Carbon market round-up Q2 2010: a tale of two halves Analysis by Bloomberg New Energy Finance shows that after three quarters of negative growth the carbon market has recovered with a 55% increase in value relative to the opening quarter of 2010. Compared to Q1 2010, traded volume in the world’s carbon markets in Q2 increased by 38% reaching 2,085Mt. The quarter was characterized by strong initial growth, with trading volumes dropping off considerably across May and June ahead of the generally slower summer trading period.
State of the Voluntary Carbon Markets Report 2010 2009 was a tumultuous year for the voluntary carbon markets, which saw transactions equivalent to 94 million tons of carbon dioxide emissions reductions, a 26% drop compared to 2008, according to the fourth annual State of the Voluntary Carbon Market Report issued today by Ecosystem Marketplace and Bloomberg New Energy Finance. The total value of traded credits declined 47% to US$387 million in 2009 and the average price of an emission reduction was $6.5/tCO2e.
Sectoral crediting mechanisms can spur mitigation in power sector A new report issued by Bloomberg New Energy Finance and the Spanish Ministry of the Environment examines how sectoral crediting mechanisms (SCMs) could be used to increase the usage of lower carbon technologies in developing economies. The report finds that the application of carefully designed SCMs could be an effective tool in the reduction of emissions in the power sector, which accounts for over 50% of energy-related emissions in the major developing economies.
Bloomberg New Energy Finance model projects clean energy investment of $200 billion per year by 2030 London, March 17— A new long-term projection model from Bloomberg New Energy Finance, the world’s leading independent expert on renewable energy and carbon markets, shows that annual global expenditure on renewable energy projects will increase from $90 billion (USD) in 2009 to $150 billion in 2020. The model shows that this will further increase to $200 billion by 2030 given current policy targets. The new findings apply the Bloomberg New Energy Finance Global Energy and Emissions Model GE2M, which is a long-term projection model covering the entire world energy system. The new model is able to forecast investments levels, technologies and policy options required to meet energy and emissions goals.
Australian Coalition’s alternative to the CPRS needs further thought – and better arithmetic The government’s Carbon Pollution Reduction Scheme (CPRS) will cost less than A$1.5bn over the first four years – not A$40.6bn as claimed by the Coalition – according to the latest Bloomberg New Energy Finance analysis. Indeed the CPRS would actually be more cost-effective than the Coalition’s proposed climate policy which would cost some A$3.2bn.
The global carbon market increases by 5% in 2009 Market growth slowed in 2009. Despite an increase in traded volume of 96% from 2008, the market gained just 5% in value, from $119bn to $125bn. But with the fraudulent VAT trading activity removed from the market and an outlook for stable prices, even this growth could stall in 2010. Our longer-term outlook remains good however, despite the poor outcome of Copenhagen, with prospects for US cap-and-trade firmly on the horizon.
Energy efficiency upgrades will keep short-term US emissions in check, but long-term costs have been The US will keep its emissions level over the next two decades, thanks in part to an abundance of short-term, cost-effective energy efficiency opportunities, Bloomberg New Energy Finance concludes in a new report. But once the “lowest hanging fruit” have been picked, the cost of making further cuts in carbon emissions starts to increase, the global clean energy research firm says. To address climate change effectively, the US will need new, more aggressive policies that spur faster energy technology improvements and result in lower long-term abatement costs.
Despite expected population and economic growth over the next two decades, the US will actually see its emissions drop slightly by 2030, as households and industry make use of a wide range of cost effective energy saving opportunities. But after the easiest abatement opportunities are exploited, the cost of making further cuts in emissions rises quickly, Bloomberg New Energy Finance finds in its new study.
In its new report, Bloomberg New Energy Finance combines its unique knowledge of clean energy and low-carbon technologies with sophisticated economic modeling to assess the costs of achieving ever greater levels of emission reductions in the US in 2020 and 2030, and under a range of different scenarios. Taking all these into account, the study concludes that US emissions will be 0.4% below 2005 levels by 2020, and 2.0% below 2005 levels by 2030, even if the US fails to enact any new carbon reduction policies. However, a major step-change in clean energy technology, along with new, more aggressive policies will be needed for the US to hit President Obama’s goal of cutting US emissions by 17% by 2020.
In contrast to previous studies, the Bloomberg New Energy Finance report finds not all the “low hanging fruit” associated with new policies is as close to the ground as had been assumed. “Some other studies of abatement costs have probably been too optimistic,” said Milo Sjardin, Bloomberg New Energy Finance head of US carbon markets. “Many energy efficiency improvements will happen as a result of trends already in place. Others will require consumers to reconsider how they use energy and there are genuine costs associated with convincing them to rethink their ways.”
