Carbon credits ≠ carbon allowances

Probably best not to invest in a fund that doesn't know the difference

In the space of as many weeks, two carbon market funds targeted at retail investors have launched in Canada.

The first ETF to launch was the Horizons Carbon Credits ETF (CARB) and is listed on the Toronto Stock Exchange. A week later the Ninepoint Carbon Credits ETF (CBON) was floated on the NEO Exchange.

Without even delving into the prospectus, the alarm bells are ringing. Both funds make the same basic mistake of marketing themselves as ‘Carbon Credit’ ETFs.

Smart, educated readers of Carbon Risk that you are, you will no doubt be rolling your eyes in exasperation. For anyone in any doubt, scroll down the page for an explanation of the difference.

While it’s good to see carbon markets become more accessible for investors in different parts of the world, it’s bad if it’s done in an erroneous, and downright misleading way.

I published a detailed article in January looking at the best ways for investors to gain exposure to the EU carbon market, either as a basket with other carbon markets or simply the EU ETS. How do these two funds compare?