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Nearing a trillion dollars in trading every year - Kraneshares' Luke Oliver on carbon markets

Kitco News

(Kitco News) - A huge capital cycle is coming for companies focused on decarbonizing the global economy, said Luke Oliver, Managing Director, Climate, at KraneShares.

Oliver spoke to Kitco earlier this month about KraneShares Global Carbon Strategy ETF.

KraneShares' ETF is benchmarked to cap-and-trade carbon allowances by tracking the most traded carbon credit futures contracts: European and North American cap-and-trade programs such as the European Union Allowances and the California Carbon Allowances.

"What [these markets] do is they set a cap on the amount of carbon that they will allow to be polluted each year and auction those offsets or those credits," said Oliver. "It sounds somewhat niche, but it is getting towards a trillion dollars in trading every year."

According to IHS Markit, the global price of carbon was $51.45 per ton of CO2 in 2021. It is estimated that carbon allowance prices need to reach $147 per ton of CO2 to meet a 1.5°C global warming limit.

Oliver said that the carbon markets are going to jump start a large industry.

"This is going to create a huge capital cycle—$140 trillion is the estimate over the next 20 to 30 years to decarbonize the global economy," said Oliver.

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