An alarming 60 percent of respondents to a recent carbon market survey, all of whom work within companies with carbon trading operations, report having scaled back, delayed or cancelled carbon credit project investments as a consequence of the economic slowdown, according to Point Carbon, a leading provider of market intelligence, analysis, forecasting and advisory services for the energy and environmental markets.

 

Some 87 percent of the respondents predicted a European Union Allowance (EUA) price of below €25 ($32) in 2010. Illustrating how the downturn has resulted in real reductions in industrial activity, the respondents to the survey also reported a reduced need to buy European Union Allowances (EUAs) in addition to their full credit limit compared to last year’s findings. Indeed, the percentage of respondents reporting they have surplus EUAs to sell is up from 15 percent last year to 24 percent this year.

 

However, hopes for a good long-term recovery are also high with almost half the respondents believing that an EUA price of €35 ($45) or higher in 2020 can be expected and some 90 percent predicting that the US will embark on its own cap-and-trade style emissions trading scheme (ETS) by 2015. In addition, many foresee a rebound in Clean Development Mechanism (CDM) investment by as early as 2009. Among companies active in the CDM market, 41 percent of respondents predict they will increase their carbon credit project investments in 2009, against 23 percent that expect their investments to decrease or stop completely. According to Endre Tvinnereim, Senior Analyst and one of the authors of the report, “This more positive outlook is confirmed by our finding that post-2012 Certified Emission Reduction (CER) market activity has increased. Some 20 percent of respondents report having traded CER forwards for post-2012 delivery, up from 8 percent last year.”

 

Despite the up-beat long-term expectations, hopes are not high among respondents that the UN climate negotiations in Copenhagen in December will produce a global climate agreement, with just 59 percent of the respondents expecting an agreement to be reached, against 71 percent in both 2007 and 2008. Point Carbon believes that the global economic slowdown, as well as the slow progress made in the post-2012 negotiations, may be to blame for this pessimism.

 

This stark reminder of how the current global recession is impacting the global carbon business comes from Point Carbon’s Carbon 2009 report, titled Emissions Trading Coming Home and published on March 17.

 

Kjetil Røine, also author of the report, concludes that, “the global carbon market has taken a hit from the global economic slowdown, but will eventually get back on its feet. Currently, the survey indicates strong confidence that the US under President Obama will enter the global carbon market and international climate negotiations in force, which will provide a further fillip for global carbon markets in the long-term.”