Saturday, June 04, 2011

World carbon credits market US$142bn

The World Bank reports that the global carbon market slipped 1.4 percent to $142 billion in 2010, the contraction due to uncertainty about market rules after the Kyoto Protocol expires in 2012. Talks aimed at securing a Kyoto successor have failed to commit to legally binding CO2 cuts.

The value of carbon offsets generated under the protocol's primary Clean Development Mechanism (CDM) market fell to around $1.5 billion from $2.7 billion the previous year -- its lowest level since the pact came into force in 2005. “The CDM rewards companies for investing in clean energy projects, mainly in developing countries,” reports Reuters. “Investors are worried that offsets will be invalid if Kyoto is not extended or if there is a gap between old and new market mechanisms.” The economic downturn, as well as an EU ban on certain types of offsets from 2013 and competition from other, cheaper U.N. credits have depressed demand as well. Investors are turning to the UN-backed REDD forest preservation scheme, with 16.7 million credits sold in 2010, up from 2.8 million in 2009. Both the Kyoto Protocol emissions rights (AAU) market and the United States' northeastern carbon market shrank last year to a combined value of $1.1 billion from $4.3 billion in 2009. The voluntary OTC market's value rose 10 percent to $393.5 million last year, as activity increased, only 0.3 percent of the global market. The European Union's Emissions Trading Scheme (EU ETS), continued to dominate the global market with its value up by 1 percent to $119.8 billion, 84 percent of the total transactions.

Analysts see prices averaging around 30 euros over the period 2013 to 2020.

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