Carbon to boom in volume but crash in price, say analysts

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Global carbon markets are set to crash 36 per cent in value this year to €61bn, despite a 13 per cent growth in trading volume, according to new forecasts from analyst firm Thomson Reuters Point Carbon.

The research firm yesterday issued an outlook for the carbon market this year, including forecasts that the volume of carbon traded globally will reach 9.5 giggatonnes, up 13 per cent, as companies prepare for the launch of the third phase of the EU Emissions Trading Scheme (ETS) in 2013.

Certified Emissions Reductions (CER) offset credits from industrial gas projects will be banned in phase three of the ETS, prompting analysts to expect greater secondary trading of these credits this year, before trading then stalls next year.

As a result, Point Carbon forecasts the overall value of the market will drop this year to €61bn (£52bn) – a 36 per cent reduction compared to 2011.

'Next year activity in the secondary CER market is set to drop by 40 per cent while in the primary credit market we foresee limited activity for the next three years,' said Point Carbon analyst Carina Heimdal.

However, she maintained the picture was not 'entirely gloomy' because emerging carbon markets, such as those in California and Quebec, could enable trading volumes to flourish again in 2015.

'Although within Europe, prices are low, look to be heading downwards and the market will shrink, globally, emerging carbon markets are growing, providing some optimism for the long term, especially from the markets in North America, which will see the highest growth in relative terms, with traded volume reaching nearly 200Mt in 2012, twice the previous year's, worth an estimated €607m,' she said.

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