Global Carbon Market
Grows to US$144 bn Despite Financial & Economic Turmoil
enduring its most challenging year to date. The global economic crisis negatively impacted both demand and supply sides and, as industrial output plummeted, the demand for carbon assets fell. The State and Trends of the Carbon Market 2010*
T also
shows that on the supply side, the reduction in access to capital made it difficult for many project developers to lock in financing. As a consequence project origination ground to a halt. As industrial output plummeted the demand for carbon
assets fell. On the supply side the financial crisis spurred financial institutions and private investors to deleverage and redirect their positions away from risky investments and toward safer assets and markets. Capital inflow to developing countries fell dramatically, while already internalized resources flowed out. As a result many project developers found it impossible to lock in finance and project origination effectively ground to a halt. Yet even as global GDP declined by 0.6% in 2009, and at
a more perilous rate of 3.2% in industrialized economies, the carbon market demonstrated resilience. The total value of the market grew 6% to US$144 bn (€103 bn) by year’s end with 8.7 bn tCO2e traded (see Table). The EU ETS remained the engine of the carbon
market with over 6 bn EUAs transacted in 2009 for a total value of US$119 bn (€89 bn) worth of allowances and derivatives changed hands. Futures trades continued to account for the bulk of transactions with a 73% share, while spot market volume swelled to 1.4 bn tons as cash-strapped EU companies monetised allowances to raise funds in a tight credit environment. Sophistication also increased in the options market, which
grew 70% to 420 million tons. However, trading volume in the secondary market for Kyoto offsets levelled off at one billion tons and value fell by one third to US$18 bn (€13 bn) as prices declined. Market consolidation accelerated
in 2009 as financial players that had weathered the economic storm chose to acquire undervalued portfolios rather than engage in project origination. Other players exited the market or significantly reduced their activity and, as a result, project-based transactions declined by 54% to US$3.4 bn in 2009.
worldPower 2010 China remained the largest CDM seller, although Africa
and Central Asia – historically overlooked regions – increased their share as buyers sought diversification. CDM contracted severely, by 59%, to US$2.7 bn (€1.9 bn). The JI market fared no better. Finally, the number of Assigned Amount Unit (AAU) deals increased as the health of the offset market declined, with the Czech Republic and Ukraine as the major sellers. Structural issues hobbled the CDM market as well. The
... it now takes over three years for the average CDM project to make its way through the regulatory process
complexity and changing nature of regulations, inefficiencies in the regulatory chain and capacity bottlenecks caused delays and negatively impacted project finance. As a result, it now takes over three years for the average CDM project to make its way through the regulatory process
and issue its first CERs. EU installations will have used fewer CERs and ERUs than allowed under their import limit during Phase II of the ETS, thus,
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he latest annual report from the World Bank on the global carbon market shows that in 2009 it grew to US$144 bn, up 6% from 2008 – despite
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