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The state of the carbon markets is Messy - not Messi

Andrew Steer's picture

Last week Barcelona brilliantly beat Manchester United to become the soccer Champions of Europe.  This week Barcelona hosted delegates at Carbon Expo, the annual jamboree for carbon marketers organized by the World Bank and others.  But sadly, the style, strength, efficiency and confidence shown by Messi, Villa, and Pedro are not much in evidence in global carbon markets today. More like my old fourth division club, Bexley United, which I believe has now ceased to exist.

  • There’s certainly a lot to be gloomy about in the world of carbon trading over the past year:
  • The overall size of the market worldwide shrank for the first time ever in 2010
  • The primary CDM market (Clean Development Mechanism) – the principal window of carbon markets to the developing world – fell another 46% to $1.5 billion, down from $7.4 billion in 2005, and the lowest since trading began in 2005.
  • Legislative disappointments in the USA, Australia and Japan, and the market have now become even more concentrated, with well over 90% of trades originating in Europe.
  • Serious irregularities and fraud in the European Trading System (ETS), and suspicions of monkey business in some CDM HFC (Hydrofluorocarbon) transactions.  

Above all, confidence in the post 2012 market, when the first Kyoto Protocol Commitment period comes to an end, is on the floor, and thus demand for post-2012 deliveries is close to zero.

These points are all documented in the Bank’s new State of Carbon Markets Report, 2011 launched this week. And yet 3,000 people turned up at the Carbon Expo this week, and seemed to doing deals and having a good time. Is there anything positive out there? Yes, actually.

First, the overall size of the market was still $142 billion, no small change, although overwhelmingly concentrated within the European Trading System.