Luke Oliver, head of strategy for KraneShares, discusses the growth of the sector as whole in 2021 as well as individual factors in a recent white paper.
The worldwide carbon index, the IHS Markit Global Carbon Index, that tracks the major global carbon markets futures and offers an easy-to-understand data set across different-sized markets, had a 108% return in 2021.
The European Commission announced their “Fit for 55” package mid-year, and it was one of the most pivotal moments for carbon markets in 2021 and will shape the future of the EUA.
One of the biggest things to come out of the summit was an agreement on creating an international carbon credit trading market under Article 6 of the Paris Agreement for public and private industries, as well as countries.
Natural gas was in high demand in 2021 and was one of a handful of markets that outperformed the carbon market last year.
The increasing natural gas prices are unrelated to carbon pricing, but increasing demand can help support carbon prices; natural gas prices soared in the European Union, rising 300% last year.
Last year also saw the introduction of a national carbon emissions trading market in China, one that is well-positioned to become the largest global carbon market and is expected to expand in 2022.
“2021 was a defining year for carbon markets as an asset class, making headlines in terms of both performance and climate impact.