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United States securities and exchange commission logo
March 30, 2023
Ronald Gutstein
Chief Executive Officer
COtwo Advisors Physical European Carbon Allowance Trust
15 Woodcock Lane
Ridgefield, CT 06877
Re:COtwo Advisors Physical European Carbon Allowance Trust
Amendment No. 1 to
Draft Registration Statement on Form S-1
Submitted March 13, 2023
CIK 0001958928
Dear Ronald Gutstein:
            We have reviewed your amended draft registration statement and have the following
comments.  In some of our comments, we may ask you to provide us with information so we
may better understand your disclosure.
            Please respond to this letter by providing the requested information and either submitting
an amended draft registration statement or publicly filing your registration statement on
EDGAR.  If you do not believe our comments apply to your facts and circumstances or do not
believe an amendment is appropriate, please tell us why in your response.
            After reviewing the information you provide in response to these comments and your
amended draft registration statement or filed registration statement, we may have additional
comments.
Amendment No. 1 to Draft Registration Statement on Form S-1
General
1.Please tell us, and revise your disclosure to disclose, why you have chosen to structure the
product to hold physical carbon allowances in light of your disclosure that the futures
market is more liquid and active than the spot market.

 FirstName LastNameRonald  Gutstein
 Comapany NameCOtwo Advisors Physical European Carbon Allowance Trust
 March 30, 2023 Page 2
 FirstName LastName
Ronald  Gutstein
COtwo Advisors Physical European Carbon Allowance Trust
March 30, 2023
Page 2
Risk Factors
Risks Related to the Trust's Investments
The Trust will face currency exchange rate risk, page 13
2.Refer to your response to comment 17.  Please disclose the currency exchange rate as of
the most recent practicable date.
Risks Related to the Trust's Structure
If this offering of Shares does not raise sufficient funds, page 15
3.Refer to your response to comment 18.  On page 15, you disclose that "[i]f the Sponsor
and the Trust are unable to raise sufficient funds so that the Trust's expenses are
reasonable in relation to its NAV, the Trust may be forced to terminate and investors may
lose all or part of their investment."  Please revise here and in the prospectus summary to
provide quantitative disclosure regarding what you believe are "sufficient funds" and what
you believe are reasonable expenses in relation to the Trust's NAV.
EUAs and the EUA Industry, page 21
4.Refer to your response to comment 8.  Please expand your disclosure here to highlight the
fragmented nature of data regarding the EU carbon market and the lack of centralized
market monitoring of the EU carbon market.  In addition, please disclose here
the potential that a lack of centralized market monitoring of the EU carbon market may
make it more difficult to identify potential market manipulation and abuse practices.
5.Refer to your response to comment 21.  Your revised disclosure explains that because the
Covered Entities may require fewer EUAs as they reduce their emissions, the Covered
Entities will be able to sell more EUAs in the secondary market, which will offset the
reduction in the EUAs sold in auction.  Please further expand your disclosure here to
address the MSR's role in the reduction of surplus EUAs and the potential impact of the
control of the total number of allowances in circulation on the Authorized Participants and
the Trust's investors.  In this regard, we note your disclosure on page 27 that "the EU use
of the MSR and the linear reduction factor have great influence regarding the overall
supply of EUAs available to the market."
6.Please update your disclosure on page 23 to describe the reform to the MSR that was
expected to be completed by the end of December 2022.
Pricing of Allowances and Trading Volume, page 25
7.Please revise to clarify that the chart on page 26 shows the spot prices in continuous
trading on the EEX and the prices on the ICE Endex in Euro/tCO2 from January 2018 to
January 2022, and revise your disclosure to clarify what you intend to highlight by use of
the chart.  In addition, we note that you have included the same chart on page 36 and state
that "[t]he chart below shows the mid-point of the bid/ask spread for EUAs traded on EEX

 FirstName LastNameRonald  Gutstein
 Comapany NameCOtwo Advisors Physical European Carbon Allowance Trust
 March 30, 2023 Page 3
 FirstName LastNameRonald  Gutstein
COtwo Advisors Physical European Carbon Allowance Trust
March 30, 2023
Page 3
and the Daily EUA Future throughout the trading days for the month of January 2023."
Please revise for clarity and consistency.
Determination of Required Deposits, page 29
8.Refer to your response to comment 25.  Please revise your disclosure to include your
explanation and materiality analysis of disregarding fractional EUAs for purposes
of computing the Basket Deposit on each day that the Exchange is open for regular
trading.  Clearly illustrate the impact to investors at different levels and over time,
including the aggregate effect of selling multiple Creation Baskets at a discount over time.
Description of the Trust
Calculating NAV, page 36
9.Refer to your response to comment 3.  Please revise here to include the table you included
in your response letter that shows a comparison between the trading volumes of spot
EUAs and daily EUA futures as well as the settlement prices.  In addition, we note that it
appears the settlement prices of the spot EUAs differ from the daily EUA futures.  Please
provide an analysis that shows the impact of using the daily EUA futures price as
compared to the spot price to calculate NAV per share for basket creations and
redemptions as well as the potential impact on the price per share in the secondary
market.  Please provide illustrative examples of how creations and redemptions will be
conducted based on market prices in relation to various spot and futures prices.
U.S. Federal Income Tax Consequences
Taxation of U.S. Shareholders, page 54
10.Refer to your response to comment 6.  Please revise your disclosure on page 54 that refers
to a holder of shares acquiring its shares "principally" in exchange for EUAs so that it is
consistent with your disclosure on page 1 that the Trust will not hold any assets other than
EUAs or cash.  Similarly, revise your disclosure in the first risk factor on page 12 to
clarify that the Trust holds only EUAs and cash.
Performance, Financials and Other Information, page 55
11.Refer to your responses to comments 28 and 29.  We re-issue prior comments 28 and 29
in full, including that you either provide a substantive response or an explanation of when
you will be able to respond and why you are unable to respond at this time.  Substantive
responses to issued comments are integral to the review of future filings.

•We note your disclosure on page 5 that your NAV is determined on the basis of
generally accepted accounting principles, and on page 33 that your NAV calculation
includes determining the current market value of the Trust’s total assets. Please
enhance your disclosures to specifically discuss how you determine NAV, fair value
and current market value, and cite the specific paragraph references in authoritative

 FirstName LastNameRonald  Gutstein
 Comapany NameCOtwo Advisors Physical European Carbon Allowance Trust
 March 30, 2023 Page 4
 FirstName LastName
Ronald  Gutstein
COtwo Advisors Physical European Carbon Allowance Trust
March 30, 2023
Page 4
accounting literature that you use to support your determination. Also disclose the
basis, if and for, differences between the valuations.
•As the Trust's assets will be comprised primarily of EUAs, please revise to disclose
how you plan to account for the EUAs, including upon deposit and issuance of
Baskets and disposition for the settlement of fund expenses and redemption of
Baskets by the Trust. Cite specific paragraph references in authoritative accounting
literature to support your position, where applicable.
            You may contact Bonnie Baynes at 202-551-4924 or Michelle Miller at 202-551-3368 if
you have questions regarding comments on the financial statements and related matters.  Please
contact Jessica Livingston at 202-551-3448 or Sonia Bednarowski at 202-551-3666 with any
other questions.
Sincerely,
Division of Corporation Finance
Office of Crypto Assets