Global Carbon Market Value Drops 35 Percent

by | Feb 7, 2013

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The value of global carbon markets fell 35 percent to €62 billion ($84 billion) in 2012, largely due to an oversupply of credits, according to analysis from Thomson Reuters Point Carbon.

The EU’s Emissions Trading Scheme, the largest global carbon market, saw the estimated carbon price drop 49 percent to €5.82 per metric ton in 2012, down from €11.45 per metric ton in 2011.

The EU ETS is facing the prospect of carbon prices in Europe inching closer to zero unless policymakers quickly agree to take action, either through backloading or some form of long-term structural change, said Anders Nordeng, senior carbon analyst at Thomson Reuters Point Carbon and co-editor of the report.

The number of global carbon markets continued to grow last year despite the market value enduring its biggest drop in value since such markets were first launched, Thomson Reuters said. Some 10.7 billion metric tons of carbon dioxide equivalent changed hands in the world’s carbon markets in 2012, up 28 percent from 8.4 billion metric tons CO2e in 2011.

The Clean Development Mechanism suffered an even starker price crash with the value of that market dropping for the second consecutive year, from €17.8 billion in 2011 to just €6.1 billion in 2012.

The average price in 2012 for credits generated under the CDM (called certified emission reductions or CERs) was €2.54/metric ton. However, this hides the sharp decline during the last two months of the year, when CERs were traded for less than €0.40/t, Thomson Reuters said.

The only market segments to see growth in volume and value last year were the Joint Implementation market and the North American market, driven by trade in California.

JI prices did fall, but in terms of volume, the market grew a whopping 469 percent in 2012. This more than compensated for the price drop, bringing the market value to €906 million, up 26 percent from €716 million in 2011.

In North America, 130 metric tons of CO2e was traded in 2012, up from 100 metric tons the previous year. The value of the market grew dramatically from €221 million ($298 million) in 2011 to €575 million ($774 million) last year, as California accounted for a larger share of the North American markets, Thomson Reuters said.

California’s next carbon auction, on February 19, will offer 12,924,822 current vintage allowances – a little over half as many as were offered in the last auction in November – with a reserve price set 71 cents higher, at $10.71 per metric ton.

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