Vital Signs

Carbon Markets Gain Momentum, Despite Challenges

Carbon markets are designed to combat climate change by putting a price on carbon dioxide (CO2) and other greenhouse gases, and then allowing companies and other entities to trade the right to emit these gases through permits, credits, or allowances. The emissions total in a state or country is often capped by law; if a company wishes to emit more than allowed under the cap, it can buy permits from another company that has reduced its emissions to below its allocation.

The global carbon market has expanded quickly over the past two years, reaching an estimated total value of US$59.2 billion in 2007, up 80 percent over 2006. The volume of carbon permits and credits traded in 2006 was likely more than double the amount traded in 2005.

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Global Economic Growth Continues at Expense of Ecological Systems

In 2007, gross world product (GWP)—the global total of all finished goods and services—was expected to grow 5.4 percent to US$72.3 trillion (in 2007 dollars, purchasing power parity basis). This was less than earlier estimates due particularly to economic disruptions in the U.S. housing market and ripple effects in Europe, Japan, and other countries.

The U.S. economy, which accounts for 19 percent of GWP, was projected to grow 2.1 percent in 2007, nearly 1 percent slower than the previous year, largely because of the turmoil in the subprime mortgage sector and rising gasoline prices.

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