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CORRESP
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    Eversheds
    Sutherland (US) LLP

    700
    Sixth Street, NW, Suite 700

    Washington, DC 20001-3980

    D:
    +1 202. 220.8412

    ericsimanek@eversheds-sutherland.us

May
12, 2023

VIA
EDGAR

Bonnie
Baynes

Michelle
Miller

Jessica
Livingston

Sonia
Bednarowski

Division
of Corporation Finance

Securities
and Exchange Commission

100
F. Street N.E.

Washington,
D.C. 20549

    Re:
    COtwo Advisors Physical European
    Carbon Allowance Trust

    Amendment No. 1 to Draft Registration Statement on
    Form S-1

    File No. 377-06546

Dear
Mss. Baynes, Miller, Livingston and Bednarowski:

This
letter sets forth responses to the written comments received in a letter dated March 30, 2023, regarding Amendment No. 1 to the Draft
Registration Statement on Form S-1 (the “Registration Statement”) confidentially submitted by COtwo Advisors Physical European
Carbon Allowance Trust (the “Registrant”) on March 13, 2023 for the purpose of registering shares of the Registrant. Unless
otherwise noted, capitalized terms have the same meanings as used in the Registration Statement.

Set
forth below are the comments and the Registrant’s response thereto.

Amendment
No. 1 to Draft Registration Statement on Form S-1

General

 1. Comment:
                                            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.

 Response:
Our disclosure in regards to the futures market being more liquid than the spot market was in the context of describing the same day
futures market versus the spot market.  It is important to note that functionally, a same day futures contract acts like a spot
market.  The contract that trades will settle for the physical underlying EUA after the close of business each day.  In this
manner, the settlement, functionality and economic outcome for a spot purchase on the EEX and a same day futures purchase on the ICE
are identical. Whether the Trust acquires an EUA through a transaction on the EEX or through the acquisition of a Daily EUA Future on
the ICE, at the end of the day the Trust will acquire the same instrument. The acquisition of the EUA through a Daily EUA Future or through
the spot market is merely a different means of acquiring an EUA – it is not the acquisition of a different instrument. It is worth
noting that the EU contracted with the EEX to run a spot and auction market.  The same day futures contract gives the ICE the ability
to compete for this trading business because it is functionally identical to the spot EUA.

Page 2

May 12, 2023

It
would be impossible to structure an ETF to hold a same day futures contract, as each day it would expire and the ETF would end up holding
physical EUAs. It is not possible to roll a futures position to a later dated contract when it expires each day.

The
only option would be structure an ETF around later dater futures products which have several drawbacks as compared to a physical ownership
structure.  The following is a partial list of the advantages of a physical EUA fund over a structure that would rely on long dated
futures (Please note the list is not exhaustive):

 ● A
                                            longer dated futures contract has both volatility and time value for the contract built in,
                                            which will decay over time causing a loss of investment.  Owning the physical EUA would
                                            incur no such impairment.  Consequently, owning a physical EUA will always outperform
                                            owning a long dated futures contract.

 ● No
                                            matter how long dated the contract is, eventually it must be rolled into another futures
                                            contract.  This will incur brokerage fees on a recurring basis that an ETF that owns
                                            the underlying physical will never have.

 ● The
                                            process of rolling out the expiration of a futures contract is a taxable event.  This
                                            will require a distribution to the ETF shareholders that could result in material tax obligations.
                                            The only transactions that a physical ETF will incur is when EUAs are sold to cover fund
                                            expenses

Registrant
notes that its disclosure regarding the more liquid and active Daily EUA Futures market was only in response to prior comment 3 to explain
why the Trust’s EUAs will be valued based off the settlement price of Daily EUA Futures instead of a calculation based off the
spot price, and that structuring the product around Daily EUA Futures is impossible and was never contemplated. Accordingly, Registrant
respectfully declines to add further explanation, since the alternative is impossible.

Page 3

May 12, 2023

Risk
Factors

Risks
Related to the Trust’s Investments

The
Trust will face currency exchange rate risk, page 13

 2. Comment:
                                            Refer to your response to comment 17. Please disclose the currency exchange rate as of the
                                            most recent practicable date.

Response:
The Registration statement has been revised accordingly.

