Prices are lower due to the economic slowdown but volumes are much higher as many depressed industry sectors in Europe have decided to trade their surplus carbon allowances illustrating how the economic slowdown is, in effect, increasing market activity in the carbon sector
Oslo and Washington, DC (Vocus) July 8, 2009
The global carbon market in the first half of 2009 grew by a massive 124% in terms of volume and by a healthy 22% in terms of value demonstrating that the global carbon market is not only dramatically bucking the current global downturn but is indeed being fuelled by it, according to a recent report - Carbon Market Monitor's Mid-Year Review - released by Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.
Some 4.1Gt CO2e was traded in H1 2009 taking the financial value of the global carbon market to €46bn ($65bn) in the first six months of the year.
"Prices are lower due to the economic slowdown but volumes are much higher as many depressed industry sectors in Europe have decided to trade their surplus carbon allowances illustrating how the economic slowdown is, in effect, increasing market activity in the carbon sector", said Henrik Hasselknippe, Global Head of Carbon Analysis at Point Carbon Trading Analytics & Research.
Volumes generated within cap-and-trade schemes; the EU's Emissions Trading Scheme (EU ETS), the north American Regional Greenhouse Gas Initiative (RGGI) and the market for Assigned Amount Units (AAUs), have seen strong growth while the primary Clean Development Market (CDM) and Joint Implementation (JI) markets have contracted.
Taking each market segment separately, the EU's Emissions Trading Scheme (EU ETS), saw a total of 3.1 Gt CO2e change hands, up 140% year-on-year. The EU ETS remains the dominant market, generating some 75% of the total global carbon market volume in H1 2009, worth €39bn, up 29% on H1 2008 and representing 84% of the total global carbon market value.
The next largest segment of the global carbon market, the CDM, saw 568 Mt CO2e traded, up 13% on H12008, generating some €5.4bn, down 28% compared with the same period last year. Volumes traded within the Primary Certified Emissions Reductions (CERs) market fell by 36% compared with H1 2008. "These reductions in volume and value reflect the fact that the economic downturn has seen future demand for (and supply of) these types of credits declining in favour of allowances which have already been issued. In addition, the project market appears uncertain given the lack of clear policy signals emerging from the current round of climate negotiations set to conclude in Copenhagen later this year", noted Hasselknippe.
The AAU market in particular appears to have benefitted from the decline in the trade of CERs and Emission Reduction Units (ERUs) generated from JI projects, as buyers seek out more certainty. Indeed, greened AAUs have emerged as a potential substitute for ERUs by offering simpler crediting from similar projects in the same countries. The AAU market saw 75 Mt CO2e change hands in H1 2009, with a value of €750m. This compares to 43 Mt and €330m in H2 2008. The first AAU transactions only took place in the autumn of 2008 but by H1 2009 the AAU market represented 2% of the global carbon market both in terms of volume and value.
Finally, volumes traded within the Regional Greenhouse Gas Initiative (RGGI), the first mandatory, market-based effort in the US, reached 321 Mt CO2e, generating some $1.2bn (€840m). Veronique Bugnion, Managing Director of Trading, Analytics and Research at Point Carbon, noted, "The growth of North American carbon markets is self-evident. And given that the lower chamber of Congress last week passed the Waxman-Markey bill by 219-212, it is now possible to imagine a nationwide greenhouse gas cap-and-trade scheme being rolled out in the future, ensuring that carbon markets stateside continue to grow."
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