2010 State and Trends of the Carbon Market Report

The carbon market endured its most challenging year to date in 2009. The global economic crisis, which started in late 2008 and intensified early in 2009, negatively impacted both the demand and supply sides of the market. As industrial output plummeted the demand for carbon assets fell. On the supply side the financial crisis spurred financial institutions and private investors to deleverage and redirect their positions away from risky investments and toward safer assets and markets. Capital inflow to developing countries fell dramatically, while already internalized resources flowed out. As a result, many project developers found it impossible to lock in finance and project origination effectively ground to a halt.

The European Union Emissions Trading Scheme (EU ETS) remained the engine of the carbon market. A total of US$119 billion (€89 billion) worth of allowances and derivatives changed hands. Futures trades continued to account for the bulk of transactions with a 73% share, while spot market volume swelled to 1.4 billion tons as cash-strapped EU companies monetized allowances
to raise funds in a tight credit environment. Sophistication also increased in the options market, which grew 70% to 420 million tons. However, trading volume in the secondary market for Kyoto offsets leveled off at one billion tons and value fell by one third to US$18 billion (€13 billion) as prices declined.