Global carbon markets reach record $949B in value in 2023 – LSEG

In 2023, the value of traded global markets for carbon dioxide (CO2) permits surged to a historic high of 881 billion euros ($948.75 billion), according to analysts at LSEG. This marked a 2% increase compared to the previous year, highlighting the growing importance of carbon markets in addressing climate change.

The rise in value can be attributed to the implementation of emissions trading systems (ETS) by numerous countries and regions worldwide. These ETS frameworks are designed to establish a price on carbon dioxide emissions, thereby encouraging companies to adopt low-carbon technologies and strategies to comply with climate targets.

Despite the total volume of carbon permits traded remaining relatively stable at around 12.5 billion metric tons, record-high prices were observed in key markets such as Europe and North America. This significant price surge contributed to the overall increase in the value of global carbon markets.

The findings from the LSEG Carbon Market Year in Review 2023 underscore the pivotal role that emissions trading systems play in driving climate action by creating economic incentives for emissions reductions and facilitating the transition to a low-carbon economy.

The European Union’s Emissions Trading System (EU ETS) maintained its position as the world’s most valuable carbon market in 2023, boasting a total worth of approximately 770 billion euros. This figure reflected a 2% increase from the preceding year and constituted a staggering 87% of the global carbon market.

While the EU ETS experienced a significant milestone with carbon permit prices soaring to a record high of over 100 euros in February 2023, a shift occurred towards the end of the year. The market faced a downturn as demand from both industrial buyers and the power sector weakened. Consequently, by the close of 2023, the price of carbon permits had declined.

This bearish trend persisted into 2024, with the benchmark contract dipping below 60 euros per ton. The drop was attributed to factors such as sluggish economic growth across Europe. The report suggested that this economic slowdown was likely to persist in the near term, leading to further demand destruction, particularly within the industrial sectors covered by the EU ETS.

The fluctuation in carbon permit prices and the ongoing economic challenges underscore the dynamic nature of carbon markets, influenced by factors ranging from industrial activities to broader economic trends. As the EU ETS continues to play a pivotal role in shaping global carbon markets, its performance and responses to economic conditions will be closely monitored for their implications on climate policies and the transition to a low-carbon future.

The value of the United Kingdom’s Emissions Trading System (ETS) experienced a notable decline in 2023, dropping by 22% to reach 36.4 billion euros. This decrease was primarily driven by a reduction in carbon permit prices, which averaged around 65 euros per ton. Compared to the average price in 2022, this represented a substantial 34% decrease, indicating significant fluctuations within the UK’s carbon market.

Meanwhile, in North America, several key compliance markets witnessed record-high prices in 2023. Notably, in the Western Climate Initiative, carbon permit prices soared to $39 per ton, reflecting the growing emphasis on emissions reduction efforts within the region. Similarly, in the Regional Greenhouse Gas Initiative, prices surged to over $15 per ton, underscoring the commitment of participating states to combat climate change through robust carbon pricing mechanisms.

In China, the national ETS also experienced a remarkable price surge in 2023, reaching a record high of 80.51 yuan ($11.19) per ton in October. This milestone highlights China’s increasing focus on carbon pricing as a key tool in achieving its ambitious climate goals and transitioning towards a greener economy.

Overall, these developments underscore the dynamic nature of global carbon markets, with prices and market values fluctuating in response to a myriad of factors, including regulatory changes, economic conditions, and evolving climate policies. As nations continue to intensify their efforts to mitigate climate change, carbon markets are expected to play an increasingly pivotal role in driving emissions reductions and fostering the transition to a low-carbon future.

The North American markets were worth a combined 71.4 billion euros while the Chinese market was worth 2.3 billion.
($1 = 0.9286 euros)
($1 = 7.1929 Chinese yuan renminbi)

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