Mixed year sees global carbon market expand to $74.5bn

Mixed year sees global carbon market expand to $74.5bn


The value of the global carbon market rose nine per cent last year to $74.5 billion, despite a 19 per cent contraction in the volume of emission allowances traded throughout 2015.

That is the main outcome from the annual Carbon Market Monitor report from the Point Carbon team of analysts at Thomson Reuters, which also predicts that volumes in the market will enjoy a recovery in 2016.

renewable-energy-solar-wind“We expect volumes to rise slightly in 2016,” the report said.

“Assuming prices to also end higher than in 2015, we forecast the overall value of carbon markets to grow by a quarter.”

Overall, the analyst firm expects the carbon market in 2016 to be worth $92.4bn, driven by a recovery in Europe and continued strong performance in the United States.

“We believe emission trading will remain modest in China and South Korea, despite the huge emission volumes covered by their emission trading schemes,” the report said.

“In terms of transactions, Europe and North America will continue to represent more than 95 per cent of the market.”

Anders-Nordeng-senior-emission-markets-analyst-Thomson-ReutersThe report highlighted how the reduction in the volume of carbon allowances being traded was largely a result of European policymakers taking steps to push up the price of carbon through the ‘back-loading’ plan, which was adopted last year in a bid to curtail the supply of allowances.

Anders Nordeng, senior emission markets analyst at Thomson Reuters and lead author of the report, said the move stabilised the price of emissions allowances the world’s largest carbon market, leading to lower levels of trading as speculators moved out of the sector.

“European lawmakers have proved their willingness to intervene to curb the accumulated oversupply of emission allowances,” he said in a statement.

“This ends a period of regulatory uncertainty, and one effect of this is a sharp drop in price volatility.”

EU-wind-turbines-smoke-stacksAs a result of the reforms carbon prices in Europe rose 11 per cent during 2015, even as the price of related commodities such as oil, gas and coal fell sharply.

“In an environment of tumbling energy prices, carbon has stood remarkably firm in 2015,” said Mr Nordeng.

However, the overall value of the European carbon market still fell by eight per cent as a result of the reduction in traded volumes.

The performance was in stark contrast to the fast-expanding US market, where Thomson Reuters said volumes grew 121 per cent and the value of the market soared 220 per cent.

california-cars-wind-turbinesThe jump was driven in large part by the inclusion of fuel emissions in California’s Emissions Trading Scheme (ETS).

The global carbon market is tipped for a period of rapid expansion over the next few years as a series of small scale pilot carbon trading schemes in China are expected to act as a fore-runner for a national carbon market from 2017.

Australia’s conservative Liberal-National government is the only one in the world to have abandoned an operating ETS when, in 2014, it repealed the carbon price laws enacted by the previous Labor government.