DWS is offering investors the opportunity to invest in EU emission allowances, with a new Xtrackers ETC.
Michael Mohr, Global Head of Xtrackers Products
- ETC tracks the development of the spot price of CO2 emission allowances
- Physical collateralisation with emission allowances
- Cost-efficient flat fee of 0.79%
With a new ETC, DWS is offering investors the opportunity to invest in EU emission allowances. These emission allowances or EU Allowances (EUA) are traded on the European Energy Exchange EEX, among others. The Xtrackers Physical Carbon EUA ETC, which was listed on Deutsche Börse on 23 November, tracks the development of the spot price of emission rights and is physically backed by them.
The EU Emission Trading System (EU ETS) was launched in 2005 with the aim of continuously reducing the environmental impact of greenhouse gas emissions, especially CO2. The EU ETS records emissions from around 9,000 installations in the energy sector and energy-intensive industry across Europe. Together, these facilities are responsible for around 40% of greenhouse gas emissions in Europe. Intra-European air transport has also been included in the EU ETS since 2012 and maritime transport will be included from 2024. Companies that emit CO2 are allocated certificates issued by the EU. One certificate corresponds to one ton of CO2. If a company wants to emit more CO2 than it has emission allowances for, it has to buy allowances from other companies on the market. In addition, the total quantity of emission allowances available decreases from year to year. This should tend to increase the price of emission allowances and incentivise companies to reduce their greenhouse gas emissions. From 2024, the EU will reduce the number of outstanding emission allowances by 4.3% annually instead of the previous 2.2%.
In addition to those responsible for high CO2 emissions, such as energy suppliers, industrial groups and airlines, professional investors can also participate in emissions trading. DWS is now opening up this asset class to other investor groups with the Xtrackers Physical Carbon EUA ETC with a cost-efficient flat fee of 0.79%. The ETC is physically collateralised with EU emission rights, which distinguishes it from products that track performance using futures contracts.
It should be noted that the market for EU emission allowances is characterised by high volatility and the price of CO2 certificates depends on many factors. These include the political framework conditions, the overall economic situation, but also the willingness of companies to invest in climate protection. “CO2 emission rights offer an attractive opportunity to diversify a portfolio with an asset class that follows different mechanisms than traditional investments and plays a major role in the long-term reduction of greenhouse gas emissions,” says Sam Sadayo, Senior Product Development Manager for Xtrackers ETFs at DWS.
Product Table
| Name | Underlying | ISIN | Ticker | TER p.a. |
| Xtrackers Physical Carbon EUA ETC Securities | EU Carbon Allowances | XS2595366340 | XEAL | 0,79 % |
Source: ETFWorld.co.uk
Subscribe to Our Newsletter
