According to a new report release by New Energy Finance, the volume of carbon credits bought and sold in the Regional Greenhouse Gas Initiative (RGGI) in the United States matched the entire volume of credits traded on the international carbon market in the second quarter of this year. The number of carbon credits sold under the CDM in Europe, in the second quarter of this year, increased by 25% on the first quarter. However the volume of credited traded on the secondary market decreased by 15% during this period. Most of this decline was due to reductions in the volume of future contracts, possibly in reaction to the higher volume of European Emission Allowances now on the markets as a result of the economic downturn. In stark contrasts, the number of carbon credits traded in the Regional Greenhouse Gas Initiative in the Northeast region here in the States, increased by 319% over the first quarter of this year.
To date, the International carbon market has been defined by the Kyoto Protocol, setting out the emission reduction targets they developed countries are required to meet up to 2010. In Europe, the Kyoto Protocol gave rise to the EU Emissions Trading Scheme, which is now the largest carbon market in the world. A key part of the Protocol is the ability to trade emissions between countries, and in particular, between developing and developed countries. This process is known as the Clean Development Mechanism (CDM), which allows emission reduction projects in developing countries, who can use them to meet their emission obligations.
The rapid increase in volumes traded in the RGGI scheme in the Northeast reflects an increased speculative interest in carbon trading in here in the States, ahead of the potential adoption of a federal cap and trade scheme under the Waxman-Market bill. Because the carbon prices in the CDM market are a lot higher than the prices in the RGGI here, the actual value of the carbon traded in the RGGI scheme considerably less than the Kyoto CDM market. The EU ETS still dominated the world carbon market, and in fact, increase its market share in the second quarter, by 84% over the previous quarter. The EU ETS continues to command the highest prices of all the carbon markets and trades the most carbon products.
© 2009, Tracey de Morsella. All rights reserved. Do not republish.