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Global carbon market worth €121 billion in 2010

The global carbon market will be worth €121 billion ($170bn) in 2010, up 33% on last year, according to a recent report by specialist advisory firm Point Carbon.

The report, Outlook for 2010 and Beyond, also predicts that traded volumes will increase by only 5% on 2009, to a total of 8.4 billion metric tons (gigatons or Gt) of carbon dioxide equivalent (CO2e).

Though policy movements in 2009 have given the market confusing signals, 2010 is likely to be a year of growth and stability in the world’s established carbon markets. Volume in the European Union’s Emissions Trading Scheme (EU ETS) is expected to be virtually flat compared to 2009, with Point Carbon anticipating that 5.4 Gt of CO2e will be traded. The EU ETS will still remain the world’s largest carbon market, comprising 64% of the volume of transactions. Its value is expected to increase to €95 billion ($134 billion) in 2010 from €69 billion ($100 billion) in 2009.

The largest growth in the major market segments is expected to come from 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. In the RGGI market, Point Carbon predicts that 985 Mt CO2e, valued at $2.2 billion (€1.6 billion) will change hands in 2010, an increase of 29% on 2009. As a result, RGGI will make up 12% of the global carbon market this year.

The market for Certified Emissions Reductions (CERs) from the Clean Development Mechanism (CDM) will see an increase in volume despite having the greatest policy uncertainty. The CDM market is expected to reach 1.8 Gt in 2010, up 11% on 2009, at a forecasted value of €22 billion ($31 billion). However, the lack of post-Kyoto policy certainty will diminish trading in primary CERs. Primary CER volume is projected to be only 240 Mt CO2e in 2010 with a value of €2.2 billion ($3 billion). The secondary CER market will benefit from continued portfolio optimization and reach a volume of 1.5 Gt, worth €19 billion ($267 billion).

Beyond 2010, a driver for global carbon markets would be the creation of a US emissions trading system. If the US were to pass federal cap-and-trade legislation, American trading activity would likely eclipse that seen in the EU ETS within a few years. However, Point Carbon believes the passage of such legislation through Congress in 2010 is only 20% likely.

Endre Tvinnereim, Senior Analyst and one of the authors of the report, said: “The overall picture is that cap-and-trade systems such as the EU ETS and RGGI will see stable or growing volumes. 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.” (BBJ Online)