Carbon market doubled to $64bn in 2007


The global carbon market grew to US$64 billion (€47 billion) in 2007 - more than doubling over 2006 - according to a new report from the World Bank - State and Trends of the Carbon Market 2008.

The European Union Emission Trading Scheme (EU ETS) also saw a doubling of both value and number of allowances transacted to the tune ofUS$50 billion (€37 billion).

The report's data shows that the global carbon market doubled or tripled in value for all segments, except for projects in developing countries, which saw a levelling-off of market volumes transacted under the Clean Development Mechanisms (CDM) - from 537 million tons of carbon dioxide equivalent (MtCO2e) in 2006, to 551 MtCO2e in 2007.

The report's analysis cautions that market momentum may be at a crossroads for many developing countries, just as they are beginning to reap the benefits of carbon finance and are stepping forward to show that they are making efforts to mitigate climate change through advancing clean energy technology. The report shows that the CDM is delivering on clean energy. Energy efficiency and renewable energy accounted for nearly two-thirds of the transacted volumes in the project-based market.

"Sixty-eight developing countries participate in the CDM - among them Jamaica, Kenya, Mali and Madagascar, which offered climate-friendly projects for the market for the first time in 2007. However, at a time when global cooperation to reduce the risk of climate change is more important than ever before, the prospects for developing countries benefiting from the carbon market are in question. It would be a shame for the world to lose this momentum now" - said Karan Capoor, senior World Bank carbon markets expert and main author of the State and Trends of the Carbon Market Report 2008.

The overall data in the report masks some key vulnerabilities - especially for developing countries. All developing countries face a demand gap sometime in 2008, when buyers realise that there is not enough time to fulfil Kyoto commitments with new projects and demand will have not yet kicked-in from emerging markets in the US and Australia that are expected to be players in a future market after 2012.

Added to that is the fact that the European Commission has proposed freezing new demand for projects from developing countries in commitments to reduce greenhouse gas emissions after 2012.

“A doubling in the size of the carbon market is significant growth, but the market is nowhere near meeting its full potential” - said Andrew Ertel, President and CEO of Evolution Markets Inc., one of the contributors to this year's report.

"Lack of clarity post-2012 and a levelling-off of primary CDM volume is countering growth of commoditised markets, such the EU ETS and secondary CDM trading. The market is truly at a crossroads, as market participants fully appreciate the complexity and risks of carbon trading. Where we go from here is up to the market players and their perception of the regulatory risk in all of these markets" - he added.

To download the report State and Trends of the Carbon Market Report 2008 - Click Here