The volume of carbon allowances traded globally grew by almost 20 per cent last year, according to new figures that also show that falling prices meant the value of the market grew by just four per cent.
Researchers Thomson Reuters Point Carbon reported yesterday that allowances covering eight gigatonnes of CO2 equivalent (Gt CO2e) were traded on the global carbon markets in 2011, compared with 7Gt in 2010, an increase of 19 per cent.
However, the value of the market edged up just four per cent year-on-year to €96bn, primarily as a result of sluggish prices for carbon allowances.
Although the European market received a temporary boost on the back of Germany's decision to abandon nuclear power in the wake of the Fukushima disaster, an "over-allocation" of credits saw a "meltdown of prices", the company said in an emailed statement.
Prices plunged to an all-time low of €6.30 in the EU's emissions trading scheme (EU ETS) at the end of last year, prompting business leaders to call for action from legislators to help bolster the price of carbon.
The poor performance towards the end of the year meant that average prices for the world's largest carbon market during 2011 fell to €11.45/t in 2011, down from €13.09/t in 2010.
The pattern of carbon credit oversupply and low prices was echoed in the UN's Clean Development Mechanism (CDM) and Joint Implementation (JI) carbon offsetting schemes.
According to Thomson Reuters Point Carbon, a total of 320 million Certified Emissions Reductions (CERs) and 91 million Emissions Reductions Units (ERUs) were issued last year, representing 39 per cent and 74 per cent of total issuance to date and leading to further over supply in the market.
On a more positive note, the analyst firm noted that the agreement brokered at the Durban climate change summit has ensured carbon markets will continue after the Kyoto Protocol expires this year.
Meanwhile, legislation was also passed last year to create new trading mechanisms in California and Australia, which should commence in 2013 and 2015 respectively.
Carina Heimdal, an editor at Point Carbon, said both schemes plan to use a significant amount of market intervention, through price floors and ceilings, in an attempt to avoid the over-allocations that have afflicted the European market.
"Last year was certainly patchy for carbon markets... [but] given the global downturn it could have been worse," she added. "Durban, widely predicted to be a failure, was a surprising success that injected some much-needed positive news into global carbon markets, even if the short-term impact on markets is limited."
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