Is global carbon market dying?

Firstly, the Cancun Agreements started a process of mitigation actions by both developed and developing countries which bode well for the carbon markets. Under the Cancun Agreements, all developed countries have pledges to reduce their emissions. This is complemented by the nationally appropriate mitigation actions of developing countries. Collectively, estimates by UNEP have shown that efforts by both developed and developing countries will result in reduction of 3-7 gigatonnes of carbon dioxide equivalent. These efforts are step towards meeting the global goal of limiting temperature rise to 2 degrees below pre-industrial level. I would also point out that although the global carbon market has reached a plateau, the total valuation is still substantial, amounting to US$142 billion last year. We have thus be come a long way from when the market started in 2005

Secondly, the large majority of developed and developing countries wants the global carbon market to continue. In fact, a specific decision was taken last year for the emissions trading and project-based mechanisms under the Kyoto protocol to continue. Therefore, the question now is not whether the carbon markets will continue, but how can they be improved and whether new mechanisms should be developed.

Thirdly, it is encouraging to note that interest in the carbon market is growing. The EU remains the pioneer in this field and has extended its emission trading scheme (ETS) beyond 2012 regardless of the outcome of the international negotiations. The California cap-and-trade system will also be operational in 2012. Australia’s decision to move towards cap-and-trade is an important boost for the global carbon market. Many other countries are developing or exploring their own voluntary carbon markets. China, India, South Korea, Brazil and South Africa are examples of such countries.