Carbon Market to Grow 15% This Year, Bloomberg New Energy Finance Predicts

Global carbon markets will grow 15 percent in 2011, the most in three years, on higher prices and increased demand for emission allowances from energy companies, analysts at Bloomberg New Energy Finance said.

Emission markets worldwide will expand to 107 billion euros ($139 billion) this year from 93 billion euros last year as European power producers buy more permits before they are forced to pay at auctions starting in 2013, London-based analysts led by Guy Turner said today in an e-mailed report.

“In spite of the recession and little progress at the international climate talks, the value of the global carbon market has continued to grow,” Turner, director of carbon market research at New Energy Finance, said in the report. “With the advent of auctioning in the European scheme, we are likely to see even higher traded volumes and prices in Europe in 2011, and these may increase further in future years.”

The carbon market’s value rose 5 percent in 2010 as global prices increased 17 percent, New Energy Finance said. Trading volume dropped 10 percent to 6.9 billion metric tons on the collapse of the Regional Greenhouse Gas Initiative market, a carbon trading program in the U.S., and “the evaporation of prospects for a federal-level cap-and-trade scheme.”

European Union carbon allowances for delivery in 2011 rose 0.9 percent of 14.66 euros today on the ICE Futures Europe exchange in London. That’s up 13 percent from a year ago. United Nation’s credits for 2011 fell 0.3 percent to 11.20 euros.

Dominated by Europe

Europe still dominates the carbon market, accounting for 81 percent of total trades in 2010, Turner said. This trend is set to continue through 2020 given the lack of progress on carbon legislation in the U.S., Japan and Australia, he said.

The world’s carbon markets could reach up to 1.7 trillion euros in 2020 “if these countries were to implement meaningful cap-and-trade schemes,” Turner said.

New Energy Finance said the value of carbon trading last year was within 3 percent of its January 2010 forecast of 96 billion euros. The European Trading System, started in 2005 as part of the EU effort to cut emissions and comply with the 1997 Kyoto Protocol, grew 80 percent in 2008, New Energy said.

To contact the reporter on this story: Catherine Airlie in London at cairlie@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net