Rising Interest in Carbon Credits: A Compelling Investment Opportunity?

With the Paris Agreement reinforced at the COP26 and the push to curb global warming picking up pace, global carbon credit markets have gained huge traction lately. Several large greenhouse gas emitting nations have announced intentions to achieve net zero emissions by 2050 making the role of carbon markets increasingly fundamental. 

The heightened demand for the carbon credit asset class has led EUA Futures (with European Union carbon allowances as the underlying asset) to outperform several major asset classes such as Bitcoin (Cryptocurrencies), Gold (Commodities) as well as S&P500 and Nasdaq Composite (US Equities) in 2021. 

However, with expectations of tightening of emission limits and as global economies work towards improving governance and infrastructure of the carbon markets, the performance recorded in 2021 could just be the tip of the iceberg.