Carbon Trading ‘to Grow 14%’ in 2013

by | Mar 27, 2013

The volume of carbon traded globally will grow by 14 percent this year, reaching 12 gigatons of carbon dioxide equivalent despite depressed prices, according to analysis by market intelligence firm Thomson Reuters Point Carbon.

Most of this year’s growth in volume will come from the 10 billion EU Allowances that will change hands this year, up 40 percent from 7 billion last year, Point Carbon says.

Current price volatility is also driving persistently high levels of speculative trading, the firm says.

Delaying some permits, a process that is also known as “backloading,” could provide some temporary stability and would raise carbon prices to around €6 ($7.71) a ton, but only structural reforms would permanently support prices, Point Carbon says. Last year EUAs averaged €7.3 ($9.39) a ton. If backloading is adopted, Point Carbon assumes that the auctioned volume will be reduced by 500 million and 400 million allowances in 2014 and 2015, respectively.

Despite the growth in volumes traded — and even assuming an EUA price elevated as a result of backloading to around €6 ($7.71) a ton — the value of the EUA market will grow by only 13 percent this year compared to 2012, reaching €62 billion ($79.7 billion) against €55 billion ($70.7 billion).

However, come next year, volumes traded on global carbon markets will drop significantly for the first time since the EU Emissions Trading Scheme was launched, to 10.5 gigaton, a decrease of about 15 percent, before returning to moderate growth in 2015. Within the EU ETS, the predicted decline in volumes next year to around 9 Gt is due to the backloading of allowances that would reduce primary, and thus also secondary trades, were it to be approved, Point Carbon said.

In mid-March, The European Union canceled an auction of carbon permits for the first time, causing prices to drop to their second-lowest close on record. The auction was canceled because bids failed to reach a secret reserve price, reported Bloomberg News. The price would have cleared “significantly” below the prevailing market rate, according to European Energy Exchange AG.

Towards the end of last week, EU Carbon prices dropped as demand fell for newly released allowances, paring a weekly gain catalyzed by speculation that EU governments were nearing an agreement on a proposal aimed at boosting prices, Bloomberg said.

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