Trading in the rapidly expanding global carbon markets jumped 61 per cent in 2008, with the volume of carbon dioxide emissions transacted worldwide rising from 2.98 billion tonnes of CO2 to 4.81 billion tonnes.
This finding is reported in the latest edition of the Carbon Markets report from International Financial Services London (IFSL), the independent organisation promoting UK financial services around the world, which also reveals that London is continuing to build on its leading position in global carbon markets.
EU ETS: The EU’s Emissions Trading System (EU ETS) continues to dominate international activity in allowance-based markets. Exchange trading on EU ETS totalled 3.2 billion tonnes of CO2 in the first half of 2009, exceeding the full year total of 2.7 billion tonnes in 2008. Spot trading on EU ETS has mushroomed since last autumn as companies have used allocated allowances as a ready source of finance. Trading in EU ETS futures and options has risen in parallel with the spot market.
The bulk of futures and options trading in EU ETS takes place on the London-based European Climate Exchange (ECX), with 92 per cent of exchange trading in 2008 and 99 per cent in the first half of 2009. Trading of energy brokers in London rose by 82 per cent to 1.13 billion tonnes CO2 in the first five months of 2009, up from 618 million tonnes in 2008.
Project Market: China dominates the project-based market with 84 per cent of volumes supplied under the Clean Development Mechanism (CDM) in 2008. India, Brazil and Mexico are also important countries for CDM investment, although projects tend to be smaller. CDM investment has slowed since mid-2008 due to the financial crisis; constraints in the registration process; and uncertainty about the outcome of the Copenhagen summit in December.
Duncan McKenzie, IFSL’s Director of Economics, said, “Alongside the dominant position of ECX in the EU ETS and prominent role of London-based energy brokers, the UK remains the leading investor in project-based transactions with 39 per cent of CDM credits purchased in 2008. Major verification agencies are based in the UK and LSE’s Alternative Investment Market (AIM) is a magnet for companies developing renewable technologies.”
A total of 78 companies developing renewable technologies are listed on AIM raising a cumulative £1.6 billion. About 70 of these companies have joined AIM since 2004 although less favourable market conditions meant that there were only 2 IPOs in 2008.
Picture: Flickr:Creative Commons:Kusaker.