Analysis of current developments in global carbon markets

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The major aim of this research project was to provide insights on the state of current carbon market activities and options for supporting the continuation of new and existing mitigation activities in the pre-2020 period. This report contains a summary of the findings and combined conclusions from all analysis components addressed within the project.


Main findings:

In an analysis of CDM project vulnerability for major project types in key countries, we assessed the risk that projects would cease continuation of their GHG abatement without significant CER revenues. In this context, we conducted a bottom up assessment of CER supply potential in the 2013-2020 period. The total CER supply potential for the 2013-2020 period is considerable, at 4.6 billion CERs, well in excess of current levels of issuance and demand. Just 4% of the maximum CER supply potential, representing 171 million CERs, comes from project types that were classified from the analysis as having typically high vulnerability.

Building further on this quantitative analysis, we assessed the marginal cost of CER supply, and how the CER supply curve would be affected by different scenarios for CER eligibility. In our Base Case, up to 3.8 billion new CERs could supply the market at prices below €1 per unit. We find evidence that robust eligibility restrictions on the supply of CERs from existing CDM projects are essential for any new sources of demand to support GHG emission abatement that would not have occurred otherwise. We assessed the impact of credit purchase facilities for supporting vulnerable projects, and the potential for similar efforts to upscale these impacts.

Within this project, the following analysis was undertaken to provide more clarity on the state of current carbon market activities and the options for their support:

  • In an analysis of CDM project vulnerability for major project types in key countries, we assessed the risk that projects would cease continuation of their GHG abatement without significant CER revenues (WP 1.1).
  • We assessed the climate change mitigation potential of providing support for the continuation of the project types deemed to be most at risk of discontinuation, taking into account that project situations may differ compared to at the point of their inception (WP 1.2).
  • We assessed the options for support provision for the project types deemed to be most at risk of discontinuation and most likely to entail significant climate change mitigation potential, considering both international and domestic market-based and non-market-based measures (WP 1.3).

    For WP 1 we have one combined publication: Vulnerability of CDM Projects for Discontinuation of Mitigation Activities.

  • Combining the findings from the vulnerability analysis with previous research on the status of CDM projects (Schneider & Cames 2014; Warnecke et al. 2015), we conducted a bottom up assessment of CER supply potential in the 2013-2020 period, differentiating between CER supply from vulnerable and non-vulnerable projects (WP 2.1).
  • Building further on this quantitative analysis, we assessed the marginal cost of CER supply, and how the CER supply curve would be affected by different scenarios for CER eligibility (WP 2.2).
  • We assessed the impact of credit purchase facilities for supporting vulnerable projects, and the potential for similar efforts to upscale these impacts (WP 2.3).

Each of the analysis components resulted in specific standalone results, published in separate discussion papers, which are attached to the Appendix of this report. A summary of the results for all analysis components and their combined conclusions is presented in this executive summary.


Contact for further information: Thomas Day, Carsten Warnecke