The Carbon Border Adjustment Mechanism (CBAM) is poised to be one of the most transformative regulatory initiatives in the global carbon market, reshaping not only the EU Emissions Trading System (EU ETS) but also influencing carbon markets worldwide. As part of the European Union’s bold strategy to achieve net-zero emissions by 2050, CBAM is designed to level the playing field by ensuring that companies importing goods into the EU pay a fair price for the carbon emissions embedded in their products. This is achieved through the purchase of “CBAM certificates,” whose prices are directly tied to the existing EU ETS allowances (EUAs). Officially phased in starting in 2026, this new carbon tariff will help protect the integrity of Europe’s climate policies while also setting a new standard for global trade.

For investors, CBAM represents a powerful new driver for the expansion of carbon trading and potential price appreciation. This regulation not only bolsters the value of carbon allowances in established markets like the EU but also paves the way for exciting opportunities in emerging carbon markets around the world. The KraneShares Global Carbon Strategy ETF (KRBN) is strategically positioned to capture these potential opportunities, as it includes the largest and most liquid carbon markets while dynamically adjusting to add new markets as they come online.

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