Carbon market to treble in value in 2006 – World Bank

Cologne, 11 May: The global carbon market could be worth $25-30 billion in 2006, based on volumes in the first four months of the year, according to the World Bank. Some $7.5 billion worth of carbon contracts changed hands up to the end of April, compared with almost $11 billion in the whole of 2005, the Bank's sixth annual market survey found*.

This growth follows an almost 40-fold increase in volumes of carbon dioxide (CO2) allowances traded in 2005 compared to 2004, and three-fold growth in project-based emission reduction transactions.

The survey – State and trends of the carbon market 2006 – says that more than 329 million tonnes (Mt) of CO2 traded in allowance markets, primarily the EU Emissions Trading Scheme (ETS), up from 16Mt in 2004. Project-based transactions, such as the Clean Development Mechanism (CDM), saw more than 374Mt traded in 2005 compared with 110Mt the previous year.

"We have a working market that has grown faster than expected," said Andrei Marcu, president of the International Emissions Trading Association, which co-sponsored the report, at a press conference in Cologne on the sidelines of the Carbon Expo trade fair.

More than 75% of the value in 2005 came from transactions in the EU ETS, but almost 50% of the volume came from Certified Emissions Reductions (CERs) generated by CDM projects.

In the first four months of 2006, more than 209Mt of allowances and 79Mt of emission reductions from projects have traded, the report says.

It notes that prices in the EU ETS spot market - trading on the Powernext exchange - have ranged from a high of €29.75 ($35.70) per tonne CO2 on 18 April 2006 to a low of €10.90/t on 2 May.

"The increase in volume and the considerable price volatility are a sign of a healthy market," said Andrew Ertel, president of brokers Evolution Markets which, along with broker and carbon asset manager Natsource, helped produce the report.

CER prices averaged $11.60/t in the first quarter of 2006, compared with $7.00/t in 2005 and $5.20/t in 2004, the report found.

Japanese private companies continue to be major buyers of project-based carbon credits, taking a 46% market share in 2005 compared with 36% in 2004. The Netherlands accounted for 10% of the market in 2005, down from 19% in 2004.

China was by far the largest seller in the CDM market, with a 67% market share in 2005, up from only 5% in 2004. India, which had a 43% market share in 2004, represented only 3% of sellers in 2005. Many Indian sellers had been holding back in expectations of rising prices, said Karan Capoor, a financial specialist in the World Bank's Carbon Finance unit and an author of the report.

* State and trends of the carbon market 2006, The World Bank,