Andurand Capital Management's Pierre Andurand. — Bloomberg
LONDON: One of the best trades in global commodities could be in the United Kingdom’s carbon market.
Andurand Capital Management, run by famed oil trader Pierre Andurand, is betting that UK carbon prices are going to rise in the coming months. A push from the government on climate policies could make the market a bright spot as other commodities markets cool after years of soaring prices.Britain launched its carbon market in 2021 after it left the European Union (EU).
While the country has maintained its long term ambition to cut greenhouse gases since then, its carbon price currently trades at a more than 20% discount to its much larger EU equivalent.
With the Labour government looking to fill a £22bil (US$28.8bil) hole in the country’s finances and speed up decarbonisation, higher carbon prices would help deliver both.
The government auctions carbon permits and the Treasury gets the proceeds.
“There’s an opportunity here,” Mark Lewis, head of research and portfolio manager at the fund, said. “This is a significant-policy driven catalyst. Those catalysts don’t exist in other markets.”
Lewis, who helps manage the Andurand Climate and Energy Transition Fund, expects the price of UK allowances to rise above £60 per tonne. — Bloomberg
