EU Carbon Trading Up 83%, Analyst Says

The global carbon market in 2008 grew faster both in terms of volume and value than estimated, dramatically bucking the current downturn that has depressed most global commodity trading, according to a report by Point Carbon, a provider of market intelligence and analysis.

Overall, 2008 saw 4.9 billion tonnes (gigatonnes or Gt) of carbon dioxide equivalent (CO2e) change hands, up 83 percent on 2007, a recent "Carbon Market Monitor" report says.

"Even Point Carbon did not fully predict the extent of the dramatic expansion in global carbon trading. This overshoot of our original forecast is largely due to brisk EU allowance (EUA) trading in the fourth quarter and to high activity in the secondary CER market," said Endre Tvinnereim, senior analyst and author of the report.

The carbon market’s total value for 2008 was estimated at €92 billion (US$125 billion), more than double the €40 billion it was worth in 2007. This results in a present weighted average, global carbon price of $26 (€19) per ton of CO2e.

Taking each market segment separately, within the EU’s Emissions Trading Scheme (EU ETS), a total of 3.1 billion EUAs were bought and sold in 2008, double the 2007 figures and with a total value of €67 billion ($90 billion). Over 350 million EUAs changed hands in October alone, taking the 2008 total to over 3.1 billion, according to Point Carbon figures. These figures illustrate that the EU ETS accounts for two-thirds of the total carbon market volume and three-quarters of its value.

Veronique Bugnion, managing director of Trading Analytics and Research at Point Carbon noted that, "This is all the more remarkable since the prices of EUAs have in fact dropped significantly in the past months. Lower allowance prices also highlight the flexibility of a cap-and-trade scheme in automatically adjusting the price of carbon in the face of lower emissions."

The largest trading platform was still the over-the-counter (OTC) market, which traded 49 percent of the volume, with the share of carbon deals traded by exchanges, such as Bluenext and the European Climate Exchange (ECX), up to 37 percent. In the final month of 2008, Paris-based Bluenext saw the majority of carbon deals, enabling it to overtake the European Climate Exchange (ECX) as the world’s largest carbon exchange.

Meanwhile, within the Clean Development Market (CDM) segment of the global carbon market, some 1.6 Gt CO2e changed hands last year, worth €24 billion ($32billion). The secondary market in Certified Emissions Reductions (CER) totaled 1 Gt in 2008, corresponding to two-thirds of the total CER market volume. In all, the CER market is up 70 percent from 2007 and has doubled in value.

Other markets saw 123 Mt CO2e change hands, valued at €481million ($640 million). The largest segment in this category was the Regional Greenhouse Gas Initiative (RGGI), the first mandatory, market-based effort in the United States, where 70 Mt CO2e changed hands last year with a value of €180 million ($240 million). These figures show that when it comes online later this year, the RGGI will become the world’s third largest carbon market. Added Bugnion, "the addition of RGGI only furthers the potential growth of this market."