World Carbon Market $176bn in 2011

World Carbon Market $176bn in 2011

The Carbon Market trading reached a record value of $176-billion in 2011, rising 11 percent spurred by secondary trading volumes which offset lower prices and slowing economies, the World Bank reported recently.

The driver appears to be companies and governments turning to emissions trading as a way of complying with climate change legislation, with the European Union by far the most active since its cap-and-trade scheme began in 2005.

Record numbers of emissions products were traded in 2011, even though prices of EU carbon permits and international offsets plumbed new depths well below 10 Euro per EUA late in the year, the bank said in its annual report on carbon markets. Worldwide emissions trading volume last year rose 17% to 10.3-billion tons of carbon dioxide equivalent, with permits in the EU Emissions Trading Scheme (ETS) accounting for more than three quarters of the total.

The rise in volume lifted the value of the EU market to $148-billion from $134-billion in 2010, despite average EU carbon prices falling 4% year on year to 12 Euro per EUA. If EUA continue to remain below 8 Euro there will be little incentive for companies and governments to invest in low-carbon projects, a bank official told reporters.

"There is a question over whether (prices) are high enough to support new projects coming in," said Alexandre Kossoy, senior financial specialist with the World Bank's Carbon Finance Unit. He said carbon prices could rise if the EU agreed to toughen its 2020 emissions-reduction ambitions or took other policy measures to rebalance a massive potential oversupply of carbon units that is likely to last until 2020.

But front-year EUA prices are averaging under 8 Euro so far this year, as the bloc's sluggish economy dampens demand for carbon permits in a market that analysts say has a surplus well into the billions of units mostly from UN programs such as the CDM. The reality however is the oversupply remains a function of over allocation in the European scheme. This arises from the miss match of the expected emissions versus the actual emissions.

Other national and regional carbon schemes showed mixed results. New Zealand's carbon market value grew threefold to $351-million, while the Regional Greenhouse Gas Initiative in North America was nearly halved to $249-million, the bank said. Much of the volume in the New Zealand market came from CER and the price quickly followed the EUA down with NZU quote recently by carbon match at just over $6 NZ.

The very latest on carbon trading and options for forestry will be the focus for forestry and investment companies at Australasia’s Carbon Forestry 2012 event planned for Auckland on 22-23 August 2012. Programmes have now been finalised and a copy of the Carbon Forestry 2012 programme can be viewed here.

Source: ETIG Carbon Monitor 2012

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