LONDON (Feb 12): The value of traded global markets for carbon dioxide (CO2) permits reached a record 881 billion euros (US$948.75 billion) in 2023, marking a 2% increase on the previous year, analysts at LSEG said on Monday.
Many countries and regions have launched emissions trading systems (ETS) to put a price on CO2 emissions and incentivise companies to invest in low carbon technology and help meet climate targets.
Around 12.5 billion metric tonnes of carbon permits changed hands in the world's emissions markets, similar to 2022, but record prices in several markets such as Europe and North America pushed up the overall value, the LSEG Carbon Market Year in Review 2023 said.
The world's most valuable carbon market, the EU's ETS, was worth around 770 billion euros last year, up 2% from the previous year and representing 87% of the global total.
The price of carbon permits in the EU ETS hit a record high over 100 euros in February last year, but fell toward the end of 2023 amid weak demand from industrial buyers and the power sector.
This bearish trend has continued into 2024, with the benchmark contract falling below 60 euros/tonne.
"Economic growth is likely to remain sluggish in the near term across Europe and is expected to lead to further demand destruction from many of the industrial sectors covered by the EU ETS," the report said.
The value of the UK's ETS fell 22% to 36.4 billion euros, with prices averaging around 65 euros/tonne, some 34% lower than the 2022 average, the report said.
In North America, prices hit record highs last year in the main compliance markets, hitting US$39/tonne in the Western Climate Initiative and over US$15/tonne in the Regional Greenhouse Gas Initiative.
Prices in China's national ETS also hit a record high in 2023 of 80.51 yuan (US$11.19) in October, the report said.
The North American markets were worth a combined 71.4 billion euros, while the Chinese market was worth 2.3 billion.