Inflation and Recession Hedge
Carbon as a way to diversify
We expect the price of carbon to rise, as rising demand is coupled with reducing supply (to reach the climate goals). This will feed into higher costs and end-user prices. Buying carbon EUAs or Kakubi KKBs will protect against those price rises.
The EU ETS has a counter-balancing mechanism to a recession. Should emissions fall in one year (e.g., driven by recession), then in subsequent years there will be a corresponding reduction in supply of EUAs (via a mechanism known as the MSR, the Market Stability Reserve). Consequently, ownership of a KKB or EUA is effectively a hedge against recession.
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