The global carbon market in 2009 will grow by 20% in terms of volume, predicts Point Carbon.

Point Carbon forecasts that 5.9 billion tonnes (gigatonnes or Gt) of carbon dioxide equivalent (CO2e) will trade this year, compared to 4.9 Gt in 2008, an increase of 20%, according to a recent Point Carbon report—Carbon Market Analyst: Outlook for 2009. However, this increase, to 5.9 Gt, represents stabilization near the transaction volumes seen in the second half of 2008 and therefore indicates a levelling off in terms of volume traded. The global CO2e market this year, according to Point Carbon, will be worth €62.6bn (US $79.7bn), down 32% compared to €92bn (US $117bn) in 2008. This is given Point Carbon’s forecast for European Union Allowances (EUA) and secondary Certified Emission Reduction (sCER) prices in 2009 (as of January 30, 2009), and current carbon prices for other markets, representing the first year of contraction in terms of market value since the start of carbon trading.

Taking each market segment separately, the European Union’s Emissions Trading Scheme (EU ETS) maintains its dominant position as the world’s largest carbon market with a 24% increase in trade over last year, to 3.8 Gt, primarily due to increased spot trading activity and despite lower emissions. However, the value of the EU ETS market, like the global carbon market as a whole, will drop significantly to €45.2bn (US $58bn), a reduction of 33% on 2008.

Point Carbon foresees a considerable drop in Clean Development Mechanism (CDM) and Joint Implementation (JI) projects, mainly due to the current economic crisis. Point Carbon predicts primary Certified Emission Reduction (CER) volume, generated by CDM projects, of 300 Mt in 2009, down 45% on last year, and primary Emission Reduction Unit (ERU) volumes, generated by JI projects, of 40 Mt, down 44% on 2008.

The good news for the global carbon market, however, lies beyond Europe, the CDM and JI. According to Point Carbon, the Regional Greenhouse Gas Initiative (RGGI), which saw its first forward trades and auctions last year and involves ten northeastern US states, will see 339 Mt CO2e traded this year, up from 71 Mt in 2008, giving RGGI a 6% share in the global carbon market by year-end. The increase is attributed to the fact that this year saw the beginning of RGGI’s first compliance, with attendant higher auctioning volume and an expected strong growth in secondary-market activity.

According to Endre Tvinnereim, Senior Analyst and author of the report, "the economic downturn will hit the value of global carbon markets as a whole but the US looks set to buck this trend and shows healthy growth."

In addition, the market in Assigned Amount Units (AAU), which enables countries with emissions lower than their Kyoto targets to sell their surplus carbon allowances, is forecast to grow steeply to 95Mt in 2009, up from 18Mt last year. Potential AAU seller countries are Central and Eastern European countries such as Ukraine, Poland, Hungary, Latvia and the Czech Republic.