COTWO ADVISORS PHYSICAL EUROPEAN CARBON ALLOWANCE TRUST
For the period ended Feb 28, 2026. Filed Apr 15, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Feb 28, 2026 · Filed Apr 15, 2026
CTWO$19.20-3.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-08-31; filed 2025-10-15.
0001213900-25-099117
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-02-28; filed 2026-04-15.
0001213900-26-044130
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 45 previous paragraphs and 45 current paragraphs.
32 unchanged; 10 reworded; 3 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
Trust NAV vs. Trust Closing Price - December 1, 2025 - February 28, 2026
Current report
During the period of December 1, 2025 through February 28, 2026 the market for European Union Allowances (EUA) traded in a range of $78.69 (February 16, 2026) to $104.60 (January 15, 2026) with the closing price on February 27, 2026 of $79.96. There were a variety of influences on the price in the EUA market. Some of those factors influencing EUA prices during the period were: (i) the ongoing tightening of allowance supply driven by the emissions cap reduction schedule and Market Stability Reserve withdrawals; (ii) record speculative long positioning by investment funds, which amplified price swings in both directions; (iii) the relative mildness of winter temperatures across Northern Europe through January 2026, which moderated near-term power demand and reduced compliance buying pressure; (iv) ongoing uncertainty regarding economic conditions and industrial activity within the EU; (v) macroeconomic and currency dynamics resulting from trade policy discussions between the United States and the European Union; (vi) continued evolution of the Ukraine-Russia conflict and its impact on natural gas supply and pricing; and (vii) the emergence of politically-driven regulatory risk surrounding the upcoming ETS revision, which intensified materially following the Antwerp Summit. Going forward, the Sponsor expects the primary drivers of EUA price levels to continue to be: (i) overall weather patterns and their impact on European power demand; (ii) aggregate EU industrial activity; (iii) the outcome of the EU ETS legislative revision process, expected to be formally initiated in Q3 2026; (iv) the ongoing Ukraine-Russia conflict and its effect on energy prices and EU industrial cost structures; and (v) the continued pace of institutional investor positioning in EUAs and the extent to which speculative long positions are maintained, reduced, or reversed in response to political developments. It should be noted In mid-January 2026, following public commentary suggesting possible structural modifications or adjustments to the EU ETS framework, EUA prices experienced significant short-term fluctuations. On January 15, 2026, EUAs traded at an intraday high of approximately $107.57 per EUA, and by February 16, 2026, had declined to an intraday low of approximately $78.49 per EUA, representing a price swing of approximately 27% within a one-month period. Such movements reflect heightened sensitivity of the EUA markets to regulatory signaling and policy uncertainty. Market participants are currently focused on the outcome of the EU’s regularly scheduled comprehensive review of the EU ETS framework, which is expected to conclude in the third quarter of 2026. Until greater clarity is provided regarding the scope and timing of any potential amendments to the program, we expect elevated price volatility in EUAs to persist. Continued uncertainty surrounding the EU ETS framework may impact trading volumes, pricing stability, and market liquidity.
Current report
Generally speaking, for the first two months of the quarter the market price of the Shares tracked closely to the NAV per Share. On February 11, an industrial competitiveness conference was held in Antwerp where public comments were made about the future structure of the EU ETS. Following these comments, a period of uncertainty and increased volatility caused the market price to decouple from the NAV with the market price trading at a premium to the NAV. Management believes this is the result of the limited number of shares outstanding and the small public float. Over time, as more Shares are issued, we expect the frequency and magnitude of the trading premiums and discounts to NAV to decline.
