Carbon players await strong government signals to energize the markets
6th June 2011
The 8th edition of Carbon Expo drew thousands of participants to its annual trade fair and conference, this year held in Fira Barcelona’s Montjuïc venue. Over 2.600 visitors from 110 countries gathered in the Catalan capital to discuss the current state and future of carbon markets and climate finance. The focus was also on networking, as Carbon Expo’s trade fair gave 220 exhibitors the chance to show their projects and technology solutions to the main players in these markets.
Amid calls by panelists for strong action and clear government signals for a future climate change scheme, countries showed that they are not at a standstill, awaiting a global agreement, but instead moving ahead fast with domestic market-based initiatives. While some Western countries have been stalling, trading initiatives were presented by countries such as China, which discussed its new pilot program to create cap-and-trade schemes in four cities and two provinces. According to Peter Zapfel, Head of Policy Coordination of DG Clima at the European Commission, “We have been looking west – especially thinking about the US – for the internationalization of the carbon markets. But we now have to look east to China and South Korea.”
Carbon Expo’s conference put the key issues of today and tomorrow in the spotlight, like the third phase of the EU ETS, bringing new sectors such as forestry and land use further into carbon finance, and developing more effective carbon mechanisms including simplified rules and standardized baselines. In addition to formal workshops, over 50 side events were hosted by exhibitors discussing specific projects in developing countries, challenges to implementing Clean Development Mechanism projects and issues beyond 2013.
The World Bank’s State and Trends of the Carbon Market report, which was launched on Day 1 of the Expo, showed that the size of the global market has stabilized at around $140bn, waiting for other countries to follow the European Union’s lead. New emission reduction projects in developing countries have slowed right down, however, waiting for demand to flow from new levels of international carbon-cutting targets. Nevertheless, the International Emissions Trading Association’s annual survey of market sentiment revealed expectations of growth in the future. And the general mood of Carbon Expo’s participants remained resilient and cautiously optimistic, as witnessed by continued high attendance rates – over 2,600 people from 110 countries.
As was clear by comments made at the Roundtable discussions, while there is an urgent need for action by governments, a lot of trust remains in the ability of market mechanisms to make a difference in the response to the climate change challenge.
“Simple logic will ensure that carbon markets will play a huge role in the future”, said Andrew Steer, World Bank Special Envoy for Climate Change. “Today, by lowering the costs of finding climate friendly solutions, carbon markets are already encouraging entrepreneurship, promoting new technologies and making success in the fight against climate change more likely”.
This was echoed by the Spanish Secretary of State for Climate Change, Teresa Ribera: “In 2010 the world set a new record for global greenhouse gas emissions. We are reaching the limit of what is tolerable. Governments must set the rules, but we also need social and economic stakeholders with a will to act. We must go further and face issues that to date have not been a priority, such as the development of a new international financial framework to fight climate change”.
As Henry Derwent, Chief Executive of IETA expressed so well: “Carbon Expo’s success this year shows that the market is content to continue its work in Europe, but is impatient for expansion worldwide. Business knows that a price on carbon is the most economically effective way to cut emissions. But it is growing tired of confused signals from the UN system, which create uncertainty about value and stifle the transformative investment in low carbon solutions that the world so desperately needs”.
While the majority of the conversations centered on Europe and emerging economies, the lack of leadership by the United States and the missing federal cap-and-trade scheme also entered into the debate. It was clear that mitigation initiatives on a state level, such as in California, are seen as a positive signal in an otherwise rather disappointing landscape. In discussing the effect of these state initiatives on US companies, Steve Starbuck of Ernst and Young stated: “This fragmentation of the market is not effective in changing behaviors in the global US economy. The lack of commitment of the US federal government may not give the certainty that corporate America needs”.