State of the Carbon Market

Point Carbon has just produced a report on the state of the carbon market. Here are some points from the first page:

• Point Carbon’s fifth annual survey shows general dissatisfaction with the Copenhagen outcome. Seventy percent of the 4,767 respondents were either “very dissatisfied” or “dissatisfied” with the outcome. This sentiment was evenly shared across major countries.
•  For the first time, an outright majority of respondents say the EU ETS has caused emission reductions in the companies they represent. Forty-three percent of all respondents think the EU ETS is the most cost-effective instrument for reducing emissions in the EU, against 20 percent who disagree with this notion.
•  More EU ETS companies appear long in phase 2, based on the survey results. This year, 28 percent of respondents said their company had an EUA surplus in 2008-12, up from 24 percent in 2009 and 15 percent in 2008. The cement/lime/glass and pulp/paper sectors had the highest reporting of surpluses.
•  EU ETS companies know little about their phase 3 allocation. Twenty-four percent of EU ETS respondents said they were “very uncertain” and 13 percent said they had “no idea” how many free EUAs they would get in phase 3. However, 68 percent thought they would be short EUAs in phase 3. Furthermore, one-quarter will bank at least part of their credit limit into phase 3.
•  Fifteen percent of respondents have seen fraud, embezzlement or corruption in connection with a CDM or JI project. We further see that 28 percent of respondents in China have reported improprieties in connection with CDM projects, whereas respondents based in Brazil reported seeing the least fraud.
•  Expectations for a global deal are down. Among our respondents, 37 percent expect a global deal in Cancun, against 59 percent for Copenhagen in last year’s survey. Only 27 percent of respondents based in the US expect a Mexico deal, while Japan (47 percent) and Brazil (58 percent) have the highest shares of respondents expecting a deal in Cancun.

•  Expectations for US cap-and-trade by 2015 are down to 61 percent of respondents. This is the lowest in three years, and down from 81 percent in last year’s survey. But among respondents in Japan, the share expecting a Japanese ETS is up from 61 to 80 percent.
•  Respondents expect a global carbon price of $35 or €31 in 2020. This is down from $39 and €35 in 2009.

So can we say the EU ETS is working?  I am encouraged that more than twice as many respondents believe the ETS is the most cost-efficient way of reducing CO2 than those who don't. The price of CO2 (EUA) on the ETS market is currently just over 14EUR per tonne.