Carbon market value up 84% in 2008 – analyst

Environmental Finance, 8 January 2009 - The carbon market was worth $118 billion last year, up 84% year-on-year, according to a report by analysis firm New Carbon Finance (NCF).

But the growth rate this year is set to be slower, with the London-based firm predicting that the market's value, based on transactions, will be $150 billion in 2009, up 27% on 2008.

The growth in value last year was driven by a mixture of higher carbon prices and increased transactions, with an estimated 4 billion emissions permits changing hands – 42% more than in 2007. 

Trade in EU allowances (EUAs) accounted for $94 billion, or about 80% of the overall total. EUA prices have been higher in Phase II of the EU Emissions Trading Scheme, which began last year, compared with Phase I, as the 2005-07 period was plagued by an oversupply of allowances which led to the collapse of prices.

By comparison, the 2008 EUA futures contract on the European Climate Exchange – the most liquid contract last year – peaked at nearly €30 ($40.75) in July, before recessionary pressure brought prices down to around €15 when the contract expired in December.

And, while secondary certified emission reduction (CER) deals grabbed an increasing share of trading, accounting for 13% of transactions, up from 8%, the value of primary CER deals – where the credits are bought directly from the Clean Development Mechanism project – dropped by 20%, said NCF, to $5.8 billion from $7.4 billion, with volumes down an estimated 30%. This is partly due to a slowdown in the number of projects seeking registration, and partly because most of the projects going forward are small-scale ones, mainly focusing on renewable energy and energy efficiency, said the firm.

Growth this year will be driven by increased liquidity in the secondary CER market, NCF said, while the EUA market will post moderate growth.

Author Environmental Finance Publication Date 8 Jan 2009 Document Type News articles Issue/Topic Energy & Climate Source Environmental Finance Include In RSS Business & Sustainable Development News Energy & Climate News