Carbon Market Value Will Rise 9.8% on Auctions, New Energy Says

The value of the global carbon market will increase by about 9.8 percent this year on higher activity caused by a surge in European Union auctions, said Bloomberg New Energy Finance.

The value of traded allowances and credits will advance by 9 billion euros to 101 billion euros ($128 billion) this year after rising 9.5 percent last year to 92 billion euros, New Energy Finance said yesterday in an e-mailed statement. Volume jumped 22 percent to 8.2 billion metric tons in 2011.

European carbon permit prices for December have dropped 52 percent in the past year, as the region’s debt crisis weakened the region’s economy amid rising supply of offset credits from developing nations. California expects to hold two auctions of allowances this year, under proposals for its market, which begins in 2013.

The volume-weighted average global price in 2012 will be 10.40 euros a ton, 7 percent less than 2011, said Guy Turner, director of greenhouse-gas and power research at New Energy Finance in London. The price drop will be more than offset by an 18 percent surge in volume to 9.6 billion tons, he forecast.

“You’ve got more opportunities for banks to buy into auctions, to play intermediary roles,” Turner said yesterday.

The European Union, which made up 78 percent of the global market last year, has started selling allowances rather than giving them to factories and power stations for free. New Energy Finance counts these sales as part of its volume numbers. It doesn’t count allocations granted free of charge.

“We previously warned that excessive volatility in carbon prices could drive traders out of the market,” Turner said in the statement. “This hasn’t happened so far. In fact traders have been more active than ever.”

EU permits for December decreased to a record 6.38 euros a ton last week in intraday trading on ICE Futures Europe in London and closed down 1.3 percent yesterday at 7.04 euros.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net