The State of Voluntary Carbon Markets Reports 2010 finds that transactions closed at 94 million tons of carbon dioxide emissions reductions against 127 million tons recorded in 2008.
The total market value also plummeted by 47 percent from 2008 levels. The cumulative value of all the traded carbon credits only amounted to $387 million, a far cry from the 2008 market’s estimated value of $728 million.
The report cites two major reasons that hampered the growth of the carbon market in 2009. First, the global economic crisis forced companies to trim down optional funding for corporate social responsibility measures, such as offsetting carbon dioxide emissions.
“The economic recession had a marked impact on the part of the market primarily concerned with buying credits to offset emissions of companies and individuals,” said Milo Sjardin, director of Bloomberg New Energy Finance.
Substantial budget cuts and shifting greenhouse gas management schemes drove some major market players such as Yahoo! and Nike to end their offset programs. David Filo, cofounder of Yahoo!, announced last year that the company will no longer purchase carbon offsets. Instead, the company will direct its resources toward minimizing its carbon footprint.
Another reason was the uncertainty of compliance-induced carbon demand. The Waxman-Markey bill, also known as the American Clean Energy and Security Act of 2009 which was first introduced in May 2009, aims to establish a nationwide cap-and-trade program and to promote renewable energy and energy efficiency.
The bill was perceived as a tool that will spur carbon market growth by promoting low-carbon development. However, uncertainty settled in during the latter part of the year as critics opposed the alleged costs of the transition to a clean economy proposed in the bill.
Republican Senator James Inhofe of Oklahoma even called the bill “the largest tax increase in American history” during a hearing by the Senate Environment and Public Works Committee in July 2009. But despite criticisms, the bill was approved in September 2009.
The United States reportedly accounted for the biggest market share of supply and demand in 2009 at 56 percent and 49 percent respectively. Ironically, Mr. Sjardin also attributed this to the anticipation of a national cap-and-trade program proposed in the Waxman-Markey bill.
“Expectations of a possible United States carbon trading program lifted the importance of the United States, which figured as the largest buyer and seller in the market,” he said.
But he also warned that this positive progress will not extend into 2010 if the political atmosphere in the United States fails to change.
“The most popular transactions were those that could count towards future compliance. However, with the current state of play of U.S. politics this situation is likely to be very different this year,” he said.
Alexandre Kossoy, co-author of a World Bank report entitled State and Trends of the Carbon Market 2010, agreed that certainty will be the key to a more stable global carbon market.
“Clear policy and regulatory signals must be provided urgently if a stronger global market is to emerge,” he said.
