Although Kyoto protocol is only binding from 2008 onwards, one could say that a global carbon market emerged in 2005, with the start of the mandatory European Emissions Trading Scheme. Carbon trading suddenly came on the agenda in boardrooms across European companies, and the search for the most cost-effective abatements initiated trade between those companies and offsetting projects around the globe.

Global carbon markets have doubled in size in the one-year period from 2005 to 2006. The booming market in credits for cutting greenhouse gas emissions was worth US$21.5 billion in the first nine months of 2006.

The prediction of market turnover for the full year 2006 is US$25-US$30 billion. Traded amounts exceeded already one billion tonnes, up from 716.6 million tonnes in 2005.

The main market, with a volume of US$19 billion, was the European Union's Emissions Trading Scheme (ETS).

The Kyoto agreement had also significant influence, as the ETS is a tributary to the scheme and the mechanisms compatible.

Market for the Clean Development Mechanism (CDM's)

In 2005, CDM projects worth US$2.65 billion were brought online, with 73% of these in China. Over the first 9-month of 2006 CDM projects accounted for some US$2.3 billion.

China lost ground to 60 percent of all CDM's. This is mainly due to the exploitation of HFC 23 reduction projects. In 2005 HFC destruction accounted for 64 percent of CDM credits, but that was down to just over 50% by September 2006. Renewable energy is increasing its portion of CDM credits (nearly 25% in the first nine month of 2006, compared with 11% in 2005).

Forecast to attract US$100 billion investment into developing countries by 2012 via CDM and to deliver over 1 billion tonnes of emissions reductions by 2012.

(Data source: "State of the Carbon Market 2006", the World Bank and the International Emissions Trading Association, October 2006)

The volume of voluntary carbon emission reduction credits has expanded dramatically tenfold over the past two years and is set to double again by 2007. The prospects for continued growth in carbon markets are strong.