The report also examines the implications of the US attempting to shrink its carbon footprint with and without cooperating with other countries. Achieving the 17% reduction on 2005 levels by 2020 entirely within US borders would require some “early wins” in energy efficiency and land-based measures, but would then require more fundamental changes to the power and transport sectors. The use of so-called international “offsets” – carbon emission reductions made in countries overseas -- could reduce these costs significantly, potentially by up to 80%.
These challenges however are hardly insurmountable, according to the report. While the negative cost abatement potential of energy efficiency is not as large as had been suggested, the cost of realizing a 17% reduction by 2020, or 30% reduction by 2030 – even without the use of international offsets - is still less than a dollar a day per US household.
In addition, the analysis clearly shows that the longer time over which emissions are to be reduced, the less it costs. With more time, investments can be scheduled to coincide with the building of new facilities rather than costly retrofitting, and by building up economies of scale in production and installation unit costs come down. This suggests that policy-makers should be considering implementing supporting policies sooner rather than later.
“This report offers a road map to policymakers, investors and traders on the true long-term costs of addressing climate change,” said Guy Turner, Bloomberg New Energy Finance head of carbon market research. “By taking into account existing trends, as well as real-world factors that affect how investors actually making decisions, our marginal abatement cost curves outline just where the best opportunities for reducing emissions lie – and how much they really cost.”
The report, titled “A fresh look at the economics of US carbon emissions abatement,” is available as a free download on the Bloomberg New Energy Finance website. It contains a detailed examination of marginal abatement cost (MAC) curves, which offer a set of options available to an economy to achieve emission reductions. The MAC curve is a valuable tool for driving forecasts of carbon allowance prices, prioritizing low-carbon investment opportunities, and shaping policy discussions around a national climate change strategy.
Bloomberg New Energy Finance’s MAC curve analysis addresses deficiencies in previous MAC studies by developing a methodology which rigorously links the MAC curve with the reference case and which accounts for hidden and missing costs. The results of this approach are US MAC curves for the years 2020 and 2030 that yield valuable conclusions with implications for policy-makers and investors.
For further information, please contact:
Milo Sjardin
Head of US Carbon Markets
Bloomberg New Energy Finance
1841 Broadway, Suite 802
New York, NY 10023
Tel: +1 646 214 6168
Guy Turner
Head of Carbon Market Research
Bloomberg New Energy Finance
283-288 High Holborn
London
WC1V 7HP
Tel: +44 207 092 8800
Ethan Zindler
Head of North American Research
Bloomberg New Energy Finance
1940 Duke Street, 2nd Floor
Alexandria, VA 22308
Tel: +1 703 486 5667
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US emissions to fall 3.1% by 2020 - even if Congress fails to act The US economy’s overall carbon footprint will shrink by 3.1% by 2020 from where it was in 2005 even if Congress completely fails to implement any new measures to address climate change in coming months, according to leading research firm New Energy Finance. This will be driven in part by the recession, but more importantly through ongoing improvements in technology and government policies to promote renewable energy and automobile efficiency. Including the impact of the Kerry-Boxer bill would reduce domestic emissions further, reaching 7.1% by 2020 with an average carbon price of $21/tCO2e over the period.
Global carbon market shrinks in Q3 According to the latest analysis by New Energy Finance, the value of the world carbon market fell by 21% from Q2 to Q3. This is largely due to a drop in activity in the European emissions market compared to Q2. Traded volumes in the North American and international offset market have continued to increase, although not enough to compensate for the reduction in volumes in Europe. By the end of 2009 we expect the global carbon market to be worth $122bn – a 3% increase on 2008 – and $1.9tr by 2020.
Global voluntary market to decline more than 60% this year in the face of economic recession The latest analysis by New Energy Finance shows that the voluntary carbon market is heading for a heavy fall in volumes and prices in 2009. The slightly more encouraging news is that, after a disastrous first half of the year, the voluntary market is now seeing some recovery, driven by the US pre-compliance market. For 2009 as a whole however, we expect the global voluntary market value to decline by an estimated 62-76% from its 2008 level to $171-261m, with an estimated 69-88Mt transacted.
US catches up with the international carbon market In Q2 2009, the volume of carbon credits bought and sold in the Regional Greenhouse Gas Initiative in the US matched the entire volume of credits traded on the international carbon market via the CDM process.
New report shows that offsets can deliver business benefits – but you have to know how to use them This is the conclusion reached in a new report (The Business Case for Carbon Offsetting - An Independent Analysis) from the Carbon Market analyst team at New Energy Finance Ltd. The research is based on an analysis of over 2,000 offsetting companies, a complete review of previous research in this field and in-depth interviews with over 40 end-buyers of carbon offsets.
