Carbon credits mkt valued at $14bn, set to grow

10 September 2008 07:05  [Source: ICIS news]

SINGAPORE (ICIS news)--The global deal to cut carbon emissions by 50% by 2050 on Wednesday has brought to the fore the immense possibilities in the international carbon credits market which was valued at close to $14bn in 2007 and is expected to grow even further, said analysts on Thursday.

This sector had a huge growth potential and would benefit the petrochemical industry, they added.  

The chemical sector was very energy intensive and required oil and natural gas-based commodities to power production processes, for transportation of products and most importantly, as a source of key raw materials, said analysts from Standard and Poor’s in their latest economic research paper.

“Such an industry would clearly have potential for the implementation of clean development mechanism (CDM) projects especially in areas such as energy efficiency and renewables,” added an analyst with IDEAcarbon, an independent provider of ratings, research and strategic advice on carbon finance.

Asia already had two active carbon emission reduction (CER) trading platforms, the Multi Commodity Exchange and the National Commodities and Derivatives Exchange in Mumbai, India and a new one, the Singapore Mercantile Exchange (SMX), was announced recently.

“Despite having launched only in 2008, they are capturing a significant share of the market,” said the source from IDEAcarbon.

"In addition, the Hong Kong Exchange, Asia Carbon Exchange, Tokyo Stock Exchange and even the authorities in Beijing are causing a stir about setting up carbon trading platforms. An Asian exchange in the future is a very real thing," he added

About 70% of global CER credits, up to 2012, were forecast to come from China and India, the IDEAcarbon analyst said.

“What is absolutely key for the efficient development of a functioning carbon market is a reliable and transparent price signal. This is not yet there in the CER markets, due to the diversity of the credits produced and the projects undertaken,” said the analyst.

The European Union Emission Trading Scheme (EU ETS), which is collectively responsible for almost half of the EU’s carbon dioxide (CO2) emissions, was currently the most matured carbon market, said sources.

Oil and petrochemical giants like Royal Dutch Shell have been actively advocating initiatives for both carbon capture techniques and the cap-and-trade system but have met with resistance from the US and a 31,000 strong, group of scientific personnel citing economical backwardation and questioning the validity of the human activity involvement factor in global warming.

“The resistance of the US to ratify the Kyoto Protocol could only make it less effective than it would have otherwise been but by no means does that mean it will fail. It is most likely that all Annex I countries will reach their emission reduction targets and by this judgement, it will be a success,” said the IDEAcarbon source.

"Over the past few years, we have seen multiple CDM projects popping up all over India adopting a greener and more sustainable approach towards growth," said a market watcher.

“This is due in part to the fact that society is more concerned with the environment today but when the country is still trying to lift millions out of poverty, the only reason for doing all these is that there is plenty of money to be made from CER credits,” she added.

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By: Bohan Loh
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