Europe’s $38 billion a year carbon market is finally starting to work the way it was intended, reining in pollution with a minimum of squealing from industry.
Thirteen years after it was created to limit carbon-dioxide emissions, prices for the allowances are rising. European Union policymakers have enacted measures expected to keep the cost of pollution on an upward trajectory through 2030, prompting hedge funds that abandoned the market to pile back in.
“For a five-year-plus period, this market was in the desert,” said Per Lekander, a fund manager at Lansdowne Partners U.K. LLP in London. “What’s happened over the past five months is the investment community is getting behind it again and putting on positions.”