The report says investment capital flowing into renewable energy climbed from $80 billion in 2005 to a record $100 billion in 2006. As well, the renewable energy sector's growth "although still volatile ... is showing no sign of abating."
The report offers a host of reasons behind and insights into the world's newest gold rush, which saw investors pour $71 billion into companies and new sector opportunities in 2006, a 43% jump from 2005 (and up 158% over the last two years. The trend continues in 2007 with experts predicting investments of $85 billion this year).
And from the report itself:
As of March 2007, the money mobilised in the carbon fund sector totalled $11.8 billion (Figure 39), an increase of $4.7 billion (approx 50%) since September 2006. The addition of 12 new funds brings the total number of carbon funds to 58. The private sector has provided most of this capital, accounting for nearly 90% of the increase.
Carbon funds cover the full carbon value chain from compliance purchasing (government-backed funds buying carbon credits in order to meet compliance obligations under the Kyoto Protocol) through to intermediary trading (aggregating, brokering and managing risk between buyers and sellers) and project development.
The growth of investment in the sellside of the market highlights an important trend: more money is now flowing into the essential process of developing and commercialising Clean Development Mechanism (CDM) and Joint Implementation (JI) projects (85% of the new money raised), rather than simply being set aside for the purchase of credits as and when they are produced.
That means that less than half (42%) of the total money committed to the carbon markets is now for direct compliance purchasing,with the remaining amount (58%) being invested in developing the projects required to generate carbon credits. Although most of the money has recently flowed into the sell-side of the market, compliance buyers still dominate in terms of the numbers of funds.
Of the 58 funds currently in existence, 37 are compliance funds (up from 33 six months ago) with 21 involved in project development and intermediary trading (up from 18 six months ago).
It is estimated that a total of around $25 billion of carbon credits (at current prices) will be needed to meet compliance targets under the Kyoto Protocol and the EU Emissions Trading Scheme (EU ETS) by 2012. Of this, around $8 billion will be met through existing forward purchase contracts, leaving a further requirement of around $17 billion to meet targets to 2012.