Value of global carbon markets up 5% in H1 2010

Value of global carbon markets up 5% in H1 2010
But North American market sees precipitous decline

Oslo (7 July 2010)

The markets for European Union Allowances (EUAs) and certified emissions reductions (CERs) exchanged 3.7 billion tonnes (Gt) CO2e over the six first months of 2010, valued at some €48 billion (US$59bn), compared to €46bn in H1 2009. In terms of volume this is down 10% on the same period last year, mainly due to dramatic reductions in the volumes transacted within the North American Regional Greenhouse Gas Initiative (RGGI) market. In terms of value, however, it represents a 5% increase compared to the same period last year, according to analysis by Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets. Point Carbon is a Thomson Reuters company.

The EU’s emissions trading scheme (ETS) remained the largest segment of the global carbon market, with a total of 2.9 Gt CO2e exchanged during the first half of 2010, down 7% on the same period last year. The estimated value of the EUA transactions was €40bn in H1 2010, up 2% on the same period last year. Exchanges over the first six months of 2010 consolidated their dominance of the EUA market, taking 64% of the total EUA volume.

The second-largest segment globally was the Clean Development Mechanism (CDM) market, which includes the primary and secondary market for CERs. The estimated market volume was 675 Mt CO2e, worth around €8bn in H1 2010. This was up 19% in volume terms and 47% in value terms compared to H1 2009.

“Despite the overall reduction in the volume of carbon traded during the first six months of this year, the value of the transactions still increased, due to higher carbon prices, indicating that global carbon markets as a whole continue to perform well despite the global downturn”, said Endre Tvinnereim, Senior Analyst and author of the analysis.

The first six months of 2010 saw an increase in average global carbon prices, to €12.97/t (US$15.86), compared to €11.16/tonne in H1 2009. The weighted-average EUA price was €13.80/t, up from €12.89/t for all of 2009. Secondary CERs over the same six-month period were seen at a weighted average of €12.36/t.

However, in North America, the picture is much more gloomy. The RGGI market during the first six months of 2010 saw a precipitous decline in transacted volume and value. Volume was down two-thirds on the same period last year, from 321 metric tonnes (Mt) to 110 Mt, worth some US$237m (€194m) in H1 2010, down 77% on H1 2009. Tvinnereim attributes much of this decline to “a collapse of the secondary market and a significant fall in prices due to the fact that the scheme is very over-supplied, and prospects that RGGI allowances will be convertible in a federal US ETS are fading as the likelihood of a federal programme has declined over the past year”.

Despite this collapse, however, Tvinnereim concludes that; “comparing the first half of 2010 with the first half of last year, the main picture is one of stability. In price terms, the year so far has been much more placid than the first half of 2009 and the EU ETS market has normalised somewhat after the steep fall in industrial production caused by the financial crisis in 2009. Still, political uncertainty prevails across markets, although the momentum that was lost in Copenhagen is slowly returning. The players in the carbon market are still waiting for one or more critical policy decisions that could bring the carbon market to the next stage”.

Note to editors

• The mid-year review includes all compliance-based carbon trading systems across the globe. This comprises the EU ETS, CDM, JI, AAU and RGGI markets. In addition, Point Carbon counts trades under the Australian NSW GGAS and CPRS markets, the Alberta provincial emissions trading system in Canada, offsets and allowance trading ahead of an anticipated US ETS as well as the New Zealand ETS. It does not include voluntary-market transactions.
• The Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in February 2005, defined targets for developed-country emissions over the 2008-12 period. It also prompted the launch of the EU’s Emissions Trading Scheme (ETS). The EU ETS is the world’s first international greenhouse gas emissions trading scheme. It works on a cap-and-trade basis, where the total volume of permitted emissions (the “cap”) is set at the start of a trading period. EU Allowances (EUAs) are the tradable units under the EU ETS, each representing a permit to emit one metric tonne of carbon dioxide equivalent (CO2e). Up to a certain limit, companies regulated by the EU ETS are also allowed to use carbon credits from third countries (CERs and ERUs) instead of EUAs.
• Certified Emissions Reductions (CERs) are project credits generated from emission reduction countries in developing countries.
• Emission Reduction Units (ERUs) are project credits generated from emission reduction projects in industrialised countries.

To arrange interviews with the author of the analysis or to see a copy of the report, please contact:

Candida Jones
PR Manager, Point Carbon
Mob: +44 (0) 777 5754 763
E-mail: cjo@pointcarbon.com

Endre Tvinnereim
Senior Analyst, Point Carbon
Mob: +47 47 45 61 66
E-mail: et@pointcarbon.com

For US press enquiries, please contact:

Adam Williams
Marketing Coordinator, North America
Mob: +1 240 330 3956
E-mail: aw@pointcarbon.com