Global carbon market contracts by 38%
in 2013 as prices and volumes

-- a _kt75 | reprint



Global carbon markets traded a total €38.4 billion worth of allowances and credits during 2013, a 38% decrease from the €62bn the previous year, in a continuation of the decline that started after the market peaked at €96bn in 2011. Since then, the key European reference price of emissions has fallen from €18 to €5 per tonne of carbon dioxide.
Last year also saw a decrease in terms of volumes – from 10.7 billion to 9.2 billion emission units – the first drop in traded volumes since 2010, according to analysis published today by Thomson Reuters Point Carbon, the leading provider of market intelligence, news, analysis and forecasting for the energy and environmental markets.The decline is most dramatic for the UN-led ‘flexible mechanisms’ that were created to incentivize emission abatement investments such as renewable energy in developing countries. Until recently, these markets – known as CDM and JI – accounted for roughly 20% of the volume and 10% of the value of the world’s carbon markets. After prices collapsed from 2012 to 2013, they now represent only 7% of volume and 1% of value.


“The main explanation for the falling prices in carbon markets around the world is the very modest emission reduction targets adopted for the period up to 2020. Without ambitious climate targets there is no need for deep emission reductions and carbon prices will remain at low levels. However, if the goal to limit global warming to two degrees shall be met, more dramatic cuts are needed over the next decades. The international negotiations towards a new climate agreement scheduled to be adopted in Paris in 2015 will be a litmus test on the political willingness among large emitters to make the required emission reductions”, says Anders Nordeng, Senior Carbon Analyst at Thomson Reuters Point Carbon and co-editor of the report

With a share of 88% of volume and 94% of value, the European Emission Trading System (EU ETS) continues to completely dominate the world of emission trading. In this market the whole of 2013 was marked by the political debate on whether or not to intervene in the market in order to address the massive oversupply of allowances. Much of the debate last year revolved around the reshuffling of auction volumes from the years 2014-16 to 2019/2020. As this proposal – known as ‘backloading’ – wriggled its way through the European institutions, the price of carbon reacted sharply to the different votes as well as to the statements of key decision makers. Read on...




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