Access Carbon-Trading Market Via This ETN

In the last few days there has been an onslaught of new ETFs and ETNs. The most interesting might be the iPath Global Carbon ETN(GRN Quote), a way to access the carbon trading market.

GRN tracks something called the Barclays Capital Global Carbon Index Total Return. It will have a 0.75% annual fee and will not pay out any interest.

Barclays provides a report on the iPath Web site -- and even if you have no interest in GRN for an investment, learning about the greenhouse gas issue is important.

There is an increase in greenhouse gas emissions stemming from greater use of fuels like oil and coal in the running of businesses and other entities around the world. One solution to this problem is to tax (sort of) companies that exceed pollution allowances and reward companies that do not.

Click here for larger image.

The rules for this stem from the Kyoto Protocol. Companies must buy carbon credits in the open market to "pay" for the excess pollution, which is pollution beyond specified allowances. Carbon credits can be bought from companies that do not exceed their pollution limits, or from speculators in the open market.

As this does occur in a market, there is a market price that can go up or go down. GRN tracks that market price.

Without turning this article into a political debate, chances are you know much more about this subject than you did five years ago. The five-year chart below, while it doesn't track the exact same index, is a proxy. It shows periods of extreme volatility, including a violent decline this year after a massive rally.