Review of carbon markets in 2022
6 February 2023 3
Sustained record high carbon prices, particularly in the European
ETS, made for another record total global carbon market turnover
in 2022 despite overall traded volume being down 21 percent
from 2021. Even though “only” 12.5 billion tonnes changed
hands in the world’s compliance carbon markets (equivalent
to 12.5 gigatonnes of CO2) in 2022, the higher prices per unit
raised overall value of the carbon markets – particularly those in
the large established emission trading systems (ETS) in Europe
and North America. We estimate the value of these transactions
at around of €865 billion, compared to €762 billion in 2021.
PRICES RISING
The most signicant example of the continued trend of rising
carbon prices is the EU ETS, but the North American carbon markets
(Western Climate Initiative or WCI, which includes the state of
California, and the northeast’s Regional Greenhouse Gas Initiative
known as RGGI) are also seeing ever higher carbon prices, as is the
New Zealand ETS. The countries/regions these carbon markets are
in have been moving toward more ambitious climate targets, and
emission trading is set to play an important role in reaching them.
As was the case last year, continued price rallies are an eect of
this higher climate policy ambition, reecting market participants’
expectations for a tight future supply-demand balance.
EUROPEAN ETS
The EU ETS witnessed wild swings and sustained high prices in
2022. The sudden drop in Russian gas supply to Europe threw
energy markets into turmoil, impacting trading in all energy
related commodities including carbon. The number of allowances
1. Executive summary
Table 1.1 Global carbon market size 2020-2022
Renitiv’s assessment of volume and value of the major carbon markets from 2020 to 2022. Millions of tonnes (Mt), millions of euros *
2020 2021 2022
Volume change
2021-2022
Value change
2022-2022
Share of total
value 2022
Mt € million Mt € million Mt € million
Europe (EUAs,
aviation EUAs)**
10 478 260 067 12 214 682 501 9 277 751 459 -24% 10% 87%
UK ETS
N/A N/A 335 22 847 512 46 626 53% 104% 5%
North America
(WCI, RGGI)
2 010 26 028
2 680 51 736 2 505 62 677 -7% 21% 7%
China***
134 257 412 1 289 85 504 -79% -61% <1%
South Korea
44 870 51 798 39 618 -24% -23% <1%
New Zealand
30 516 81 2 505 60 2 845 -26% 14% <1%
CERs (primary and
secondary)
16 61 38 151 42 157 11% 4% <1%
Total
12 712 287 799
15 811 761 827 12 520 864 886 -21% 14%
*All non-European transactions are priced in local currencies, for the sake of consistency we have converted values into euros. The units traded in the Regional
Greenhouse Gas Initiative are short tons, which are 0.907 metric tonnes. For unit consistency, we have converted RGGI’s total volume gures to metric tonnes.
** Volume and value include spot, auctions and futures. Option positions are not included.
*** Volume includes allowance units for pilot ETS, national ETS, and CCER transactions. Value includes only allowances.
Source: Renitiv, February 2022
traded in the EU ETS declined 24 percent - but since allowance
prices remained at record highs, the overall value of the EU ETS still
increased 10 percent year-on-year.
The cost of emitting greenhouse gases in Europe had tripled in
2021, with permit prices ending the year near €100/tonne. They
began 2022 at those levels but oscillated after the war in Ukraine
broke out, falling from €95/t to €55/t in just over a week before
recovering to around €80/t in Q1. The benchmark EUA contract
traded near €90/t by the end of the year, averaging over 50 percent
higher than in 2021 at €81/t.
Policy drivers of the EU carbon price were strongly related to
these energy fundamentals, with a plan to improve Europe’s
energy autonomy in response to Russia’s invasion of Ukraine
(REPowerEU) being proposed in early Q2 and causing a price
drop because it involves selling extra emission allowances to
fund itself. Throughout the year, European lawmakers wrestled
with the details of EU ETS reform as part of the “Fit for 55” process
revamping the bloc’s climate and energy policies to meet tighter
greenhouse gas mitigation targets – this was bullish for carbon
prices, and culminated in a landmark deal reached in December
that prescribing cutting the number of allowances available in the
EU ETS. All eyes will be on the implementation of this legislation
in 2023, with a massive one-o reduction in allowances scheduled
for 2024. On the ipside, sales of extra allowances to nance the
REPowerEU plan will inject additional supply and thus weigh on
prices. Gas prices will remain an important driver for EU ETS prices
in 2023.
In the UK ETS, allowances traded at a premium to their EU
counterparts throughout 2022, with the spread between the two
averaging roughly €12. Volumes were up from 2021, as trading
VIP
