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State and Trends of the Carbon Market 2003

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  • Franck Lecocq
  • Karan Capoor

Abstract

The emerging carbon market encompasses both project-based emission reduction transactions, whereby a buyer participates in the financing of a project which reduces greenhouse gases (GHGs) emissions, compared with what would have happened otherwise, and gets some of the emission reductions (ERs) thus generated in return; and, trades of GHG emission allowances allocated under existing, or incoming, cap-and-trade GHG emissions control regimes. This Review of the state and trends of the carbon market as of November 2003, based on material provided by Evolution Markets LLC, Natsource LLC and PointCarbon, and on direct interviews with market participants, suggest that: volume exchanged on the carbon market has more than doubled since 2002; buyers are governments, and public-private partnerships like the Prototype Carbon Fund; in 2003, nine out of ten tones of emission reductions originate from projects located in transition economies or developing countries; prices differ depending on the segment of the market, and on the structure of the transaction; allowance markets dominate in number of transactions, but volume exchanged remains small compared with project-based transactions; and, because of long lead time between project preparation and first "yield" of emission reductions, and absent clarification of the validity of project-based emission reductions beyond 2012, the window of opportunity for project-based transactions is rapidly closing. The report further discusses volumes of GHG Emission Reductions (ERs) up to 2012 only, to provide an idea of the volume that might be available for compliance, since 2012 is the end of the first commitment period of the Kyoto Protocol, and a milestone in most regimes. For projects where vintages 2013 and beyond are purchased (in particular in forestry-related projects), it was assumed an even annual accrual of ERs, unless known otherwise. Also, throughout the paper, volumes are reported in metric tones of CO2 equivalent (tCO2e).

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Bibliographic Info

Paper provided by The World Bank in its series World Bank Other Operational Studies with number 13416.

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Handle: RePEc:wbk:wboper:13416

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Keywords: Energy - Energy Production and Transportation Environment - Carbon Policy and Trading Environment - Environment and Energy Efficiency Environment - Environmental Economics & Policies Macroeconomics and Economic Growth - Markets and Market Access;

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Citations

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Cited by:
  1. Zhang, ZhongXiang, 2008. "Is it fair to treat China as a Christmas tree to hang everybody’s complaints? putting its own energy saving into perspective," MPRA Paper 12276, University Library of Munich, Germany.
  2. Pizer, William & Kruger, Joseph, 2004. "The EU Emissions Trading Directive: Opportunities and Potential Pitfalls," Discussion Papers dp-04-24, Resources For the Future.
  3. ZhongXiang Zhang, 2004. "The World Bank’s Prototype Carbon Fund and China," Working Papers 2004.138, Fondazione Eni Enrico Mattei.
  4. Lecocq, Franck & Crassous, Renaud, 2003. "International climate regime beyond 2012 - are quota allocation rules robust to uncertainty?," Policy Research Working Paper Series 3000, The World Bank.
  5. Marenya, Paswel Phiri & Nkonya, Ephraim M. & Xiong, Wei & Rossel, Jose Deustua & Edward, Kato, 2012. "Which would work better for improved soil fertility management in sub-Saharan Africa: Fertilizer Subsidies or Carbon Credits?," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126904, International Association of Agricultural Economists.
  6. I. Jürgens & B. Schlamadinger & P. Gomez, 2006. "Bioenergy and the CDM in the Emerging Market for Carbon Credits," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(5), pages 1051-1081, September.
  7. Cacho, Oscar J., 2008. "Carbon markets, transaction costs and bioenergy," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6007, Australian Agricultural and Resource Economics Society.
  8. Zhang, ZhongXiang, 2004. "Towards an effective implementation of clean development mechanism projects in China," MPRA Paper 13147, University Library of Munich, Germany, revised Jul 2005.
  9. Ellis, Jane & Winkler, Harald & Corfee-Morlot, Jan & Gagnon-Lebrun, Frederic, 2007. "CDM: Taking stock and looking forward," Energy Policy, Elsevier, vol. 35(1), pages 15-28, January.

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