According to the World Banks report State and Trends of the Carbon Market 2008, in 2007 the global carbon market grew to US$64 billion. In other words, it nearly doubled in size compared to 2006. And, according to Andrew Ertel, president and CEO of Evolution Markets Inc., a carbon market consultant and brokerage firm that contributed to the report, the future could be strong for the young market. [It] is nowhere near meeting its full potential,” he explains in the press release to announce the report, though he cautions were in early days, and success is not guaranteed.
As also explained in the World Bank press release, developing nations face some roadblocks in the full realization of their carbon markets. All developing countries face a demand gap sometime in 2008 when buyers realize that there is not enough time to fulfill Kyoto commitments with new projects, and demand will have not yet kicked in from emerging markets in the US and Australia that are expected to be players in a future market after 2012, the release notes. Added to that is the fact that the European Commission has proposed freezing new demand for projects from developing countries in commitments to reduce greenhouse gas emissions after 2012. The success of the CDM [Clean Development Mechanisms] is also weighed down by procedural delays as more than 2000 projects out of more than 3000 have not yet been processed through the CDM approval cycle.
The future is up to those involved in the market, says Ertel. The market is truly at a crossroads as market participants fully appreciate the complexity and risks of carbon trading, he explains. Where we go from here is up to market players and their perception of the regulatory risk in all of these markets.
The Montreal Climate Exchange is scheduled to launch on May 30, subject to regulatory approval.