Global carbon markets to rise to $62.5 billion in 2014

Clare Saxon Ghauri
10 January 2014

LONDON: Global carbon markets will rise to reach a value of EUR 46 billion (US$62.5 billion) in 2014 according to forecasts by Bloomberg New Energy Finance (BNEF).

The increase to US$62.5 billion will be a 15% rise on 2013’s global carbon market value, but still below the all-time high of EUR 98 billion in 2011.

BNEF analysts say the main reason for this growth is the European Union’s plan to ‘backload’ auctions of its emissions trading scheme’s carbon allowances.

The EU’s move, which was approved at the end of 2013, could cause European carbon prices to increase over 50% to reach an average of EUR 7.5 a ton, according to analysts.

Guy Turner, chief economist and head of commodities at Bloomberg New Energy Finance, said: “Carbon markets have been on a roller coaster over the last few years and we continue to see a stomach-churning ride ahead. The value of the market peaked at around EUR 100bn in 2011 and then plummeted to around EUR 40bn in 2013. Thanks to backloading in the EU ETS, the track should turn upwards again in 2014, potentially reaching new highs of EUR 180bn by 2016. The roller coaster could well take another dip downwards towards 2020 if the backloading rules remain in place, as they would force supply to increase again in the latter years of the decade. For compliance players, this volatility will be unwelcome. But for speculators with a sense of adventure and good timing, they could prove tempting in 2014.”

BNEF also estimates North American carbon markets to grow thanks to a climb in the floor price of California’s trading scheme. Asia is also predicted to help swell markets in 2014.

Konrad Hanschmidt, head of the carbon analysis team at Bloomberg New Energy Finance, commented: “World carbon markets have suffered some setbacks in recent years, notably with the recession-fuelled fall in European prices and efforts by the new Australian government to abolish that country’s carbon trading scheme.

“But new carbon-trading programmes are emerging in China and South Korea, and policy-makers in Europe are taking clear steps to ensure that carbon prices drive future emission reductions.”

Commenting on the launch of carbon trading markets in Beijing and Shanghai in November, Changhua Wu, Greater China Director, The Climate Group, said: “With its success in overtaking the EU-ETS earlier in the year, the Shenzhen Exchange has set an example of how to put a price on carbon in China. At COP19 China further promised climate action, and as we are now at the halfway point in the 12th Five-Year Plan period, many Chinese companies are looking ahead to see if they are able to achieve the set carbon reduction targets by 2015.

"The new carbon markets offer big opportunity for business in 2014. While there are still challenges ahead for China, the regional carbon markets could set the foundations for a strong national carbon trading market that would be the biggest in the world -- and that would help transform China’s economic development towards strong, sustainable, green growth.”

Analysts estimate a yearly trading volume of 8.3 gigatons in 2014's global carbon markets. This compares with 2013's second-highest volume of 10.1 gigatons, which closely follows 2012’s record 10.7 gigatons.

Related news:

China to launch two critical carbon markets next week

Open letter to EU President Barroso: a clear carbon price signal is essential to drive growth in Europe

North American governors representing 53 million people agree to account for the cost of carbon

By Clare Saxon

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