Nina Chestney

LONDON (Reuters – Last year’s record value for CO2 permits was 760 billion euros, which Refinitiv analysts said Monday.

The European Union’s Emissions Trading System, (EU ETS) was the main driver of most of the growth. It launched in 2005 and has been the largest carbon market worldwide.

The annual Refinitiv Carbon Market Year in Review revealed that 90% of world’s value, 683 billion Euros, was due to it.

On the assumption that the EU would be able to reduce emissions by 55% in 2030, the prices for the EU ETS were more than doubled by 2020’s end, the market will become tighter.

Plus, the fourth-quarter price surge led to greater coal power generation. Permits became more expensive and more in demand. Analysts predict that the gas price will continue to affect EU carbon permit prices.

“More expensive emission permits hit coal power plants relatively harder than gas plants, but because of the soaring gas prices in the second half of 2021, coal generation was still more profitable,” lead carbon analyst at Refinitiv Ingvild Sørhus said.

Emissions trading or carbon markets are market-based tools that limit greenhouse gas emissions. The market-based tools set limits on what countries and companies can emit. If they go over those limits they may be able to purchase permits from others.

Refinitiv reported that the two North American regional carbon markets, the Western Climate Initiative (and the Regional Greenhouse Gas Initiative) grew together by 6% to 49 billion euro last year.

These permits rose by 70% in the last year. Trade volumes reached record levels as well, due to tighter caps at the scheme’s end in 2030 and 2020.

CHINA AND BRITAIN LUNCH SCHEMES

China launched its national emission trading program in July last year. In contrast to other schemes, China’s emission cap is based on emissions intensity.

According to the report, around 179million tonnes of Chinese permits for emissions were traded in the first five months. That’s a low volume relative to liquid carbon markets like North America or Europe.

Following its withdrawal from the EU in 2016, Britain established a carbon market.

While the UK scheme is distinct from the EU ETS, the price floor at 25 euros/tonne for the UK scheme helps drive fossil fuel investment. Some companies claim it places them at disadvantage on the global market.

The turnover reached around 23 Billion Euros last year.

Voluntary carbon markets (VCM), which allow individuals to purchase carbon credit from companies or organisations that have reduced their emissions, saw a $1 billion turnover in November. It is on the verge of achieving an all-time high value annual, according to the report.

It stated that VCM interest will continue to grow, due in part to the increasing participation of businesses worldwide in carbon neutrality and other climate commitments that include the use carbon offsets.

($1 = 0.8936 euros)