Thoughts on carbon trading?
Been hearing and reading a few things on the carbon emission trading market growing and/or predictions on it booming over the next decades.. is there anyone in trading who currently trades these or is around it to add some color?
Curious as well. Interested in the market drivers and business model. Seems quite different from other commodities in that there does not appear to be any sort of "arb" whether across location, grade, or time as the credits appear to be isolated to regional jurisdictions on an annual allocation. Also curious how spec trading carbon credits might work if it is even possible. Could be wrong though and happy to learn more.
Yeah I’m curious about that as well. Could be cool to see the market develop. To your point about lack of “arb” and the markets being mostly regional—I read something about the UN voting on an article later this year that would allow for a regulated international carbon market—or something along those lines. It may not happen but thought that was interesting
IF the US (Ex CA and RGGI) replaces the REC market for a fungible EUA product, the market here will explode. Otherwise you are looking at a NOX/SOX type market which is dead. Carbon dramatically shuffles the supply stack as much as renewables. See: "Duck Curve" in CA. The real gutsy market right now is SRECs, especially in the Northeast / Midwest. It is a rules driven "regulatory mandate" market with lots of political risk.
Not embarrased to say I am long about 1.2 million SRECS per year right now and happy given price levels. A move to a carbon market (assuming 1 for 1) will really REALLY suck to the tune of a 80% price hit.
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