By Joydeep Gupta, IANS
New Delhi : The global carbon market was worth $60 billion in 2007, up by 80 percent from 2006. And market analysts feel carbon prices have now become an important factor in the operating and investment decisions of companies.
The volume of carbon traded increased by 64 percent from 1.6 Gt (1.6 billion tonnes) in 2006 to 2.7 Gt in 2007.
Releasing the figures after an international survey, Point Carbon, a US-based analyst of the market, said that there was a “generally bullish sentiment on carbon, not necessarily reflected in current market prices”.
Kjetil Røine, manager of Point Carbon’s market research team, predicted: “The global carbon market will see 4.2 billion tonnes of carbon emissions transacted during 2008, up 56 percent from 2007. At today’s prices, that would make the market worth $92 billion.”
The firm surveyed over 3,700 organisations that have been trading in carbon, a trade that started in the wake of international treaties to reduce emissions of carbon dioxide – the main greenhouse gas that is warming the atmosphere and leading to climate change.
In carbon trading, a firm in an industrialised country that is emitting more than its quota of carbon dioxide can buy permits from a developing country firm that is reducing carbon dioxide emissions in some way or a developed country firm that is emitting less than its quota.
The survey showed that “carbon prices are now seen as an important factor in the operating and investment decisions of companies”, Røine said.
“Over two-thirds of survey respondents claim that the European Union Emissions Trading Scheme (EU ETS) has caused emission reductions of some kind, either already implemented or at the planning stage.”
According to Røine: “As the world increasingly takes into account the cost of emissions and the value of reductions, the carbon market will continue to incentivise investments in cleaner technology and emission reductions.”
Survey respondents told the firm they expect an average carbon price of $37 per tonne in 2010 and $54 per tonne in 2020.
“This demonstrates that market participants now realise that the EU ETS will face a considerable shortage and that much of this will have to be met through reductions taking place in Europe,” said Røine.
Those surveyed by Point Carbon were optimistic that there was a move towards a global carbon market.
“More than 70 percent of respondents believe that a climate agreement for the post-2012 period will be agreed upon before the end of the Kyoto period,” Røine said.
“We expect that the general trend of increasing traded volumes will continue to expand exponentially as the global market becomes more mature and sophisticated. An increase in contract types, more players and markets and greater competition between market players together will generate momentum for higher volumes.”
Around 40 percent of the 3,700 firms surveyed by Point Carbon trade or own European Union Allowances (EUAs) or Certified Emission Reductions (CERs).