Despite financial turmoil, the global carbon market doubled in size and grew to an estimated value of $126 billion, according to the latest State and Trends of the Carbon Market Report 2009, released today by the World Bank at Carbon Expo in Barcelona. 

The report is based on data from the trading of European Union Allowances (EUAs) under the European Union Emissions Trading Scheme (EU ETS). It is also based on transactions completed under the Kyoto Protocol’s flexible mechanisms—the Clean Development Mechanism (CDM) and Joint Implementation (JI)—that allow industrialized countries to purchase greenhouse gas (GHG) emission reductions in developing countries and in countries with economies in transition, as well as data from voluntary markets.

The report finds that the value of transactions from CDM projects in developing countries declined by 12% to an estimated $6.5 billion in 2008, with an average price of $16.8.

The EU recently approved a package of post-2012 commitments to reduce emissions, with a promise to reduce emissions even more if other countries join an international agreement to be negotiated in Copenhagen this December. The World Bank suggests that this package, along with a comprehensive climate and energy policy currently being considered by the U.S., will scale up developing country supply of carbon. 

“This is a golden opportunity which challenges the international community to develop new thinking on how to scale up climate mitigation to promote sustainable development,” said report co-author Karan Kapoor. He was referring to average likely demand of 560 million tons of CO2e per year from 2012 to 2020 compared to just about 80 million tons of CO2e that was registered in the CDM in its best year so far.

The Kyoto Protocol expires in 2012, and to keep the process online, government representatives from 170 countries will convene from December 6 to 18 this year with the goal of ending up with a replacement treaty, likely to be called the “Copenhagen Protocol.”

But recent scientific research and findings by the Intergovernmental Panel on Climate Change (IPCC) and other entities call for industrialized countries to collectively reduce emissions even more aggressively (by 25% to 40% below 1990 levels by 2020) than the proposals on the table for Copenhagen would require.

“If the carbon markets respond to the recommendations of the scientific community in terms of required GHG emission reductions, a carbon market in the order of $150 billion per year of traded certified emission reductions could be envisioned,” the World Bank said.

Sources: World Bank, Copenhagen Climate Conference, IPCC