Risks
Related to the Trust’s Structure

If
this offering of Shares does not raise sufficient funds, page 15

 3. Comment:
                                            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.

Response:
Registrant respectfully advises that there’s no specific amount of “sufficient funds” that the Trust must raise in
order to continue operations. Revenue received from management of the Trust, including the ability of the revenue to cover fund expenses
that the Sponsor has assumed, will be one of many factors that the Sponsor will consider on an ongoing basis in connection with the decision
to continue the operation of the Trust. The Prospectus has been revised to include an example to illustrate the level of assets that
the Trust will have to raise in order to cover various levels of hypothetical operating expenses. In addition, the Trust’s expenses
will remain constant in relation to NAV, due to the unitary Sponsor’s Management Fee, so the statement about the Trust’s
expenses being “reasonable in relation to [the Trust’s] NAV” has been deleted.

EUAs
and the EUA Industry, page 21

 4. Comment:
                                            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.

Response:
The Registration Statement has been revised accordingly.

Page 4

May 12, 2023

 5. Comment:
                                            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.”

Response: The
Registration Statement has been revised to explain the MSR's role in the reduction of surplus EUAs. In addition, in any year, if the
total number of allowances in circulation is less than 400 million, 100 million allowances shall be released from the reserve and
added to the volume of allowances to be auctioned. The Registrant respectfully believes that, due to the high number of EUAs that
will remain in circulation at all times, the limited decrease in supply due to the annual linear reduction and the reduction of
surplus EUAs via the MSR will have no impact on liquidity or availability of EUAs. Therefore, this annual reduction of EUAs will
have no impact on the creation/redemption process or the bid/ask spreads of the Trust’s Shares.

 6. Comment:
                                            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.

Response:
Registrant notes that the referenced MSR reforms were adopted and has updated the Registration Statement accordingly.

Pricing
of Allowances and Trading Volume, page 25

 7. Comment:
                                            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 and the Daily
                                            EUA Future throughout the trading days for the month of January 2023.” Please revise
                                            for clarity and consistency.

Response:
Registrant notes that the above referenced chart shows the spot prices in continuous trading on the EEX and the intra-day prices (mid-point
of the bid/ask spread) of Daily EUA Futures on ICE ENDEX. See ESMA, Final Report, Emission allowances and associated derivatives,
footnote 41 (March 28, 2022) (stating that “[i]n this section ‘spot’ refers to both spot contracts traded on EEX and
daily futures traded on ICE ENDEX”) (“ESMA Report”). Registrant has removed the chart on page 26 of the Registration
Statement and revised the disclosure on page 36 to state: “[t]he chart below shows the spot prices in continuous trading on the
EEX and the intra-day prices of Daily EUA Futures on ICE ENDEX, in EUR/tCO2 from January 2018 to January 2022.”

Page 5

May 12,
2023

Determination
of Required Deposits, page 29

 8. Comment:
                                            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.

Response:
Registrant has added the requested disclosure.

Description
of the Trust

Calculating
NAV, page 36

 9. Comment:
                                            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.

Response:
Registrant has added the requested table. Registrant notes that, as discussed above, the settlement, functionality and economic outcome
for Daily EUA Futures on ICE ENDEX and spot purchases on the EEX are identical, as the Daily EUA Futures settle for the physical underlying
EUAs at the close of business on each day. The differences observed in the table provided are due to the differences in timing between
the last sale price in the EUA spot market and the settlement price for the Daily EUA Future. EUA spot trading is done on the EEX, which
has a much more limited membership than the ICE, on which the Daily EUA Future is traded. Therefore, the last sale price on the EUA spot
market is often several hours before the close of trading, while the settlement price always reflects the price of the EUA at the end
of the trading day.

A
more accurate measure of the extent to which the spot EUA price reflects the Daily EUA Future price is the graph shown on page 36. This
graph compares the intraday spot EUA price with the median bid-ask spread of the Daily EUA Future throughout the trading day, and it
shows an average absolute difference from January 2018 to January 2022 between spot prices on the EEX and Daily EUA Futures on the ICE
Endex of €0.015. See ESMA Report, par. 157 (“Comparing daily settlement prices from EEX and ICE Endex, where most of
the trading takes place… no major differences can be observed with an average absolute difference of 0.015 EUR – suggesting
the absence of clear arbitrage opportunities between the two main venues.”).

The EEX now publishes daily the end of day market price (which is different
from the last sale price) of spot EUAs on the EEX. This is a more relevant comparison of how closely the settlement price of the Daily
EUA Future tracks the