Global 2008 carbon market expected up 56 percent

NEW YORK, Feb 26 (Reuters) - Global trade in credits representing reductions of planet-warming gas emissions should rise 56 percent this year as Europe tightens its flagship program to tackle greenhouse gases, a carbon analysis group said on Tuesday.

Greenhouse gas trade should grow to 4.2 billion tonnes from 2.7 billion tonnes last year as the EU Emissions Trading Scheme's second phase that launched this year tightens allowed emissions levels and adds new members, according to the 2008 annual carbon market outlook from Point Carbon.

"The market is shifting from a very nascent stage to a fledgling stage," Tiffany Potter, a Point Carbon senior analyst, said in a telephone interview.

The global greenhouse gas market is growing despite complaints about the quality of some of the credits representing emissions reductions, especially in voluntary markets, as governments try to tackle emissions blamed for global warming which could lead to deadly storms, droughts and floods.

The value of the trade is expected to rise to about $92 billion, or 63 billion euros, from about $59 billion, or 40 billion euros, in 2007.

Potter said the EU scheme's first phase was based on government estimates of emissions which prompted industries to exaggerate their output of the gases. That ended up stifling trade when the market discovered it was over-allocated.

The second phase is based on hard data directly from emitters, she said, which means more power plants, concrete makers and other players will need to buy credits to meet their mandatory emissions targets.

As the market tightens, it should increase speculation in the greenhouse gas market from banks and hedge funds, Potter said.

She warned, however, that turbulence in global financial markets could spur players to opt for safer havens than carbon markets, which could trim the bullish outlook slightly.

Carbon trade should also rise in the United States, by many counts the world's largest greenhouse gas polluter, as it edges toward mandatory greenhouse markets. Ten states in the U.S. Northeast will start regulating the main greenhouse gas carbon dioxide from power plants starting next year, but forward trade has already begun.

Trade should also pick up in Australia, which last year ratified the Kyoto Protocol treaty which requires them to cut emissions by 2012, Potter said.

*For additional analysis on the carbon markets, please visit here (Reporting by Timothy Gardner, editing by Matthew Lewis)