Markets Have ‘Deep Roots’ in UN Climate Process, IETA Says

Market mechanisms such as the European Union’s emissions-trading system still have “deep roots” in the United Nations climate talks after negotiators failed to adopt major decisions this year, the head of a trading lobby said.

Envoys from more than 190 countries backed some measures to improve the UN’s carbon offset market, the Clean Development Mechanism, at last week’s climate summit in Warsaw. They postponed a mandated review until June and failed to agree on a framework for linking national systems. While decisions on long-term measures were put back, the commitment to have markets at the core of the future agreement is strong, according to Dirk Forrister, the chief executive officer of the International Emissions Trading Association, a market lobby.

“Markets are going to be a part of the future architecture,” IETA’s Forrister said in an interview in Warsaw on Nov. 22. “We have to fight to ensure they’re workable and that they’ve got good fundamentals.”

Market-based mechanisms such as emissions trading are regarded by groups including IETA and the Climate Markets and Investment Association as being the most economically efficient way to achieve a set target for reducing climate pollution. The UN’s Kyoto Protocol gave 39 industrialized countries a goal of a collective 5.2 percent cut in greenhouse-gas output from 1990 levels by 2012, and discussions are continuing over extending a target to 2020.

Emissions Clarity

Nations were unable to complete talks on a proposal known as the Framework for Various Approaches to link domestic markets from China to California and offer common standards for elements like reporting and measuring emissions.

Chile was one developing nation that supported the start of a global framework at the Warsaw meeting, said Juan Pedro Searle, head of the climate change unit in the ministry of energy.

“If you have a global deal with tools such as market instruments, countries will have more clarity on how to tackle emissions,” Searle said in a Nov. 22 interview.

Talks broke down as countries from the European Union to New Zealand sought to continue discussions in Warsaw while nations including India and Bolivia proposed delaying discussion to a meeting in June.

“There was no agreement on the text of an agreement, and no agreement to continue the work into a second week,” Richard Muyungi, a delegate from Tanzania chairing the discussions, said at the closing session of the negotiating group.

Ambition

Countries need to increase their emission-reduction targets before talks can continue, T. S. Tirumurti, a climate negotiator for India, said in Warsaw. Until then, “we don’t see how we can start discussions on another market mechanism,” he said. “Ambition is the key.”

The postponement of talks on the future framework for national markets disappointed emissions-trading supporters, who pointed out that when countries first approved a linking mechanism in Durban in November 2011, they gave negotiators two years to come up with the mechanism.

“Warsaw’s been a big disappointment just because I think there were some things within reach, close to getting good conclusions, but that seemed to get bogged down in procedure and petty disputes rather than big fundamentals,” IETA’s Forrister said.

The failure of the talks to advance a global network of markets means that confidence in carbon trading won’t come from the United Nations process, but instead from national and regional markets, according to Jonathan Grant, the sustainability and climate change director at PricewaterhouseCoopers LLP.

“We’re not seeing anything yet from this process that builds confidence in the carbon markets,” Grant said by e-mail on Nov. 22. “That boost will have to come from developments in Brussels, Beijing and Sacramento.”

To contact the reporters on this story: Alessandro Vitelli in Warsaw at avitelli1@bloomberg.net Mathew Carr in Warsaw at m.carr@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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