The fight against climate change is a costly affair. This realization is not only becoming increasingly clear in political debates. There is also hard evidence for it, first and foremost the price of CO2. The price of a tonne of greenhouse gas, which is traded on the ICE commodity futures exchange, has just climbed above EUR 60 for the first time. The economic upswing is seen as a key driver behind the rally - the price has risen by 85% since the turn of the year. It is ensuring that the industrial companies participating in the European Emissions Trading Scheme (EU ETS) are increasing their output and need more pollution rights accordingly. The contract was also boosted by the recent sharp rise in energy prices.
In addition to these more short-term factors, there are structural reasons for the CO2 boom. In the summer, the European Union (EU) began the legal process of launching its "Fit for 55" climate protection plan. The overriding goal is to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. The CO2 price plays a central role in achieving this goal. Consequently, Brussels wants to reform the EU ETS once again. On the one hand, it is planned to reduce the total number of pollution rights available and those issued free of charge. In addition, the EU Commission is planning to expand the system, which has been under discussion for some time. From 2023, the shipping industry is to be successively included.
The EU ETS is regarded as a global model. For this reason alone, CO2 pricing is likely to be the subject of intense debate at the 26th World Climate Conference (COP26). From 31 October to 12 November in Glasgow, the participating countries must give an account of how far they have come in the fight against climate change. Time is pressing: in order to keep the goal adopted in Paris in 2015 of keeping global warming well below 2 degrees realistic, at best no greenhouse gases at all should be released into the atmosphere from 2050 onwards. Host Boris Johnson has just reiterated the importance of the meeting. "I think Glasgow - COP26 - is a watershed moment for the world and the moment we need to grow up and take responsibility," the British prime minister said.
What is certain is that the CO2 future has been moving in a chart-technical upward corridor for almost a year. Most recently, the price failed once again to leave this channel to the upside. Should a stronger consolidation now occur, horizontal support would be waiting at just under EUR 60 and at around EUR 10. In addition to the high volatility, investors should not underestimate the political dimension of this particular asset class. For example, critics are already warning of an overburdening of the economy and consumers due to the strong upward pressure on prices. Be that as it may, CO2 futures are likely to remain in focus, especially in view of the upcoming COP26. For investors who would like to position themselves on the long side ahead of the possible climate policy change, tracker certificates from Leonteq offer simple and cost-effective access. The structured products track the futures maturing in December and thus the highest-volume contracts in the CO2 spectrum. In addition to a variant maturing in just over two months, Leonteq also offers a tracker certificate on the ICE ECX future expiring in December 2022.
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