As the urgency to reduce global emissions grows, carbon pricing is emerging as a powerful tool. A very timely tool as well, given the recent discussions in the EU. In this latest issue of Sustainability in Action, discover how carbon pricing works, how it intersects with farmland and soil health and what it all means for investors.
A positive outlook for carbon prices
The success of any carbon trading or removal programme hinges on the price. It must be high enough to incentivise companies to reduce emissions. When the European carbon pricing programme began around 20 years ago, most ‘credits’ were distributed free of charge. Consequently, the price was negligible in the early years, rising steadily to around 100 euros per tonne of CO2-equivalent by 2023. However, in 2024, the price fell back to just above 60 euros per tonne CO2-equivalent, partly due to reduced demand, increased sustainable energy capacity, and a lower gas prices.[1]
Conversely, prices in Australia, for instance, moved in the opposite direction. In 2024, they rose more than a quarter, as companies prepared to comply with new emission regulations. Thus, price developments worldwide are not synchronous. However, projections suggest that prices in most regions will rise in the coming years. In the EU, estimates range from 130 to 400 euros per tonne by 2040, with further increases expected.
Read the full article in the latest version of Sustainability in Action.
Foot note
- State ad Trends on Carbon Pricing, World Bank Group. GHG Emissions Coverage | Carbon Pricing Dashboard
Disclaimer
Van Lanschot Kempen Investment Management NV (VLK Investment Management) is licensed as a manager of various UCITS and AIFs and authorised to provide investment services and as such is subject to supervision by the Netherlands Authority for the Financial Markets. This document is for information purposes only and provides insufficient information for an investment decision. This article does not contain investment advice, no investment recommendation, no research, or an invitation to buy or sell any financial instruments, and should not be interpreted as such. The opinions expressed in this article are our opinions and views as of such date only. These may be subject to change at any given time, without prior notice.
General risks to take into account when investing in Farmland: economic downturns and market fluctuations can significantly reduce returns and affect rental income, property values, and dividend payments. Environmental, social, and governance events can negatively impact investment value and overall portfolio risk. Farmland investments have a low vacancy risk, but asset allocation and investment selection can affect returns. Farmland is not a liquid asset class, and external factors may also affect the liquidity of individual farms. Tenant defaults can affect returns and working capital. Currency exchange rates can impact the asset value of the strategy. Government related risks, including taxation and legislation, can affect financial performance and investment returns. Incorrect asset valuation can negatively impact the strategy returns.
The value of your investment may fluctuate, past performance is no guarantee for the future. Do not take unnecessary risks. Before you invest, it is important that you are aware of and are informed about the characteristics and risks of investing. This information can be found in the available documents of the strategy and/or in the agreements that are part of the service you choose or have chosen.
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