[Corrected 21/7/09 : Treatment of RGGI under Waxman Markey]


The volume of carbon emissions traded worldwide grew 6 per cent in the second quarter of 2009. The growth came on the back of a surge in speculative trading in US regional carbon allowances.

New Carbon Finance (NCF) market analysis shows the total worldwide volume of carbon allowances and offset credits traded rose to 2,047 million tonnes (Mt) in the three months to June. That’s a rise from the 1,926Mt in the first quarter when economic recession hit hardest in the carbon market.

The overall rise was entirely accounted for in a 320 per cent surge in the number of allowances traded in the Regional Greenhouse Gas Initiative (RGGI) emissions trading scheme in the US North-East. The 172Mt-rise in RGGI trade does not include 100 million US tons released at two auctions this year.

The RGGI rise offset falls in volumes traded on the Chicago Climate Exchange and Kyoto’s AAU and secondary CER markets. RGGI volumes reached 227Mt, almost overtaking the world’s second biggest carbon market, Kyoto’s Clean Development Mechanism (CDM), which saw trading in its CERs fall 2 per cent to 233Mt.

Trade in RGGI credits lifted in the second quarter on anticipation of their acceptance on a one-for-one basis under a US federal cap-and-trade scheme outlined in the Waxman-Markey bill. That offered potential for speculative profits for carbon traders who might buy RGGI credits at their lower prices around $3-$4 and exchange them for new US carbon allowances expected to be above $10 per allowance.

However, when the bill passed the House of Representatives in late June, treatment of RGGIs changed, NCF says. The US climate bill as it currently stands would allow RGGIs bought between 2009 and 2011 to be valued only at their average auction price in exchange for federal allowances. The heavy trade is therefore not expected to be maintained in the third quarter of 2009, the analyst firm says.

NCF says secondary trading of issued CERs fell 15 per cent to 154Mt while there was a welcome lift in primary market transactions of new and future CERs to 79Mt. New projects to generate CERs virtually dried up toward the end of 2008 as carbon prices fell and finance became harder to find following the global credit crunch.
 
The world’s biggest existing market, the EU ETS, saw a 3 per cent rise in volumes traded in the June quarter to 1,541Mt.

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