The value of the global carbon market grew by 15% during 2014 to €45bn, according to the latest analysis from the Point Carbon team at Thomson Reuters.
Higher prices in the European emissions trading scheme (EU ETS) and steady liquidity and prices in the North American markets were the main reasons for the increasing value of carbon markets. In terms of trading activity, however, the traded volume shrank by 17% to 7.7 billion (Gt) in 2014.
In 2015, the world’s carbon market will grow by 10% to 8.5 Gt while its value will increase by half to €69.5bn, according to senior Point Carbon analyst Olga Chistyakova. This forecast is based on a higher turnover of EUAs on the secondary market and a virtual doubling of the volume of North America’s Western Climate Initiative (WCI) to 610 Mt in 2015 following the expansion of the cap to include transportation fuels and natural gas, translating to larger auction volumes and higher secondary market liquidity.
“By 2017, we expect a gradual but steady increase in the global carbon market volume to 11.5 Gt, surpassing the 2012 record volume of 10.8 Gt by a significant margin,” commented Chistyakova.
“All eyes will be on Asia this year,” according to Hongliang Chai, Point Carbon analyst at Thomson Reuters. “China’s seven pilot schemes captured the attention of the world this year, showing a sixfold growth in market volume to 23 million tonnes (Mt) and with value quadrupling to €123 Mt – materially higher than this year’s CDM and JI combined value.”
The volume from China’s seven markets will continue to grow, potentially doubling in 2015 to 40 Mt and with an expected value of €146m. The national government is considering a national ETS by 2016, though this may be optimistic for full-scale implementation, according to Chai, adding, “The seven provincial emissions trading schemes in China show much promise, with volume of about 24 Mt in 2014 to skyrocket to 75 Mt in 2017.”
South Korea also launched its emissions trading scheme on 1st January 2015, which is set to become the fourth largest carbon market, with expected volume of 70 Mt and a forecasted value of approximately €360m in 2015.
The European carbon market bucked historical trends in 2014 as the EUA price increased for the first time since 2010 with the December 2014 delivery contract breaking through €7.4/t, following the long-awaited adoption of the backloading measure. However, backloading also shrank the supply coming to the market, thus reducing the number of transactions by 13% year-on-year, and interrupting three years of consecutive growth in traded volume.
As CER and JI mechanisms waned in 2014, North America’s WCI and the Regional Greenhouse Gas Initiative (RGGI) gained a ranking in the global market hierarchy, taking second and third place respectively. The two American markets combined were at 457 Mt, contributing €3.2bn by value. The WCI volume and value both grew by more than 50% year-on-year as a result of vigorous secondary trading and virtually 100% subscription rate at all actions.