Carbon emissions market could reach $1.4 trillion in 2020

The growth of carbon emissions trading markets has stagnated amid the economic downturn but may reach $1 trillion in value in 2017 and could total up to $1.4 trillion yearly by 2020, according to Bloomberg New Energy Finance, a London-based research group.

In a report Monday, the company finds that the market gained just 5 percent in value in 2009 to reach $127 billion, compared with 83 percent growth the prior year, and the market could even contract slightly this year.

The European emissions trading market accounts for the lion's share of the activity but the report also tracks other trading, including carbon offset credits, and the Regional Greenhouse Gas Initiative among America's Northeastern states.

The global market is slated to pick up in 2011, as power companies in Europe get ready for the next phase of the European Union emissions trading system that requires new reductions beginning in 2013. Activity should also increase in anticipation of emissions trading rules being put into effect in the U.S. and Australia, the report finds.

Indeed the NEF analysts don't think the underwhelming outcome of the Copenhagen climate summit will constrain market growth. They predict the U.S. will pass a cap-and-tade bill this year or in 2011, and also think an emissions law will make a comeback in Australia after that nation's Senate blocked it last year.

"The future growth of the world's carbon markets will not be determined by the success, or indeed likely failure, of the U.N.-led process to deliver a legally binding agreement but rather progress in climate legislation at the national level," the report states.