Market News

 April 05, 2012
World's carbon markets down 20 per cent in 2012

 The value of global carbon markets plunged by over a fifth during the first three months of the year, despite increased volumes of trading, as a dramatic drop in the price of carbon undermined the sector.

Figures from analysts Bloomberg New Energy Finance (BNEF) show the world's carbon market fell to €14.2bn over the first quarter of 2012, 21 per cent less than the last three months of 2011 and 41 per cent down on the same period a year ago.

BNEF said the drop was caused by a headline-grabbing 50 per cent decline in the volume-weighted average carbon price compared with the start of 2011 to €6.6 per tonne. Earlier this week, prices hit a new record low of €6.14 per tonne.

This left carbon in the first quarter of this year at its lowest value since the start of Phase II of the EU emissions trading scheme (EU ETS) in 2008.

However, over two billion tonnes of EU allowances (EUAs) and UN certificates were traded over the first three months of 2012, a 17 per cent rise on a year ago, which represents the largest first-quarter volume on record.

BNEF said it expects volumes to continue to grow by 39 per cent during 2012 as increasing amounts of permits are auctioned in the EU ETS.

However, it warned an over-supply of carbon allowances in Europe's carbon market will continue to undermine market values, which are predicted to fall by 7.5 per cent on an annual base to €85bn.

Guy Turner, director of carbon and power research at BNEF, said the market continued to show signs of life despite the negative headlines.

"Trading volumes should pick up further into the year with the introduction of early auctioning in the EU ETS and growing activity in California, although this increase is unlikely to offset the effect of low prices," he said. "We expect the total value of the carbon market in 2012 to be down slightly on last year."

In related news, the Department of Energy and Climate Change (DECC) has postponed an auction of four million EUAs from 7 June 2012 to 6 September 2012, although an auction planned for 10 May will go ahead as scheduled.

In a statement, DECC said: "This revision to the auction calendar is due to the current uncertainty around the exact timing of the activation of the Single Union Registry and to provide as much prior notice to the market as possible."

National registries are due to close this year and shift all EU ETS accounts and operations to the centralised single registry. The European Commission said in November the registry is not expected to be activated before June.

A DECC spokeswoman told BusinessGreen: "In anticipation of the work which is likely to be involved in migrating registries during this period, and without more details on the timings, the decision was taken to move the June auction. Further announcements are expected by the Commission in due course."