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While the volume of trading in the global carbon markets dropped in 2022, the value of the trading activity rose along with the price of carbon, Refinitiv reports.

The volume of carbon trading dropped by about 21% last year, yet the carbon markets set a new record with €865 billion in the value traded, up 14% from the previous year, a report from Refinitiv said.

“The cost of emitting greenhouse gases was higher than ever before in 2022 in the main emission trading systems (ETS),” it said, noting that EU emission allowances averaged more than €80 per tonne, up 50% from the average in 2021.

The vast majority of carbon trading takes place in Europe’s ETS, where “the volatile but continuously high permit prices were strongly influenced by effects of the war in Ukraine on energy prices overall, particularly high gas prices,” Refinitiv said.

Looking ahead, the EU’s growing efforts to curb emissions “will lead to a tighter market balance,” which will be bullish for prices, it said.

At the same time, the North American carbon markets are also seeing “ever higher carbon prices,” it noted.

“As was the case last year, continued price rallies are an effect of this higher climate policy ambition, reflecting market participants’ expectations for a tight future supply-demand balance,” it said.

Outside of the world’s various emissions trading systems, in the so-called “voluntary carbon markets,” trading activity has also been on the rise in recent years as a growing number of companies are pursuing net-zero targets.

“However, the global geopolitical and economic instability of 2022 that affected all energy-related markets did not spare voluntary carbon trading: offset prices plummeted after Russia’s invasion of Ukraine in Q1, as did the number of transactions,” the report said.

“The ensuing high fuels prices and overall macroeconomic instability sent [voluntary carbon market] prices downward throughout the rest of the year, with volumes remaining low even long after a massive sell-off of credits in February and March,” it said.