Global Carbon Market Will Exceed $100 Billion in 2008

The deepening global economic recession could delay implementation of a U.S. cap on carbon emissions and reduce demand for carbon credits in states that have enacted regional carbon limits. However, both U.S. presidential candidates support alternative energy programs and climate change initiatives. In our view, it’s not a matter of whether these regulations will be implemented. They will. It’s simply a matter of when they will take effect.

The recession is expected to slow industrial production and reduce demand for carbon offsets. Nonetheless, a recession is a good time to prepare for widely anticipated legislative mandates. The drought will eventually end and companies need to be ready for the post-recession regulatory era.

The EU is already tightening regulations on GHG emissions. Now we’re watching to see what the American election will bring in the way of commitment to climate change initiatives, which have to be balanced with the slowing US economy.

Even though U.S. legislative initiatives may be delayed, companies would still be wise to move forward with their investments in technology, including integrated carbon management solutions. Implementing a proactive strategy will lower your company’s risk exposure to carbon market fluctuations. Delaying your decision could be very costly going forward.

The global carbon market is on pace to grow more than 80 percent this year to $116 billion, according to New Energy Finance, a clean-technology research and analytics firm. That growth can be attributed to consistently high prices for carbon allowances and credits in European Union countries that are bound by the Kyoto Protocol cap on heat-trapping gases.

The volume of carbon emissions transacted will grow 31 percent this year to 3.9 gigatons. European Union allowances, which constitute about 68 percent of trading by volume, have averaged about $34 a ton. Meanwhile, collective trades in secondary certified emission reductions (CER) more than doubled to $10 billion.

Although the trading volume of secondary CERs increased by 100 percent, the volume of the new CDM market — the main currency of the European Union’s Clean Development Mechanism (CDM) market — fell 26 percent. New Energy Finance analysts underscored that there has been a drop in the size, but not the number of carbon mitigation projects, such as industrial heat recovery and afforestation investments.

Experts are projecting that when the U.S. — the world’s top per-capita CO₂ emitter — adopts an emissions cap-and-trade scheme, the global carbon trading market will reach $3 trillion annually by 2020.

Investing in carbon management technology tools can minimize companies’ exposure to the growing carbon market. As organizations prioritize their IT expenditures, carbon management systems should be at the top of the list. Addressing emissions now means your company won’t be at risk whenever government officials put new limits in place.

Add comment October 24th, 2008