
The European Union continues to cross major milestones as it transitions away from fossil fuels and to renewable energies. Investors looking to harness ongoing energy transition through the EU’s regulated carbon market should consider the KraneShares European Carbon Allowance Strategy ETF (KEUA ).
EU solar and wind power growth in the last decade resulted in a 61% decline in coal use over the same period, reported Ember in their recent European Electricity Review. Coal fell to less than 10% in the EU last year, with solar overtaking for supply in 2024. The strong growth of solar and wind power played a major contributing factor to coal use declines. It’s all part of a concentrated push by the EU to transition from fossil fuels to renewable energies.

“This new energy system will reduce the bloc’s vulnerability to fossil price shocks, tackle the climate crisis and deliver affordable energy for its households and companies,” explained Dr. Beatrice Petrovich, senior energy analyst at Ember, in the report.
The growth of renewables also left gas use declining for the fifth straight year. Overall, fossil fuel use currently sits at four-decade lows in the EU, Ember reported. Renewable energy accounted for nearly half (47%) of energy production in 2024. Despite how far the EU has come, it still has a further to go as it moves to its net-zero goals.
“While the EU’s electricity transition has moved faster than anyone expected in the last five years, further progress cannot be taken for granted,” noted Dr. Chris Rosslowe, senior energy analyst at Ember.
The Role of Carbon Allowances in the EU Energy Transition
The European Union Emissions Trading System (EU ETS) plays a significant role in driving further emissions reductions while funding the transition. Market participants are allotted a set amount of emissions each year. These participants must then cover any overages with additional carbon allowances (EUAs), each equal to one ton of greenhouse gases. The market is structured such that allowance supply decreases along a specific trajectory and prices rise, increasing the cost to pollute.
The EU pulled allowances forward from future auction supply when it enacted REPowerEU in 2022. This legislation funds the transition away from Russian fossil fuels in the wake of its invasion of Ukraine. The bloc has reduced its exposure to Russian gas imports drastically in the last five years. Levels fell from approximately 50% of EU gas in 2019 to just 14% in 2024, reported Ember. This occurred despite a marginal increase last year. The decrease of available supply at auctions creates greater potential EUA price pressures looking head.
Further tightening within the carbon allowances market, the expansion of coverage across more industries, and ongoing policy support create a strong foundation for allowance prices. In addition, the enactment of the Carbon Border Adjustment Mechanism works to keep EU industries competitive against those countries without carbon allowance programs. It may also lead to greater market participation for those looking to use EUAs as a hedge.
Gain Targeted Exposure With KEUA
Advisors and investors looking to gain targeted access to the market would do well to consider the KraneShares European Carbon Allowance Strategy ETF (KEUA ). KEUA offers targeted exposure to the EU carbon allowances market and is actively managed. The fund’s benchmark is the S&P Carbon Credit EUA Index.
The fund’s benchmark tracks the most-traded EUA futures contracts, the oldest and most liquid carbon allowances market. Currently, the market covers roughly 40% of all EU emissions, including 27 member states and Norway, Iceland, and Liechtenstein.
KEUA carries a management fee of 0.79%.
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