Removed paragraphs (3)
Previous report
Trust Overview (continued)
Previous report
Fund NAV vs. Fund Closing Price - June 20, 2025 - August 29, 2025
Previous report
During the period of June 20, 2025 through August 31, 2025 the market for European Union Allowances (EUA) traded in a range of €67.95 (June 30, 2025) to €73.39 (June 24, 2025) with the closing price on August 29, 2025 of €72.46 and an average value of €70.73. There were a variety of influences on the price in the EUA market. Some of those factors were (i) mild temperatures during the summer months across Europe resulting in lower power demand for cooling (ii) uncertainty in overall levels of economic productivity resulting from potential tariffs levied by the United States on the European Union (iii) Currency fluctuations resulting from both interest rate uncertainty and ongoing tariff negotiations (iv) ongoing conflict between Ukraine and Russia and how that will impact both ongoing economic activity and supply of natural gas in the future. Going forward we expect the primary drivers of EUA price levels will continue to be (i) overall weather and how it will impact demand for power for heating/cooling demands (ii) overall levels of economic activity and how robust the EU economy is (iii) ongoing conflict between Ukraine and Russia and how that will impact flows and price of natural gas (iv) possible linkage of the United Kingdom Allowance market and the European Union Allowance market (v) introduction of shipping industry to the EU ETS. For the most part, the fund NAV and market price tracked closely. The periods in which there was a discrepancy are related to the small public float and limited trading in CTWOs equity. Over time as more shares are issued, we expect the frequency and magnitude of the trading premium/discount to NAV to decline.
Reworded paragraphs (10)
Previous wording
The investment objective of the Trust is for the Shares to reflect the performance of the price of EU Carbon Emission Allowances for stationary installations (“EUAs”), less the expenses of the Trust’s operations. The Trust intends to achieve this objective by investing substantially all of its assets in EUAs, which are issued via the European Union Emission Trading System (“ETS”) and permit the holder to emit one ton of carbon dioxide equivalent or other greenhouse gas. The Trust’s assets will consist of EUAs and cash. The Trust may hold cash in connection with cash purchases and redemptions of Shares and it also will occasionally hold cash for short periods to pay the Sponsor’s management fee and any other Trust expenses and liabilities not assumed by the Sponsor. The Trust will not hold any assets other than EUAs and cash or cash equivalents.
Current wording
The investment objective of the Trust is for the Shares to reflect the performance of the price of EU Carbon Emission Allowances for stationary installations (“EUAs”), less the expenses of the Trust’s operations. The Trust intends to achieve this objective by investing substantially all of its assets in EUAs, which are issued via the European Union Emission Trading System (“ETS”) and permit the holder to emit one ton of carbon dioxide equivalent or other greenhouse gas. The Trust’s assets will consist of EUAs and cash. The Trust may hold cash in connection with cash purchases and redemptions of Shares and it also will occasionally hold cash for short periods to pay the management fee to the Sponsor (the "Sponsor's Management Fee") and any other Trust expenses and liabilities not assumed by the Sponsor. The Trust will not hold any assets other than EUAs and cash or cash equivalents.
Previous wording
In addition to selling EUAs to distribute cash to Authorized Participants redeeming Shares, the Trust may sell EUAs to pay certain expenses not assumed by the Sponsor (described above), including the Sponsor’s Sponsor fee, which may be facilitated by one or more Liquidity Providers.
Current wording
In addition to selling EUAs to distribute cash to Authorized Participants redeeming Shares, the Trust may sell EUAs to pay certain expenses not assumed by the Sponsor (described above), including the Sponsor’s Management Fee, which may be facilitated by one or more Liquidity Providers.
Previous wording
For both the period June 17, 2025 (Date of commencement of operations) to August 31, 2025 and the period April 29, 2025 (Effective date of the registration statement) to August 31, 2025, 150,000 Shares were issued in exchange for 30,000 EUAs and 0 Shares were redeemed in exchange for 0 EUAs. The Fund’s NAV per Share began the period at $16.95 and ended the period at $16.93.
Current wording
For the period December 1, 2025 to February 28, 2026, no Shares were issued in exchange for EUAs and no Shares were redeemed in exchange for EUAs. The Trust’s NAV per Share began the period at $19.20 and ended the period at $16.21.
Previous wording
The change in net assets from operations for the period June 17, 2025 to August 31, 2025 and the period April 29, 2025 to August 31, 2025 was $(0.02) per share, which was due to (i) payment of the Sponsor’s Fee of $3,875, (ii) net realized loss from EUAs sold to pay expenses of $619, (iii) net realized gain from foreign currency transactions of $6,657, and (iv) a net change in unrealized depreciation on investment in EUAs of $2,359. Other than the Sponsor Fee the Fund had no expenses during the period June 17, 2025 to August 31, 2025 and the period April 29, 2025 to August 31, 2025.
