May 7 2008
The value of trading in the carbon market more than doubled in 2007 to $64 billion (euro 47 billion), according to the World Bank's annual report, "State and Trends of the Carbon Market." The $64 billion was comprised of approximately $50 billion in allowance transactions and more than $13.5 billion in transactions of project-based emission reductions. Traded volumes also increased.
The report was prepared by the World Bank. Natsource, a leading global provider of asset management, transaction and advisory and research services in global emissions and renewable energy markets, and the largest buyer of carbon credits on a risk-adjusted basis according to independent analysis, provided expert views on the market to the World Bank. Natsource's review of the market was undertaken on behalf of the World Bank for its report on trends in the carbon market, which was released today at the 2008 Carbon Expo in Cologne, Germany.
"Natsource has provided input into the World Bank's market assessment every year since 2001 and we congratulate them for this work, which comes at a very important time," said Jack Cogen, CEO of Natsource. "The doubling of traded value in 2007 illustrates the ability of market mechanisms to mobilize capital to address climate change."
The report had some mixed findings for the CDM sector, which represents approximately 90% of traded value and volumes for the project-based market segment. Traded volumes for primary CDM transactions grew modestly in 2007. On a positive note, there was sharp growth in carbon contracts from renewable energy and energy efficiency projects. Reductions created by this class of projects represented nearly two-thirds of transacted volumes in this market segment, compared with just 33% in 2006 and 14% in 2005. According to the report, the CDM helped to leverage $33 billion in investment into clean energy projects in 2007. "The growth in traded volume and investment into these important types of projects illustrates that carbon finance can spur clean energy development," Cogen said.
Natsource also strongly supported calls by the World Bank to streamline the project-approval process, clarify the post-2012 policy framework and the role of project-based mechanisms in it. Mr. Cogen added: "In order to continue to stimulate investment in projects that provide revenue for developing countries and reduce compliance costs, policy-makers need to improve the performance of the project-based mechanisms, and send the project development and buying sectors a clear signal that market mechanisms will continue to be an important policy tool in the post-2012 policy framework to address climate change. In addition, all those participating in the U.S. climate policy debate should draw important lessons from the world's efforts to develop carbon markets and apply them in U.S. legislation."
The World Bank's reports on the carbon market were initiated in 2001 and covered market activity since 1996. Natsource is the only entity that has contributed to this analysis every year. The full report may be found on the World Bank Web site at http://www.worldbank.org.