The value of global carbon markets hit a record $909 billion last year

*

Value of permits due to energy boost, EU reforms

*

Next year the number of EU approvals will decrease once

*

Trade in the Chinese market is restricted by a pandemic

By Swati Verma and Nina Chestney

LONDON, Feb 7 (Reuters) – The value of traded global markets for carbon dioxide (CO2) allowances hit a record 850 billion euros ($909 billion) last year, analysts at Refinitiv said on Tuesday.

Around 12.5 billion tonnes of carbon allowances changed hands in global emissions markets – down 20% year-on-year – but the value of the markets rose 14% as allowance prices were much higher.

Emission trading systems are market-based instruments for limiting greenhouse gas emissions. They limit the amount that countries or companies can emit, and if they exceed those limits, they can buy permits from others.

The world’s largest carbon market, the EU Emissions Trading Scheme (EU ETS), launched in 2005, was worth around €751 billion last year, up 10% on the previous year and accounting for 87% of the global total.

The price of carbon allowances under the EU ETS averaged over €80 per tonne last year, up 50% year-on-year as energy prices soared after the war in Ukraine.

Prices in the UK and North American markets were also higher than in 2021.

Over the past year, as part of efforts to tighten climate policy, EU lawmakers have also been working on reforming the EU ETS, agreeing to cut the number of permits in the system, which has also been optimistic for prices.

“All eyes will be on the implementation of this legislation in 2023, with a massive one-off reduction in allowances planned for 2024,” Refinitiv analysts said.

“On the other hand, the sale of additional certificates to finance the REPowerEU plan will inject additional supply and thus weigh on prices. Gas prices will remain a key driver of EU ETS prices in 2023,” they added.

The REPowerEU plan aims to reduce the bloc’s dependence on Russian energy supplies and includes selling additional EU carbon credits to fund itself.

North America’s two regional carbon markets — the Western Climate Initiative and the Regional Greenhouse Gas Initiative — were collectively worth over $70 billion last year, the report said.

China’s national emissions trading system was launched in mid-2021. Unlike other systems, China’s emissions cap is based on emissions intensity.

It was worth €504 million last year, down 61% year-on-year. The program provided for limited trade as its development was slowed by other priorities such as the COVID-19 pandemic and the government failed to release a new permit allocation plan.

($1 = €0.9349) (Reporting by Swati Verma and Nina Chestney; Editing by Barbara Lewis)

Source