Items in this collection
State and Trends of the Carbon Market 2011
2011-06, Linacre, Nicholas, Kossoy, Alexandre, Ambrosi, Philippe
After five consecutive years of robust growth, the total value of the global carbon market stalled at $142 billion. Suffering from the lack of post-2012 regulatory clarity, the value of the primary Clean Development Mechanism (CDM) market fell by double-digits for the third year in a row, ending lower than it was in 2005, the first year of the Kyoto protocol. The Assigned Amount Unit (AAU) and the United States Regional Greenhouse Gas Initiative (RGGI) markets shrank as well. As these segments declined, the dominance of the European Union Allowances (EUAs) market became more pronounced than ever and the share of the carbon market primarily driven by the EU Emissions Trading Scheme (EU ETS) rose to 97 percent, dwarfing the remaining segments of the market. The carbon market growth halted at a particularly inopportune time: 2010 proved to be the hottest on record, while emission levels continued their seemingly inexorable rise. In the end, however, the year may be remembered most for the political opportunities that arose, yet were ultimately failed to materialize in the United States, Japan, Australia, and the Republic of Korea. While the international regulatory environment remains uncertain, national and local initiatives have noticeably picked up and may offer the potential to collectively overcome the international regulatory gap. These initiatives signal that, one way or another, solutions that address the climate challenge will emerge.
State and Trends of the Carbon Market 2008
2008-05, Capoor, Karan, Ambrosi, Philippe
The carbon market is the most visible result of early regulatory efforts to mitigate climate change. Regulation constraining carbon emissions has spawned an emerging carbon market that was valued at US$64 billion (Euro 47 billion) in 2007. Its biggest success so far has been to send market signals for the price of mitigating carbon emissions. This, in turn, has stimulated innovation and carbon abatement worldwide, as motivated individuals, communities, companies and governments have cooperated to reduce emissions. The European Union Emission Trading Scheme (EU ETS) market has been successful in its mission of reducing emissions through internal abatement at home, and of stimulating emission reductions abroad. The European Commission, learning from the experience of Phase I, has strengthened several important design elements for EU ETS Phase II. Clean Development Mechanism (CDM) accounted for the vast majority of project-based transactions (at 87 percent of volumes and 91percent of values) and JI saw transacted volumes doubling and values tripling in 2007 over the previous year. The CDM alone saw primary transactions worth US$7.4 billion (Euro 5.4 billion), with demand coming mainly from private sector entities in the EU, but also from EU governments and Japan.
State and Trends of the Carbon Market 2006 : Update, January 1-September 30, 2006
2006-10, Capoor, Karan, Ambrosi, Philippe
Carbon transactions are defined as purchase contracts or ERPAs (Emission Reductions Purchase Agreements) whereby one party pays another party in return for greenhouse gas (GHG) emissions reductions that the buyer can use to meet its compliance or corporate citizenship - objectives vis-a-vis GHG mitigation. Payment is made using one or more of the following forms: cash, equity, debt, or in-kind contributions. This paper includes the following headings: executive summary; methodology; allowance-based markets; project-based markets; investment climate and regulatory environment; and regulatory outlook.
State and Trends of the Carbon Market 2010
2010-05, Kossoy, Alexandre, Ambrosi, Philippe
The carbon market endured its most challenging year to date in 2009. The global economic crisis, which started in late 2008 and intensified early in 2009, negatively impacted both the demand and supply sides of the market. As industrial output plummeted the demand for carbon assets fell. Yet even as global GDP declined by 0.6 percent in 2009, and at a more perilous rate of 3.2 percent in industrialized economies, the carbon market demonstrated resilience. The total value of the market grew 6 percent to US$144 billion ( 103 billion) by year s end with 8.7 billion tons of carbon dioxide equivalent (tCO2e) trade.
State and Trends of the Carbon Market 2007
2007-05, Capoor, Karan, Ambrosi, Philippe
This report points out that there is a tendency to believe that the carbon market is somehow a magic bullet that will alone save the world from global warming. While the authors recognize the enormous strength and potential of the market to achieve results, it would be wise not to assume the market will provide a painless, magical way to mitigate climate change. First, the market does not set the level of a cap, policy-makers do. The market can only be a tool to help achieve that target. It cannot be a surrogate for a target and policy makes should not expect to be let off the hook from their jobs - making sensible policy. Second, policy makers need to set targets and support mechanisms that meet two massive challenges. They have the responsibility of taking into account the risks of climate change, especially on the poorest, as well as the opportunity of expanding clean development choices to meet the basic needs and aspirations of billions worldwide, many without access to electricity or clean water. Third, there is no free lunch. The exuberance of creating value - and enormous wealth - in a new market should not mask the fact that there are costs for mitigation. Fourth, the integrity of a market rests on the clarity and simplicity of its rules, the transparency of information and on institutions that guard against fraud and manipulation. Fifth, it is not fair to expect "cap-and-trade" or emissions trading to work in all sectors globally; clearly, housing and transport are sectors that do not lend themselves easily to an elegant emissions cap-and-trade approach. There may be other policies - including other market-based approaches or removal of subsidies - that may be more suitable in some contexts. Finally, a solution to urgent problem of the climate change problem will require sustained effort by all of us. Markets can, to a certain extent, accommodate the appetite that individuals and companies in Europe, Japan, North America, Australia and beyond have for carbon emission reductions that go well beyond what their law makers require of them. This high-potential voluntary segment, however, lacks a generally acceptable standard, which remains a significant reputation risk not only to its own prospects, but also to the rest of the market, including the segments of regulated emissions trading and project offsets.
