Global carbon market expanded 68 per cent in 2009

The value of the market may have flat-lined, but the volume of credits being traded went from strength to strength

Despite global recession, falling carbon prices and ongoing questions about the effectiveness of carbon trading, credits equivalent to 82bn tonnes of carbon dioxide were traded last year, an increase of 68 per cent.

According to research released yesterday by analyst firm Point Carbon, the falling price of carbon meant that the value of the global carbon market rose only marginally from €92bn (£82bn) in 2008 to €94bn (£84bn) in 2009.

However, the market still continued to expand rapidly with the European emissions trading scheme (ETS), the UN Clean Development Mechanism (CDM), and the voluntary US Regional Greenhouse Gas Initiative (RGGI) cap-and-trade scheme all showing significant increases in the volume of credits traded.

The ETS was worth €73bn last year and continued to dominate the market, accounting for 68 per cent of all global trades. It was followed by the CDM, which generated €17.5bn in trades, and the RGGI, which grew around tenfold to be valued at €1.7bn.

"The almost 10-times increase in value and volume traded in the US last year shows that cap-and-trade has finally landed in America, with the launch of the Regional Greenhouse Gas Initiative on 1 January 2009", said Point Carbon senior analyst Endre Tvinnereim.

The global fall in industrial output and resulting drop in demand for carbon emissions meant that the Point Carbon's weighted-average world carbon price fell from €18.87 in 2008 to €11.40 last year.

However, despite recent volatility in the market following the failure of last month's Copenhagen Summit to deliver a more ambitious agreement, Point Carbon's research highlighted the long-term strength of the market, noting that since its records began in 2003, the world's carbon markets have exchanged 18.3Gt of CO2 equivalent at a total value of €259bn. As a result, the carbon market in 2009 represents almost half the total volume and just over one-third of total value transacted over the past seven years.

The new data comes as a separate report from US-based analyst firm ABI Research predicts that the likely integration of carbon capture and storage (CCS) into the global carbon market will see the market expand more than threefold over the next four years to a value of $395bn a year.

The report also predicted that globally $14.6 billion will be invested in 73 new CCS projects over the next four years.

"One of the major findings of the study is an increasing interconnection between CCS and the Carbon Emissions Trading market, as carbon credits accrued from CCS plants will be traded at carbon exchanges, generating additional revenue for CCS project developers," said report author Atakan Ozbek.

However, it remains to be seen if CCS projects will be granted access to the official carbon markets in the coming years. Negotiations to include such projects in the UN's CDM offsetting scheme foundered at last month's Copenhagen Summit amid a row between Saudi Arabia and Brazil over whether CCS or forestry projects should be allowed to issue carbon credits.

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