Report from Carbon Expo

A quick overview of major messages from Carbon Expo, the Global Carbon Market Fair & Conference:

The carbon market is booming. Growth is exponential. Its main driver is the EU-ETS. Primarily the private sector is buying (75% of the market). Over 50% of CER supply comes from China. The share of HFC's and N2O is decreasing, fortunately, as this project opportunity has been exhausted. The share of clean energy in CER trading is increasing (now 25%).

There is strong confidence that the market will continue to develop after 2012. No doubt investors are taking post-2012 carbon into consideration.

The size of the market is currently well over 15B$. It's not so easy to get an exact handle on its full size, for several reasons:

• the size of the voluntary market, which is growing quickly
• the size of the secondary market, which is exploding.

Towards the future, some projects may be expected to underdeliver, but the market will grow to 100 B$ within 3 years.

The question of US participation has shifted from 'if' to 'when'. There is strong confidence that the US will join, while high demand from Japan and Europe will continue.

The voluntary market has received some negative press coverage recently, for example from the FT. Its standards need to be close to CDM. VER buyers come mainly from the corporate sector, which should insist on due governance during transactions. It's 'buyer beware'.

While CDM - with 1600 projects in the pipeline and 1.9 billion CER's expected by 2012 - is generally regarded a success, there are some disappointments:

• lack of participation from Africa (and to a lesser extent Latin America)
• limited projects on energy efficiency
• delays on programmatic CDM

As the 'low hanging fruit' is disappearing, it's becoming increasingly difficult to spot the next project. Many funds are meanwhile seeking to diversify their portfolio.