rising carbon costs and the urgent need for decarbonization.
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Carbon Allowances Incentivize Emission Reduction
- Carbon allowances incentivize companies to reduce emissions by making them pay for pollution.
- This creates opportunities for innovation in emission-reducing technologies.
KRBN Invests in Carbon Futures
- KRBN invests in carbon allowance futures, not companies disrupting the area.
- These futures trade on exchanges after initial government auctions.
Drivers of Carbon Allowance Prices
- Carbon allowance prices are driven by inelastic demand and increasingly scarce supply, similar to a central bank managing currency.
- This creates a constructive fundamental backdrop for price appreciation.