Index Investing: From Theory to Practice · Dr MAI Huu Minh, TRAN Phan Bao Ngoc & HUYNH Nguyen Quoc BuuChapter 28 of 37 · Module 7: Latest index trends and innovations
CHAPTER 28
Carbon Markets and Carbon Indexes
Pricing emissions: compliance and voluntary markets, carbon credits and the indexes that track them
Opening question
“I keep reading that carbon was one of the best-performing assets of the early 2020s, and that there is now an ETF for it. What exactly would I own — and is a tonne of CO₂ an investment?”
In this chapter
- Why economists want a price on carbon: cap-and-trade versus a carbon tax
- The main compliance markets, from the EU ETS to China, Korea and the new Asian schemes
- How allowances trade: auctions, spot and futures, with a company hedging example
- The voluntary carbon market, credit quality and the new integrity rules
- Carbon prices around the world
- Carbon indexes, ETFs and the mathematics of rolling futures
- Risks, portfolio role and a checklist for any carbon product
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 28 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Index Investing: From Theory to Practice (Volume 1, NXW Investment Library).
Read Chapter 1 freeGet the full book — contact@nxw.vnSections of this chapter
28.1 Why put a price on carbon?
28.2 Compliance markets around the world
28.3 How allowances are traded
28.4 The voluntary carbon market
28.5 Carbon prices around the world
28.6 Carbon indexes and the products that track them
28.7 Risks: policy, volatility, liquidity and credit quality
28.8 Carbon in a portfolio
28.9 A checklist for any carbon index or product