ETF Commodity Type: Carbon Allowances ETFs that focus on commodity futures can be broadly divisible into two camps: those ETFs that track a particular commodity, and those ETFs that track a commodities index. The former will generally have a higher weighting in the underlying commodity than the ETF's index, while the ETF's index will provide greater diversification. Commodity ETFs are often used as a hedge against inflation. Carbon Allowances ETFs are a type of commodity ETF that invests in carbon emissions credits and allowances. These ETFs provide exposure to the carbon market, which is becoming increasingly important as global regulators move to cap emissions. Carbon Allowances ETFs offer investors a way to gain exposure to this market without the need to directly purchase and trade carbon credits or allowances.