Global carbon market to hit $669bn by 2013

Investors are being urged to take advantage of the "exceptional opportunity" presented by the low price of carbon credits after a new report predicted the global carbon market is poised to enter a five-year-long period of rapid growth as the world's economy recovers.

The report from US-based research firm SBI predicts that while the global carbon market will contract 29 per cent this year to just $84bn (£56bn), it will recover quickly over the next four years, growing at an average of 68 per cent a year to be worth $669bn by 2013.

Echoing recent comments from a number of market analysts, Shelley Carr, associate publisher at SBI, said that the impact of the recession and falling demand for carbon credits on the carbon market during 2009 presented an opportunity to long-term investors.

"This temporary blip in an otherwise burgeoning industry presents an exceptional opportunity for investment as prices in the carbon markets are expected to rebound significantly post-2009," she said.

The report said that demand for credits would increase significantly over the next few years as a result of increasing emissions associated with economic recovery, tightening emission caps within the EU cap-and-trade scheme, and the planned introduction from 2012 of a US-wide scheme.

According to official budget figures released by the Obama administration earlier this year, it expects to raise $646bn between 2012 and 2019 for the US treasury through the auctioning of carbon allowances. However, the plans have yet to passed into law and are expected to face stern opposition from Republicans.

The SBI report is more optimisitic about the market outlook for this year than some analysts, predicting that it will only decline 29 per cent during 2009.

In contrast, recent projections from analyst Point Carbon suggest falling industrial output and reduced emissions mean the market will contract 32 per cent in 2009 to €62.6bn.