Current wording
The change in net assets from operations for the period December 1, 2025 to February 28, 2026 was $(2.99) per share, which was due to (i) payment of the Sponsor’s Management Fee of $3,720, (ii) interest income earned on short-term investments of $171, and (iii) a net change in unrealized depreciation on investment in EUAs of ($295,252). Other than the Sponsor’s Management Fee the Trust had no expenses during the period December 1, 2025 to February 28, 2026.
Previous wording
Below is a comparison of per Share net asset value (“NAV”) to the Shares’ market value for the period from June 20, 2025 (first day of trading), to August 31, 2025.
Current wording
Below is a comparison of per Share net asset value (“NAV”) to the Shares’ market value for the period from December 1, 2025 to February 28, 2026.
Previous wording
In the period June 17, 2025 to August 31, 2025, 150,000 Shares (3 Baskets) were created in exchange for 30,000 EUAs, no Shares were redeemed, and 300 EUAs were sold to maintain a cash position in line with fund policy. For accounting purposes, CTWO reflects creations and redemptions on the date of receipt of a notification of a creation but does not issue Shares until the requisite amount of EUAs are received. Upon a redemption, CTWO delivers EUAs upon receipt of Shares. These creations were completed in the normal course of business.
Current wording
In the period December 1, 2025 to February 28, 2026, no Shares were created, no Shares were redeemed, and no EUAs were sold to maintain a cash position in line with fund policy. For accounting purposes, CTWO reflects creations and redemptions on the date of receipt of a notification of a creation but does not issue Shares until the requisite amount of EUAs are received. Upon a redemption, CTWO delivers EUAs upon receipt of Shares.
Previous wording
At August 31, 2025, the number of EUAs owned by the Trust and held by the Custodians was 29,700, with a market value of $2,516,249 based on the Daily EUA Futures price determined by the ICE Endex on August 31, 2025 (cost— $2,518,608).
Current wording
At February 28, 2026, the number of EUAs owned by the Trust and held at the Union Registry was 19,700, with a market value of $1,605,267 based on the Daily EUA Futures price determined by the ICE Endex on February 28, 2026.
Previous wording
There were no material estimates, which involve a significant level of estimation uncertainty and had or are reasonably likely to have had a material impact on a Fund’s financial condition, used in the preparation of these financial statements.
Current wording
There were no material estimates, which involve a significant level of estimation uncertainty and had or are reasonably likely to have had a material impact on the Trust’s financial condition, used in the preparation of these financial statements.
Previous wording
The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s fee. The Trust intends to satisfy this obligation through the transfer of cash (generated, if necessary, through the sale of EUAs) in the necessary amount. At August 31, 2025, the Trust held $24,327 in cash & cash equivalents.
Current wording
The Trust is not aware of any trends, demands, conditions or events that are reasonably likely to result in material changes to its liquidity needs. In exchange for a fee, the Sponsor has agreed to assume most of the expenses incurred by the Trust. As a result, the only ordinary expense of the Trust during the period covered by this report was the Sponsor’s Management Fee. The Trust intends to satisfy this obligation through the transfer of cash (generated, if necessary, through the sale of EUAs) in the necessary amount. At February 28, 2026, the Trust held $16,816 in cash & cash equivalents.
Previous wording
The Trust is obligated to pay the Sponsor a management fee (the “Sponsor Fee”), calculated daily and paid monthly, equal to 0.79% of the Trust’s average daily net assets. From the Sponsor Fee, the Sponsor has contractually agreed to pay all of the routine operational, administrative, and other ordinary expenses of the Trust, excluding brokerage fees, interest expenses, and certain non-recurring or extraordinary fees and expenses. The Sponsor Fee is paid in consideration of the Sponsor’s management services to the Trust.
Current wording
The Trust is obligated to pay the Sponsor’s Management Fee, calculated daily and paid monthly, equal to 0.79% of the Trust’s average daily net assets. From the Sponsor’s Management Fee, the Sponsor has contractually agreed to pay all of the routine operational, administrative, and other ordinary expenses of the Trust, excluding brokerage fees, interest expenses, and certain non-recurring or extraordinary fees and expenses. The Sponsor’s Management Fee is paid in consideration of the Sponsor’s management services to the Trust.