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Carbon ETN Outpaces Oil and Natural Gas ETFs

by: Mike Havrilla October 06, 2008 | about stocks: GRN / SPY / UNG / USO    

Mike Havrilla

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During recent market turmoil and a meltdown in commodities, the Global Carbon ETN (GRN) [-10%] has held up much better than oil (USO) [-35%] and natural gas (UNG) [-45%] and about the same as the overall market S&P 500 ETF (SPY), with the approximate three month returns listed after each ticker.

Key factors in the demand for carbon credits include overall power demand and the relationship between natural gas and coal prices since burning gas results in the release of less than half of the greenhouse emissions versus coal. Currently, the simplest way for power utilities to reduce greenhouse emissions is to convert from coal to gas.

With the price of coal easing over the past few weeks, demand for more carbon credits resulted; although this effect was mitigated by a sharp decline in natural gas as well which has dropped even more than crude oil.

Since diverging from oil and natural gas in late July, the Global Carbon ETN has trended lower with other commodities but its downturn has not been as severe -- offering investors the potential for a new type of commodity that may prove to be only partially correlated to energy commodities because of its unique characteristics as an economic incentive to curtail air pollution.

Disclosure: None

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This article has 4 comments:

  •  
    Oct 06 12:39 PM
    Don't forget about the Mileage Credits Car makers used for years to make it look like they were meeting Mileage Standards. Or similar Carbon credits sold in the 70's which were bought by Coal Plants as they spewed CO2 into the air but met environmental standards.
    Reply
  •  
    Oct 06 03:03 PM
    I can't get excited about carbon credits as a way to limit global warming. You allow many companies to continue dumping massive amounts of CO2 into the atmosphere as long as they have carbon credits. Also, the other side of the trade is ripe for "creative" ways to limit carbon that are hoaxes like saving the rain forest when it should have been saved for other reasons. Plus, you have the people and capital overhead of the carbon trade market that would be better used in technology development. And, you have the illusion of progress which will take the pressure off finding real solutions through technology development.

    I much prefer to charge ahead directly with alternate energy development, and make them cost competitive to put the carbon dirty energy sources out of business. That is the real, direct solution to global warming. I like this direct solution more than the indirect solution of carbon credits.
    Reply
  •  
    Oct 06 11:40 PM
    carbon credit is just another system to make money for the riches, and giving them the excuse and right to pollute.
    Reply
  •  
    Oct 08 02:05 AM
    Carbon credits (vs. the offsets Gore promotes for when reductions reach their practical limit) are supposed to be one market-based approach. It's a matter of tweaking for maximum effectiveness. The cap & trade system used for coal-fired power plants seems to have had some success. That is, at reducing SULFUR dioxide, paultaut, not carbon dioxide. That program's aim was to reduce smog and acid rain, not the risk or rapid global climate change. The pollution reduction efforts of the past have done little to moderate the output of fossil CO2, which remains largely unregulated.
    Reply
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