WisdomTree Launches Europe’s First California Carbon Allowance ETP

WisdomTree, a global financial innovator, has launched Europe’s first exchange-traded product (ETP) that allows investors to gain exposure to the performance of California Carbon Allowances (CCA). The fully collateralized WisdomTree California Carbon ETP (WCCA), is listed today on the London Stock Exchange and Borsa Italiana with a management expense ratio of 0.49%.  WCCA will list on Börse Xetra on 20 April 2023.

WCCA seeks to reflect the movement in the price of ICE California Carbon Allowance Futures through the Solactive California Carbon Rolling Futures TR Index. WCCA complements the $287m WisdomTree Carbon (CARB), a fully collateralized ETP providing exposure to EU carbon allowances (EUA). 

California Carbon Allowances are issued by the California Air Resources Board as part of their Cap-and-Trade Emissions Trading System (ETS), a markets-based system aimed at mitigating climate change and reducing global greenhouse gas (GHG) emissions. The scheme is the first multi-sector Cap-and-Trade ETS in North America and seeks to help the State of California to achieve its target of reducing GHG emissions by 85% below 1990 levels by 2045. A recent shift in policy aims to reduce GHGs by 48% by 2030 from 1990s levels, which is markedly higher than the prior goal of 40% and highlights the need to sharpen policy tools.

“The California Cap-and-Trade Program is a key element within the State’s plan to reduce GHG emissions and represents one of the largest multi sector emissions trading systems globally, covering roughly 80% of Californian’s green-house gas emissions.  A portion of revenues obtained through CCA auctions are used to fund a range of environmentally friendly and climate change mitigating initiatives. California has laid out a path to cut emissions aggressively by 2045 and CCAs will play a larger role in the policy toolkit than ever before. The success of the European Union Allowances (EUA) ETS provides a great example of what happens when policy makers get serious about cutting emissions.”

Nitesh Shah, Head of Commodities and Macroeconomic Research, WisdomTree.

Since beginning in 2013, the California Cap-and-Trade ETS has expanded by linking with the province of Quebec to cover emissions from both jurisdictions. The CCA market has been one of the fastest growing and is the second most liquid carbon allowance market globally. In 2022, CCA futures traded around $1.7 billion per month.

“The process of reducing GHG emissions to net zero, is an increasingly important focus for policymakers around the world. There is more emphasis on climate change mitigation than ever before, but progress will be limited if investors and policymakers aren’t aligned and working together toward reaching climate targets. It is, therefore, imperative that investors have access to a wide spectrum of exposures. WCCA removes many of the barriers investors face when allocating to this asset class and builds on WisdomTree’s heritage of bringing hard-to-access exposures to investors through ETPs. We are building a range of differentiated and complementary ETPs that allow investors to participate in the energy transition through thematic equities, commodities, or carbon allowances.”

Alexis Marinof, Head of Europe, WisdomTree.

WCCA is the seventh addition to a suite of WisdomTree ETPs providing investors access to the energy transition. The prior launches in the range are WisdomTree Carbon (CARB), WisdomTree Recycling Decarbonisation UCITS ETF (WRCY), WisdomTree Battery Solutions UCITS ETF (VOLT), WisdomTree Global Automotive Innovators UCITS ETF (WCAR), WisdomTree Battery Metals (WATT) and WisdomTree Energy Transition Metals (WENT).