Point Carbon, the Norwegian-based carbon consultancy, has released a report indicating that the global market in carbon emissions could grow to more than €4 billion this year.

The report shows a larger than expected European market, based on price rises which rallied from €6 in January to highs of close to €30 recently after the European Commission ordered some governments to set industry tougher CO2 targets, reducing the number of credits in circulation.

Drought across southern Europe that has hit hydro reserves has also bolstered carbon prices as use of more carbon intensive coal has risen.

“In the first six months of 2005 the market has seen 65.6 million tonnes traded in the brokered market and 10.2 million tonnes on the different exchanges,” Point Carbon said, adding: “The global carbon market has seen transactions totalling an estimated volume of 134.5 million tonnes of carbon dioxide equivalent worth approximately €1.62 billion. Based on forward market prices we expect the financial size of trades this year to be €4.5 billion.”

However, investments under the Clean Development Mechanism have not realised their expected growth, the group says, revising down its forecast for CDM projects to €420 million this year.