A global climate deal to extend the life of the Kyoto treaty and establish the parameters for negotiating a new pact by 2015 will provide a fresh stimulus to the world’s floundering carbon markets, according to bankers and analysts.
“The deal provides a significant boost for investors in low-carbon technology,” said Abyd Karmali, head of carbon markets at Bank of America Merrill Lynch, adding this was an achievement amid the woes of the eurozone crisis.
In one of the more bullish business assessments of the new pact, which also includes a separate agreement to negotiate a new process aimed at obliging all countries to commit to cut their carbon emissions, he said the deal was “like a Viagra shot for the flailing carbon markets.”
Carbon prices have plunged to record lows in recent weeks as Europe’s emissions trading scheme, the world’s largest, has been hit by eurozone uncertainties and fears of an oversupply of carbon credits.
An extension of the first phase of the Kyoto climate treaty – the only one that legally obliges wealthy countries to curb emissions – and a process to negotiate a new pact were the significant accomplishments recorded at the two weeks of UN climate change talks that ended on Sunday.
The Kyoto treaty was kept alive after negotiators brought the marathon talks back from the brink of collapse with a compromise deal to work toward the new pact. The nearly 200 nations at the Durban meeting agreed that the new arrangement would be in place by 2015 and in force from 2020. It will include the world’s top emitters: China, the U.S. and India.
The conference finally gave the green light to a new climate fund that aims to channel up to $100bn a year to poor countries.
Failure to achieve these goals would have plunged the often maligned UN climate negotiations into disarray.
Other carbon trading analysts welcomed the salvaging of the Kyoto treaty, noting that some countries had threatened to try to kill off the carbon offset market created under the treaty, if the conference rejected its extension. Negotiators agreed to new market mechanisms to put a price on carbon, though many details were left undecided.
But several business leaders echoed the concerns of some environmental campaigners that the final deal was a weak compromise that will require years of negotiation.
Copyright The Financial Times Limited 2011