Carbon market set to grow 33 per cent in 2010, despite uncertainty
Greenwise Staff
29th January 2010
The outlook for the carbon market remains uncertain, but it is still set to grow in 2010, according to analyst Point Carbon.
The analyst firm forecasts the carbon market will grow to €121 billion (£105 billion) in 2010 – up 33 per cent on last year. It says the Clean Development Mechanism (CDM) will be hit this year because of the failure of the Copenhagen Summit to agree decisive action to cut emissions, while carbon volumes traded on the European Union’s Emissions Trading Scheme (EU ETS) will remain flat compared to 2009.
But it predicts trading under the United States’ Regional Greenhouse Gas Initiative (RGGI), a mandatory cap-and-trade system covering the power sector for 10 Northeastern and Middle Atlantic states, will increase by 29 per cent on 2009, to $2.2billion (£1.4 billion) growth. As a result, RGGI will make up 12 per cent of the global carbon market this year.
Despite dark clouds hanging over it, Point Carbon predicts the market for Certified Emissions Reductions (CERs) from the CDM will see an increase in volume to 1.8 gigatonnes (Gt) of carbon dioxide equivalent (CO2e) in 2010 – up 11 per cent on 2009 –at a forecasted value of €22 billion (£19 billion).
The EU ETS, the world's largest carbon market, is only anticipated to trade 5.4 Gt of CO2e, but its value is expected to increase to €95 billion (£82 billion) in 2010 from €69 billion (£60 billion) in 2009.
Globally, Point Carbon forecasts traded volumes will increase by only five per cent on 2009, to a total of 8.4 Gt of CO2e.
The biggest boost to the global carbon markets, says Point Carbon, would be the creation of a US emissions trading system, but the analyst is forecasting only a 20 per cent chance of federal cap and trade legislation being passed through Congress in 2010.
“The overall picture is that cap and trade systems such as the EU ETS and RGGI will see stable or growing volumes," said Endre Tvinnereim, senior analyst at Point Carbon. "By contrast, the market in projects that generate offsets under the CDM are suffering from post-2012 uncertainty. However, the great unknown is the volume that could be generated by trading under a US ETS towards the end of the period.”
A report by Bank of America Merrill Lynch this week concluded that "a dark cloud" was hanging over the carbon markets. It reported that the chances of a US climate bill being passed in 2010 were fading, and with that the chance of a massive stimulus to global carbon market demand. Along with this, the failure of the Copenhagen climate conference agreeing a robust deal on emissions cuts and depressed demand in the existing European carbon market, were all conspiring to