Environmental Valuation & Cost-Benefit News

Point Carbon, a provider of independent analysis and consulting services for governments and companies in the global power, gas and carbon markets, released its “Carbon 2008” report which includes the results of the largest survey ever conducted into the carbon market. This report was announced at a press briefing today during Point Carbon’s 5th annual conference, Carbon Market Insights 2008, in Copenhagen, Denmark.

Point Carbon received over 3700 responses to their comprehensive survey, 40 percent of which trade or own European Union Allowances (EUAs) or Certified Emission Reductions (CERs). Combined with additional Point Carbon analysis, the report presents an overview of the carbon market in 2007, an outlook for 2008 and expectations for the remainder of the first Kyoto period and beyond.

The report explores in-depth the following key findings:

Global carbon markets worth USD $60 billion (€40 billion) in 2007, up by 80 percent from 2006. The total traded volume increased by 64 percent from 1.6 Gt (1.6 billion tons) in 2006 to 2.7 Gt in 2007.

There seems to be a generally bullish sentiment on carbon, not necessarily reflected in current market prices. Survey respondents now on average expect a carbon price of USD $37/ton (€24/ton) in 2010 and USD $54/ton (€35/ton) in 2020, which is USD $9 (€6) and USD $15 (€10) higher, respectively, than they expected a year ago. This demonstrates that market participants now realize that the EU ETS will face a considerable shortage and that much of this will have to be met through reductions taking place in Europe.

General optimism that we are moving towards a global carbon market. More than 70 percent of respondents believe that a climate agreement for the post-2012 period will be agreed upon before the end of the Kyoto period. In Point Carbon’s view, getting the United States on board will be vital for a new agreement. Interestingly, survey respondents do not necessarily agree, with about 77 percent expecting an agreement to be reached regardless of whether or not the U.S. participates. However, more than half of respondents expect that the U.S. will take on reduction commitments and participate in a new agreement.

Carbon prices are now seen as an important factor in the operating and investment decisions of companies. Over two-thirds of survey respondents claim that the EU ETS has caused emission reductions of some kind, either already implemented or at the planning stage. While this might be good news for the development of greenhouse gas emissions in Europe, expect to see similar developments in other places around the world in the years to come. Over 72 percent of the survey respondents expect there to be a global reference price for carbon by 2020 and 73 percent of EU ETS survey respondents agree that the carbon price is relevant to investment decisions. As the world increasingly takes into account the cost of emissions and the value of reductions, the carbon market will continue to incentivize investments in cleaner technology and emission reductions.

“The global carbon market is heating up at a fast and furious pace, while forming at a time of ever-increasing attention to climate change,” said Kjetil Røine, Manager of Point Carbon’s Carbon Market Research team. “Last year was another record one in the market, with markets worth more than USD $60 billion (€40 billion) in 2007, up 80 percent from 2006.”

Point Carbon predicts that the global carbon market will see 4.2 billion tons carbon emissions (CO2e) transacted during 2008, up 56 percent from 2007. At today’s prices, that would make the market worth USD $92 billion (€63 billion).

“We expect that the general trend of increasing traded volumes will continue to expand exponentially as the global market becomes more mature and sophisticated. An increase in contract types, more players and markets and greater competition between market players together will generate momentum for higher volumes,” said Røine.

Point Carbon www.PointCarbon.com
http://www.pointcarbon.com/getfile.php/fileelement_134499/11_March_2008_Largest_survey_ever_conducted_into_the_world%E2%80%99s_carbon_market_released__today.pdf
Press Release dated March 11, 2008