New Emissions Index Would Make Attractive ETF

There's an interesting new development in the alternative energy space that may soon apply to ETFs. The following is from Hedgeworld.com:

UBS today [Nov. 2] announced the launch of the first index to track emissions allowances. The UBS World Emissions Index will initially track two of the European Emissions Trading Scheme platforms and will potentially expand to include other emissions programs. The EU-ETS is the largest carbon dioxide trading scheme, and covers about 46% of European carbon dioxide emissions. The new index will be published in U.S. dollars, euro and Swiss francs.

This is an interesting play on what looks to be the big issue of this century: global warming. Further from this press release:

The timing for the launch of the new index couldn't have been much better. Carbon dioxide emissions are seen as one of the main factors in climate change and global warming, and the index has been presented in the same week that Sir Nicholas Stern, head of the Government Economics Service [United Kingdom] and adviser to the U.K. government on the economics of climate change and development, presented his influential report, The Stern Review on the Economics of Climate Change.

Here is a short executive summary on this report (.pdf). And here’s the main page for further information.

Lastly, this section from the same press release gives an indication of current product development efforts as well as constraints:

UBS has already structured products on the new index, available in the index's three denominations. "Open End PERLES on UBS World Emissions Excess Return Index" products were launched today, and the subscription period will remain open until Nov. 24, which will be the pricing date. The pre-announced bid-offer spreads—1.75% when markets are open and 3% when markets are closed under normal market conditions—are an indication of the currently limited liquidity in the underlying markets.

We could potentially see some form of fund structure providing exposure to this important new market in the not too distant future. Certainly, this would be a good compliment to PBW and uranium related holdings as diversifiers to long energy holdings.