By Joydeep Gupta, IANS
New Delhi : The global carbon market grew by 80 percent in 2007, says a report by Point Carbon, a firm that analyses the international trade that has developed in an effort to address climate change. India has become the largest beneficiary of the trend since 2006.
The report, called 2007 Carbon Market in Review, says the cash value of carbon traded worldwide grew from $33 billion in 2006 to $60 billion in 2007. Total traded volume in the global carbon market reached 2.7 billion tonnes in 2007, up from 1.6 billion tonnes in 2006, a 64 percent jump.
The European Union’s Emissions Trading Scheme (ETS) accounted for almost two-thirds of the total traded volume, with 1.6 billion tonnes of carbon emissions worth $40.9 billion changing hands. The ETS covers over 10,000 power stations and other stationary sources of greenhouse gas emissions in the 27 countries of the EU.
The other major market was the UN-administered Clean Development Mechanism (CDM), under which 947 million tonnes of carbon dioxide equivalent worth $17.5 billion were traded.
The secondary market in issued CDM credits skyrocketed from 40 million tonnes worth $836.2 million in 2006 to 350 million tonnes worth $8.3 billion in 2007.
“The 2007 numbers show that greenhouse gas emission trading has become a commodity market in its own right,” said Endre Tvinnereim, senior analyst at Point Carbon.
“The remarkable growth in the secondary CDM market, for example, shows that companies are ready to invent new, creative tools for managing present and future carbon constraints.”
The international carbon market has developed as a response to global warming, caused by emissions of greenhouse gases – mainly carbon dioxide – into the earth’s atmosphere. Global warming has already led to a big drop in agricultural productivity, more damaging and frequent droughts, floods and storms and a rise in the sea level, particularly affecting developing countries in the tropics and sub-tropics.
As global warming and its effects threaten to accelerate in the 21st century, industrialised countries – the main emitters of carbon dioxide – have entered into a pact to reduce greenhouse gas emissions. The international carbon market is part of the efforts.
This is how the market operates: suppose a factory in an industrialised country is allowed to emit 100 tonnes of carbon dioxide in a year but is actually emitting 120 tonnes. Also suppose there is a project in a developing country such as using solar power or planting trees, that is saving the emission of 50 tonnes of carbon dioxide a year. In the international carbon market, the factory in the industrialised country can buy 20 tonnes of carbon dioxide equivalent from the project in the developing country.
In 2006, India sold 84 million tonnes of carbon dioxide equivalent, at a rate of 10 euro per tonne, according to an official of PriceWaterhouseCoopers, which has been mediating in most of the carbon trade of the country.
The CDM of the UN Framework Convention on Climate Change (UNFCCC) is a two percent levy on all carbon trading. The money is meant to help developing countries adapt to climate change that has occurred already.