June 2010 - The seventh Carbon Expo was held in Cologne at the end of May. In light of current market uncertainties, many participants used this central forum to obtain first-hand information on market trends and the carbon market mechanisms, and to discuss the possibility of reaching a legally-binding climate agreement. Contrary to expectations after the climate change conference in Copenhagen, many issues remain unclear. Will the CDM remain in place? Will there be any new market-based mechanisms? If so, when? Who will buy excess emissions allowances beyond 2012?
The German Environment Ministry shared the German Pavilion, a joint exhibition stand, with the German Emissions Trading Authority (DEHSt) and a number of German businesses, both public and private. As in previous years, the pavilion was used for meetings and the signing of agreements. The success of this joint approach speaks for itself and confirms to BMU the wisdom in continuing along these lines.
Market Trends: Winners and Losers
The current carbon market statistics announced in the World Bank’s report paint a clear picture: The global trading volume rose slightly compared to the previous year, from 130 to 140 billion US dollars. A strong increase in the trade of state-owned emissions allowances saw the Eastern European states more present than ever in relation to Green Investment Schemes (GISs). However, developing countries clearly lost investment volume in the primary market for CDM projects. This is partly the result of the upswing in the use of the CDM since the Kyoto Protocol entered into force in 2005, which enabled a large portion of demand potential to be served by both the Kyoto Protocol and the EU Emissions Trading Scheme. Also, this trend clearly shows that the carbon market is entirely dependent on government-stipulated emission reduction targets. High expectations by market players thus relate to the increase in demand for allowances following the signing of an international climate change agreement, the adoption of a 30 percent reduction target by the EU and the still hoped-for demand from an emissions trading scheme in the US.
Röttgen: The programmatic CDM acts as a bridge to the new mechanisms
In his opening speech, Environment Minister Röttgen stressed that in the existing voluntary contributions to climate change mitigation, which industry and developing countries registered under the Copenhagen Accord, the emission reductions would be nowhere near sufficient. The 2 °C target, within which the impacts of global warming would remain manageable, would be dramatically missed with such limited efforts. With regard to the importance of and the outlook for the carbon market, Minister Röttgen stressed the market’s financing function in respect of the annual 100 million US dollars in funding which were promised in Copenhagen to developing countries as of 2020. Looking at the CDM, he pointed out that the CDM can serve as a bridge to other mechanisms in the coming years.