The benefits of including forestry in the global carbon market likely to outweigh the risks Research by New Carbon Finance shows that the price impact of including forestry in the global carbon market is lower than other observers have claimed. Price reduction effects can also be mitigated by modest increases in emission reduction commitments of developed countries.
Voluntary carbon markets double in size and value in 2008 Report by Ecosystem Marketplace and New Carbon Finance confirms that 123 million tonnes of carbon credits valued at US$705 million were transacted in the voluntary carbon markets in 2008.
Carbon market volume up 37% in Q1 2009 The latest analysis by New Carbon Finance shows that in spite of the global recession the volume of trading in the global carbon market in the first quarter of 2009 grew by 37% compared to Q4 2008. This was driven by increased volatility in the European allowance market coupled with the physical link up of allowance registries enabling the EU spot market to function. In terms of value however the market shrunk by 16% compared to the previous quarter due to the substantially lower prices seen across all carbon products.
Recession lowers cost of EU Emissions Trading Scheme by a half According to the latest analysis by New Carbon Finance, lower economic growth forecasts have reduced the cost of meeting the 20% reduction target for the EU Emissions Trading Scheme by 2020 by around a half. In fact, the cost of meeting the 30% reduction target is now less than last year’s prediction of the cost of meeting the 20% reduction.
Emissions from the EU ETS down 3% in 2008 The latest analysis from New Carbon Finance suggests emissions from the EU ETS totalled 2.1Gt CO2 in 2008, down 3% from 2007 levels. Even taking into account reduced economic output, its analysis indicates that the largest cause of the reduction is the EU ETS itself encouraging greater use of gas in power generation.
Carbon markets up 84% in 2008 New Carbon Finance’s latest analysis of 2008 trading activity confirms our Q3 2008 projections with total transactions throughout the year worth $118bn, representing 4bn tonnes of carbon allowances changing hands. In spite of the uncertain economic climate, we expect growth in the global carbon market to continue, reaching $150bn in 2009.
Poznan's likeliest outcome is backing for an improved CDM The United Nations Climate Change Conference in Poznan will see negotiators attempt to find common ground on emissions policy ahead of the even more important gathering in Copenhagen in a year’s time. Analysis by New Carbon Finance suggests that Poznan will highlight a continuing divide between the European Union and key developing economies such as China, India and Brazil. The best hopes of progress in this timeframe are agreement on an improved Clean Development Mechanism system.
Press Release: Carbon Markets to Break the $100bn Barrier in 2008 The latest analysis by New Carbon Finance indicates that the world’s carbon markets grew by 81% over the first nine months of this year to reach $87bn by the end of Q3. New Carbon Finance estimates that by the end of 2008 the market will have broken the $100bn mark to reach $116bn. This growth is expected to continue to 2012 by when it should reach $550bn. If the US introduces a federal cap and trade scheme we expect the market to turn over $3 trillion per year by 2020.
Press Release: Launch of New Carbon Finance Voluntary Carbon Index (VCI) New Carbon Finance is pleased to announce the launch of the first-ever monthly price index for the over-the-counter (OTC) voluntary market: the NCF Voluntary Carbon Index (VCI). The VCI conveys prices at the project origination and wholesale distribution levels for offsets varying by standard and type.
Press Release: Ground-breaking emission model for Australia New Carbon Finance announces the launch of its new research and analysis services for the Australian carbon market and publication of its first price pathway for the Australian Carbon Pollution Reduction Scheme.
Press Release: Easy carbon credits coming to an end The latest analysis from New Carbon Finance confirms that many of the low hanging fruit of cheap carbon credits in the developing world have now been harvested. Further opportunities for reducing emissions will require more effort, spurring investments in renewable energy and energy efficiency.
Press Release: Boxer Amendment to Lower US Carbon Price The Boxer amendment, released ahead of the Lieberman-Warner debate on the Senate floor, is expected to lower carbon prices, sustain Kyoto market growth, and spur boom in international forestry protection.
Press Release: Fundamentals point to higher carbon prices In spite of the recent rally in the price of carbon traded in the European Emissions Trading scheme, analysts at New Carbon Finance believe that there remains considerable upside potential with prices expected to increase to €38/t between now and 2012. Our central price forecast has been revised upwards over the last month on the back of further delays in issuances of Certified Emissions Reductions (CERs) supply and continued increases in gas prices.
Press Release: Voluntary Carbon Market 2008 At least 65 million tonnes of carbon credits with a total market value of $331 million were transacted in 2007 according to a study conducted by New Carbon Finance and the Ecosystem Marketplace.
Press Release: The Post-2012 Carbon Market With an international agreement on climate change, the carbon market could be two or three times as large as today. If the EU is left to go it alone, the international carbon market could shrink by 60%.
