'I dont know why carbon has become such a strange concept.' Andrew Grant, CO2 Group.

'I dont know why carbon has become such a strange concept.' Andrew Grant, CO2 Group. Photo: Erin Jonasson

THE carbon tax may have been a hot political topic in 2012 but carbon trading seems to be sliding down the corporate agenda, both here and overseas.

European Union carbon permits - representing the world's biggest carbon market - fell 8.9 per cent to €6.67 ($A8.35) a tonne in 2012, marking a fourth decline in the past five years, and have since dropped as low as €6.22.

Still, the EU contract fared better than the previous year when the value slumped 49 per cent, according to Bloomberg.

Tumbling carbon prices should be a lure for Australian companies liable to pay for carbon-dioxide emissions.

The current $23 a tonne price, implemented last July, is scheduled to convert to a variable price when an Australian emissions trading system starts in mid-2015. Local prices will link to Europe's market.

Deutsche Bank research analyst Tim Jordan noted daily European carbon prices were 40 per cent more volatile last year than 2011.

"Higher day-to-day price volatility suggests that the prolonged debate among European policymakers about the future supply of allowances has left the market without clear guidance," Mr Jordan wrote in a report.

"With the Australian carbon price set to track the European price from 2015, a volatile EU carbon price and a lack of consensus about the future supply of allowances is relevant for Australian companies making decisions about low-carbon investments."

Trade-exposed polluters received almost $1 billion in free carbon permits as part of government efforts to soften the impact of the carbon tax. Rio Tinto got more than $300 million in permits for its alumina and aluminium production, while BlueScope Steel collected $135 million, Deutsche Bank said, noting reports that European groups have complained the allocations are too generous.

Andrew Grant, chief executive of CO2 Group, an adviser and trader in carbon markets, said Australian companies appeared to be complacent about carbon in general, with many firms apparently waiting for a Coalition victory in this year's federal election.

Opposition Leader Tony Abbott made a "pledge in blood" in 2011 to repeal the carbon price and related clean energy legislation if elected.

Mr Grant said firms appeared to have ditched usual diversification of risk measures that suggest they at least hedge against the prospect of a price remaining on carbon.

"The traditional strategies don't seem to apply to carbon," Mr Grant said. "I don't know why carbon has become such a strange concept."

Snapping up cheap international carbon credits would seem to make sense, even if European prices continued their slide, he said.

The value of global carbon market transactions plunged 36 per cent last year, according to Bloomberg New Energy Finance.

The market's value declined to €61 billion, while trading volume jumped 26 per cent to 10.7 billion tonnes, equivalent to a third of the world's carbon-dioxide emissions.

The market's worth will be €80 billion euros this year, assuming the EU has some success in fixing a glut of permit supply in the bloc and boosting prices, according to Bloomberg New Energy Finance.

With BLOOMBERG