Carbon market up more than 80% in 2008 – analysts
14 January, 2009
The carbon market was worth more than $100 billion last year, up more than 80% year-on-year, according to analysts New Carbon Finance (NCF) and Point Carbon. But the growth rate this year is set to be slower, with London-based NCF predicting that the market’s value will be $150 billion in 2009, up 27% on 2008.
NCF valued the market at $118 billion last year, while Oslo-based Point Carbon estimated that it was worth $125 billion.
“Some people would have expected that economic slowdown would have led to less volume, but that was not the fact,” Endre Tvinnereim, a senior analyst at Point Carbon, told Carbon Finance, noting that the market saw record volume in October. Market observers have pointed to industrial players monetising surplus EU allowances (EUAs), mostly through the spot market, as the financial outlook worsened in the last quarter of 2008 and industrial output was cut (see Analysts cut Phase II emissions forecasts).
NCF said that the growth in value last year was driven by a mixture of higher carbon prices and increased transactions, with an estimated 4 billion emissions units changing hands – 42% more than in 2007. Tvinnereim attributed the growth – estimating that volumes were up by 83% to 4.9 billion – to the start of Phase II of the EU Emissions Trading Scheme (ETS) in January 2008 and to the launch of secondary certified emission reduction (CER) contracts on the London-based European Climate Exchange.
Both firms noted that trade in EUAs accounted for at least $90 billion, or about 75-80% of the overall total. EUA prices have been higher in Phase II than in Phase I of the EU ETS, 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 ($39.50) in July, before recessionary pressure brought prices down to around €15 when the contract expired in December.
Secondary CER deals grabbed an increasing share of trading, accounting for 13% of transactions, up from 8%, according to NCF. But the value of primary CER deals – where the carbon 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.
This year, growth will be driven by increased liquidity in the secondary CER market, NCF said, while the EUA market will post moderate growth.
