Value of global carbon market increases by 5% in 2010 but volumes decline
London, January 6, 2011 – Analysis by Bloomberg New Energy Finance shows that the value of carbon emission rights traded throughout the world in 2010 increased by 5%, reaching €93bn ($120bn). This outcome is only 3% different from Bloomberg New Energy Finance's forecast in January 2010 that the market would trade €96bn ($122bn) in the year.
The reason for the increase in market value was the higher level of carbon prices seen in 2010. The weighted average price of carbon transactions throughout the world increased by 17%, from €11.6/tCO2 to €13.6/tCO2. In the EU Emissions Trading Scheme, which accounts for 80% of global transacted volume, weighted average carbon prices increased by 6.6%, from €13.6/tCO2 in 2009 to €14.5/t in 2010.
In contrast to the movement in prices, traded volumes across the world fell by 10%, decreasing from 7.7bntCO2 in 2009 to 6.9bntCO2 in 2010. The main source of this decline was the collapse of trading in the Regional Greenhouse Gas Initiative (RGGI) in the US. In 2009 the RGGI scheme accounted for 9% of global carbon market transactions, but in 2010 this fell to less than 1%, caused by the evaporation of prospects for a Federal-level cap-and-trade scheme in the US. The volume of carbon credits traded under the Clean Development Mechanism of the Kyoto Protocol increased by 1%. The main market of the EU Emissions Trading Scheme saw virtually no change in volume traded, stable at 5.5bntCO2.
Bloomberg New Energy Finance believes that 2011 will see renewed growth in these markets, to post a market value of €107bn ($136bn) – a rise of 15% on 2010. This will largely be driven by a boost in demand for allowances from utilities in the EU Emissions Trading Scheme, reflecting the prospect that they will face much lower free allocations in 2013 when full auctioning is due to start.
Europe still dominates the carbon market – accounting for 81% of total trades in 2010. This trend is set to continue out to 2020 given the lack of progress on carbon legislation in other countries – notably the US, Japan and Australia. If however these countries were to implement meaningful cap-and-trade schemes, the world's carbon markets could reach up to €1.7 trillion in 2020, on our estimates.
Guy Turner, director of carbon market research at Bloomberg New Energy Finance, commented, “In spite of the recession and little progress at the international climate talks, the value of the global carbon market has continued to grow - albeit at a slower rate. With the advent of auctioning in the European scheme we are likely to see even higher traded volumes and prices in Europe in 2011, and these may increase further in future years.”
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