Carbon trading hits $949 bln in ’23 – LSEG

The value of traded global markets for carbon dioxide (CO2) permits hit a new high in 2023, reaching €881 billion ($948.75 billion), a 2 per cent rise from the previous year, as reported by analysts at LSEG on Monday, according to Reuters. 

To encourage investment in low-carbon technology and achieve climate targets, many countries and regions have initiated emissions trading systems (ETS).

These systems price carbon dioxide (CO2) emissions, creating a financial incentive for companies to reduce their carbon footprint.

The LSEG Carbon Market Year in Review 2023 reported that approximately 12.5 billion metric tons of carbon permits were traded globally, mirroring the volume in 2022.

However, record-breaking prices in several markets, including Europe and North America, drove an increase in the total value.

Last year, the EU’s ETS, the world’s most valuable carbon market, had a value of approximately €770 billion, which represents an increase of 2 per cent from the previous year and accounts for 87 per cent of the global total.

In February last year, the EU ETS saw carbon permit prices reach a record high of over 100 euros; however, prices had dropped by the end of 2023 due to reduced demand from the industrial and power sectors.

This downward trend has persisted into 2024, with the benchmark contract price falling below €60 per ton. 

The report further indicates that demand from many industrial sectors under the EU ETS is likely to decrease further due to the anticipated sluggish economic growth across Europe. 

It also mentions that the UK’s ETS value experienced a 22 per cent drop to €36.4 billion, with an average price of around €65 per ton, which is about 34 per cent lower than the average in 2022.

Last year, North American compliance markets saw record prices, with the Western Climate Initiative reaching $39 per ton and the Regional Greenhouse Gas Initiative exceeding $15 per ton.  

Meanwhile, China’s national ETS also reached a new high in October 2023, with prices hitting 80.51 yuan ($11.19).

The combined value of the North American markets stood at €71.4 billion, while the Chinese market was valued at €2.3 billion.