Anytime Ulf Ek needs to think, he goes for a walk in London’s Richmond Park with Dollar, a Maltese-Yorkie mix. The 2,500-acre expanse of fields, forest, and deer herds about 12 miles southwest of the financial district has long been a bucolic respite from urban life.
In the 17th century, King Charles I moved his court to a nearby palace to avoid the plague. For Ek it’s a break from the frenzy of the energy markets; he knows just how fraught that world can be, having lived through a price meltdown that cost him a fortune and made him nauseous.
As Dollar sniffed around the park one day in late 2017, Ek, the founder, and chief investment officer of hedge fund Northlander Commodity Advisors LLP, mulled over some news he’d later use to make tens of millions of dollars.
In Brussels, European Union policymakers were finalizing plans to overhaul the bloc’s Emissions Trading System, a carbon market created to reduce greenhouse gas emissions by making them a tradeable commodity like soybeans or gold. The ETS—the biggest market of its kind—wasn’t working. Generous pollution limits in the system’s design had flooded the market with carbon permits. Prices were too low to persuade businesses to clean up, so the EU drafted measures to boost prices by removing permits from the market.
Ek was trying to figure out how the market would react to the EU’s latest moves and how he should play it. A Swede who’d moved to London in 1998, Ek had bought and sold European electricity and gas contracts for about two decades, including at Enron Corp. and Deutsche Bank AG. He followed the ETS since its inception in 2005 but cooled on the market after a disastrously bad bet lost him about €12 million ($14.2 million) just months later.
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