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Carbon Market

Voluntary carbon offsetting hit $576 million in 2011

The global voluntary carbon offsetting market amounted to more than $576 million in 2011 according to a new report released by Forest Trends' Ecosystem Marketplace initiative and Bloomberg New Energy Finance.

Voluntary carbon offsetting refers to the market of entities not required to cap their carbon emissions by either national or regional legislation, but still buy carbon credits to mitigate their greenhouse gas emissions.

The 2011 figure is a three-year high, second only to $776 million in 2009.

Carbon credits or offsets come from projects that reduce or avoid carbon emissions and are voluntarily purchased in one of two ways - through a private exchange or the "over-the-counter" market, where buyers and sellers engage directly through a broker.

The over-the-counter market is the source of most voluntary offset transactions. Trading activity remained strong this year, moving 92 metric tons of carbon dioxide equivalent, at a value of $572 million.

Wind led as a source of offsets in 2011, with traded credits amounting to 23.5 MtCO2e.

Renewable energy projects as a whole produced 35 MtCO2e, while other big sources of offsets were landfill methane (5.6 MtCO2e) and clean cook stoves (3.4 MtCO2e).

With a transaction volume of 29 MtCO2e, valued at $151 million, the United States was the world's largest single-country buyer of voluntary offsets, even in the absence of an established national cap-and-trade scheme.

This support for U.S.-based renewable energy projects resulted in transaction volumes of around 6.1 MTCO2e in offsets last year.

Europe remained the largest source of offset demand, with 33 MtCO2e or $204 million for a third of the overall O.T.C. market value in 2011.

North America as a whole came in second with 29 MtCO2e worth $159 million followed by Oceania (3 MtCO2e, $22 million); Asia (3 MtCO2e, $47 million); Latin America (2 MtCO2e, $23 million) and Africa (.9 MtCO2e, $10 million).

Corporate buyers dominated the market, contributing $368 million or nearly 65 percent of the voluntary carbon market's total value.

Of the buyers of offsets, the largest proportion (54 percent) did so to attain corporate greenhouse gas emission targets that had been established as part of corporate social responsibility initiatives or for public relations and branding purposes.

Companies in the energy sector (27 percent) were the largest voluntary buyers of carbon offsets, followed by the wholesale/retail sector (23 percent), manufacturing (19 percent) and financial and insurance (18 percent).

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