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In touch with global carbon markets

Europe rises to the challenge of climate ambition

“Of all risks, it is in relation to the environment that the world is most clearly sleepwalking into catastrophe”. This was the stark warning from the World Economic Forum’s Global Risks Report, launched at the Forum’s annual Davos gathering in January. It comes on the heels of another year of extreme weather, with the most costly single event being the $16 billion Camp Fire in Northern California. According to Munich Re, who compiled the data, “there are clear indications of the influence that man-made climate change has had on devastating wildfires in California, which, like last year, again caused billions in losses in 2018”.

Never has the need for action been greater, and Europe is rising to that challenge. In November 2018, the European Commission published a strategy for Europe to become the world's first major economy to go climate neutral by 2050. With just over 30 years to achieve this, all scenarios outlined in the strategy will require action at an unprecedented scale, which will impact all parts of the economy.  

At the heart of the EU’s climate plans lies the EU ETS, which caps around half of Europe’s total emissions and remains the largest carbon market in the world. 2018 was a record year for the EU ETS; traded volume increased by 51% from the previous year with nearly 8 billion allowances changing hands, market value quadrupled from 2017’s levels to hit €130 billion, and the average allowance price tripled over the course of the year. Unsurprisingly, European carbon allowances finished 2018 as the best-performing major global commodity.  

2019 already looks to be a busy year, starting with the launch of the Market Stability Reserve (MSR) on 1st January. Over the course of the year, the MSR is expected to reduce supply by nearly 400 million allowances and, over the next five years, should eliminate the market’s historic oversupply. The shadow of Brexit also looms large over the market, with questions over the UK’s participation in the system going forward. However, even if the market loses one participating country in 2019, it looks set to gain another in 2020 with the start of the link to the Swiss ETS. This passed another regulatory stage in January, as the commission of the Swiss parliament's upper house approved legislation to link the systems.

Although the Swiss market is very small, the launch of a fully functional two-way link to the EU ETS in 11 months’ time could lay the groundwork for more such linkages in the future. In 2018, the European Commission agreed deals to collaborate on carbon markets with California, China and New Zealand. The experiences from linking with Switzerland could open the door to greater market integration in the 2020s.

As usual, IETA will be working hard over the course of 2019 to keep our EU members informed in these turbulent times, and to advocate for stronger and more effective carbon markets to be deployed around the world to meet the climate challenge. An ideal place to catch up with us is at the inaugural European Climate Summit, being held in Lisbon in April - more information is available online

Simon Henry
Director of Carbon Market Development


14-15 February: Dirk Forrister will participate in the Carbon Pricing Leadership Coalition's Research Conference in New Delhi

27-28 February: Katie Sullivan will attend the Globe Capital conference in Toronto

5-6 March: Julia Michalak and Stefano De Clara will speak at the Argus Emissions Markets in The Hague

12-13 March: Dirk Forrister will speak at the Global Expert Meeting on Renewable Energy Markets in Amsterdam 

18-22 March: Dirk Forrister and Stefano De Clara will attend the Africa Climate Week event

20-22 March: IETA is co-hosting the Climate Leadership Conference in Baltimore, Maryland

16-17 April: IETA will host the first European Climate Summit in Lisbon, Portugal

24-26 April: Katie Sullivan will attend the North American Carbon World 2019 in Los Angeles

4-7 June: IETA will attend the Innovate4Climate event in Singapore

IETA Members' Corner


How is DNV involved in the carbon market?

Since the early days of the Kyoto Protocol DNV GL has been actively involved in developing a transparent and trustworthy carbon market. Through the work of IETA, and in partnership with other industry players DVN GL was actively involved in the development of the Clean Development Mechanism and the EU Emissions Trading System.

In particular, DNV GL was involved in the development of the standards & methodologies that would be used for the validation & verification of carbon projects and industrial installations. During the height of the CDM’s activities, DNV GL was the leading validator/verifier: for a time, more than 50% of all CDM projects were either being validated or verified by DNV GL.

Following the downturn in CDM market activity after 2012 DNV GL decided to wind down its validation & verification services in anticipation of future developments that eventually led to the Paris Agreement. Nonetheless DNV GL has remained active within local markets, notably the EU ETS, where we offer verification services. At the same time we’ve expanded our core services with climate-related services such as renewable energy equipment testing, blockchain technology, risk management, green shipping, and the energy transition outlook.

Why did you join IETA?

Having been an early member, DNV GL re-joined IETA this year because of its conviction that market mechanisms will be a fundamental part of the implementation of the Paris Agreement.

DNV GL believes that an effective carbon market mechanism is not only essential to addressing the challenges of climate change, but will also require collaboration between industry, non-governmental organisations & governments.  

IETA has over the years shown itself to be the organisation that speaks most effectively on behalf of business when it comes to carbon markets and emission trading programmes. IETA provides the platform for organisations like DNV GL to access the extended network of technical expertise needed to deliver input to the policy making process when it comes to carbon markets, whilst balancing effectively the interest of all stakeholders.

Through its working groups but also its collaborations with multilateral organisations, IETA provides companies like DNV GL a platform in which effective exchanges can develop ideas and solutions for an effective carbon market. Working with other industry players as well as DNV GL peers has provided many of the solutions that now form the foundations of many of the carbon markets operating around the world.

Edwin Aalders
Senior Principal Scientist, Climate Change, DNV GL

IETA Publications


 IETA COP24 Summary Report

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   from COP24 with IETA's

   comprehensive report on the 

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