State and Trends of the Carbon Market 2006
2006-05, Capoor, Karan, Ambrosi, Philippe
The overall value of the global aggregated carbon markets was over US$10 billion in 2005. In the first quarter of 2006, overall transactions worth US$7.5 billion had le d some to predict that this new financial market would be valued at between US$25-30 billion in 2006. We dedicate a significant portion of our effort in this study to exploring the project-based market in particular. This segment is also of the most interest to the World Bank's Borrowing Country clients. Our interest in the EU ETS and other emerging Kyoto- and non-Kyoto allowance markets is strong to the extent that events in those markets help explain the development of the project-based markets. The objective of this study is to get a representative sense of the activity of the carbon markets, their evolution over time up to April 2006, and sketch what we see as the likely trends in the future. The study is organized as follows. Section 2 describes the structure and main segments of the carbon market. Section 3 explains the methodology that was followed to conduct the analysis. Section 4 focuses on allowance markets, and particularly on the EU ETS. Section 5 focuses on project-based transactions, and particularly on the CDM and JI projects. Section 6 presents the major trends that we see emerging.
State and Trends of the Carbon Market 2009
2009-05, Capoor, Karan, Ambrosi, Philippe
Over the past year, the global economy has cooled significantly, a far cry from the boom just a year ago in various countries and across markets. At the same time, the scientific community communicated the heightened urgency of taking action on climate change. Policymakers at national, regional, and international levels have put forward proposals to respond to the climate challenge. The most concrete of these is the adopted European Union (EU) climate and energy package (20 percent below 1990 levels by 2020), which guarantees a level of carbon market continuity beyond 2012. The EU package, along with proposals from the U.S. and Australia, tries to address the key issues of ambition, flexibility, scope, and competitiveness. Taken together, the proposals tabled by the major industrialized countries do not match the aggregate level of annex one ambition called for by the Intergovernmental Panel on Climate Change, or IPCC (25-40 percent reductions below 1990). Setting targets in line with the science will send the right market signal to stimulate greater cooperation with developing countries to scale up mitigation.
State and Trends of the Carbon Market 2006 : A Focus on Africa
2006-11, Capoor, Karan, Ambrosi, Philippe
Many African countries have thin energy and industrial sectors with limited opportunities to reduce carbon emissions, certainly relative to countries such as China and India. Carbon sequestration from avoided deforestation and from agriculture--potentially important areas for climate mitigation and important in many African economies--has been systematically excluded from the Clean Development Mechanism (CDM). At the same time, CDM-eligible assets from afforestation and reforestation are excluded from entry into the large European Union-Emissions Trading Scheme (EU ETS), substantially limiting their market value and potential share in the multi-billion dollar global carbon market. The Africa share of the CDM market is lower than the share of African countries to developing nations in Foreign Direct Investment (FDI) over the past few years, which has been around 10 percent.
State and Trends of the Carbon Market 2003
2003-12-01, Lecocq, Franck, Capoor, Karan
The emerging carbon market encompasses both project-based emission reduction transactions, whereby a buyer participates in the financing of a project which reduces greenhouse gases (GHGs) emissions, compared with what would have happened otherwise, and gets some of the emission reductions (ERs) thus generated in return; and, trades of GHG emission allowances allocated under existing, or incoming, cap-and-trade GHG emissions control regimes. This Review of the state and trends of the carbon market as of November 2003, based on material provided by Evolution Markets LLC, Natsource LLC and PointCarbon, and on direct interviews with market participants, suggest that: volume exchanged on the carbon market has more than doubled since 2002; buyers are governments, and public-private partnerships like the Prototype Carbon Fund; in 2003, nine out of ten tones of emission reductions originate from projects located in transition economies or developing countries; prices differ depending on the segment of the market, and on the structure of the transaction; allowance markets dominate in number of transactions, but volume exchanged remains small compared with project-based transactions; and, because of long lead time between project preparation and first "yield" of emission reductions, and absent clarification of the validity of project-based emission reductions beyond 2012, the window of opportunity for project-based transactions is rapidly closing. The report further discusses volumes of GHG Emission Reductions (ERs) up to 2012 only, to provide an idea of the volume that might be available for compliance, since 2012 is the end of the first commitment period of the Kyoto Protocol, and a milestone in most regimes. For projects where vintages 2013 and beyond are purchased (in particular in forestry-related projects), it was assumed an even annual accrual of ERs, unless known otherwise. Also, throughout the paper, volumes are reported in metric tones of CO2 equivalent (tCO2e).