GHG Emission Credit Participation Corp.: Canadian Carbon Emission IPO

by: Richard Kang

Interesting finding in the Globe and Mail’s Streetwise blog where Andrew Willis provides news of an upcoming IPO for GHG Emission Credit Participation Corp. on the Toronto Stock Exchange. Willis mentions that this is a pure play into the carbon emissions market similar to other funds on the TSX that provide pure play exposure to gold, molybdenum and uranium. I’ve mentioned Uranium Participation Corp. [TSE:U] as a unique and easy means to uranium price exposure however there are now futures for this commodity as well.

This press release give a bit more on the IPO.

Technically neither of these “Participation Corp.” (uranium and now emission) instruments are ETFs but they are traded on an exchange like a stock and for the vast majority of investors do the job of providing indirect commodity exposure as StreetTracks Gold Trust ETF (NYSEARCA:GLD) and iShares Silver Trust ETF (NYSEARCA:SLV) do for gold and silver respectively.

I’ve discussed carbon markets in the past and some googling will provide more background information … more than you need, of course. I find Wikipedia may not be the most reliable source of information for a particular subject, but it usually provides a decent set of links and this is true when you look here and here.

Not surprisingly, there’s also news of problems in this new space. Fertile ground for active managers.

Another interesting angle is to explore getting a piece of the infrastructure by purchasing shares in Climate Exchange PLC (CLE) which is covered in the topmost link as well as in this National Post article.

For the large institutional investors, I’d speculate that they would gain exposure to emission markets through hedge funds. Frankly, I would be surprised if internal managers in even the largest pension funds included direct carbon instrument exposures within their GTAA programs. For most investors, this market is still in its infancy and therefore getting in quick and easy may be the best approach simply for practical reasons. Alternative energy will be hot for a long while and emissions may be the next uranium. Perhaps exposure to the market itself through GHG Emission Credit Participation Corp. as well as to the exchanges through Climate Exchange PLC should provide more than enough of an allocation replacement should uranium investors decide to take their profits and move on.