What's next?
The 193 parties to the UN Framework Convention on Climate Change (UNFCCC) will work through 2010 with the aim of agreeing on a new global climate change treaty at the 16th Conference of the Parties (COP) in Mexico in November-December.
The Copenhagen Summit in December 2009 failed to produce an agreement beyond a loose text saying attempts should be made to try to ensure average global temperatures do not increase more than 2C over pre-industrial levels. Scientists say a failure to do so would result in runaway climate change.
To have any hope of achieving this, most scientists say rich countries must cut emissions 25-40 per cent under 1990 levels by 2020 and 80-95 per cent under 1990 levels by 2050, while poorer nations must ensure economic growth is sustainable.
As of 31 January, 55 industrialised and developing countries officially associated themselves with the Copenhagen accord by submitting their pledges to combat climate change. More countries are expected to submit their plans to the UN despite the fact the 31 January submission deadline has passed.
The accord required industrialised countries to state the level of emission reductions they plan to achieve by 2020. Major developing countries, meanwhile, were asked to submit a list of their planned national appropriate mitigation actions (Namas).
However, these targets will not be binding and future emission cuts will be subject to further negotiations throughout the year.
The Copenhagen summit unlocked $30 billion of short-term financing to the poorest countries for climate change mitigation and adaptation, and also achieved some reform of the clean development mechanism (CDM).
But after two years of deadlock and a "you first" approach by many emitters, the machinery of a post-Kyoto deal – such as market mechanisms – remain highly contentious and require long, difficult negotiations.
Some key questions that will be faced in 2010 include:
• How will the US fit into a new legally binding treaty;
• How large will be the cuts that rich countries pledge to undertake;
• What types of nationally appropriate mitigation actions will developing nations pledge; and
• What sort of mechanism for adaptation and mitigation financing will the new treaty contain?
From a carbon market perspective, several key issues are up for debate, including:
• How new and existing markets will help rich countries cut emissions;
• Rules on surplus emission rights from the Kyoto period;
• Rules on using forestry to offset domestic emissions; and
• Incentives for carbon capture and storage technology to cut emissions.
For a list of official Copenhagen accord pledges, please see Relevant links on the right-hand side of this web page.
To keep up to date with how UN talks will affect existing and future carbon markets, follow the latest developments here.
What's next?
Read more
Relevant links
The Copenhagen Accord
Download the pdf document
Quantified economy-wide emissions targets for 2020
View submissions at UNFCCC
Nationally appropriate mitigation actions of developing country Parties
View submissions at UNFCCC
Founding document of the UNFCCC
Download the pdf document
The Kyoto Protocol
Download the pdf document
The Marrakesh Accords
Download the pdf document
Background information
Countries have met under the UN Framework Convention on Climate Change (UNFCCC) every year since 1992, where nations promised to cut emissions. The summit is normally held over two weeks with ministers attending for the final two days. However, this year’s meeting will be the first where most world leaders will attend.
Kyoto
Following a failure to cut emissions under the UNFCCC, some countries pledged in 1997 to be legally bound to cut emissions of six greenhouse gases under the Kyoto protocol. The treaty classified all countries in the world as either those with an absolute cap on emissions (Annex B) and those without (non-Annex B). It also established three market mechanisms to help cut emissions at the lowest cost. These were: government trade in emissions rights between Annex B countries; a mechanism to generate carbon credits from emission reduction projects in non-Annex B countries (under the clean development mechanism) and a mechanism to allow credits to be generated from reductions made in Annex B nations (joint implementation).
The Copenhagen Accord
At the December 2009 Copenhagen Summit, the heads of state of Brazil, China, India, South Africa and the US struck a deal that aims to limit temperature growth to 2C from pre-industrial levels by 2050. Another 20 countries backed the deal with more expected to follow. However, the accord did not set specified targets or actions for anyone, and was not adopted by the UN. Instead it will be brought into the negotiations set to take place in 2010. But while the outcome of talks is uncertain, it appears the market mechanisms will face changes under a new treaty.
CDM
Since 2005 the clean development mechanism has been successful in generating carbon credits on a wide scale. However, the environmental integrity of the scheme has been called into question, with green groups and some voices in the US criticising the scheme for awarding credits to emission reduction projects that would have happened anyway.
JI
JI struggles to generate many credits. Russia, potentially the largest supplier of carbon credits, has yet to approve a single project due to bureauctratic infighting, while Ukraine has generated only a handful of credits so far.
AAU
Trade in government emission rights, known as assigned amount units (AAUs) has been heavily criticised by green groups, who claim that many countries' surplus rights have emerged as a result of a collapse in their economies as opposed to any environmental policy. Trade has also been tainted by allegations of corruption and ministers in at least two countries have been forced to resign over deals. But despite the oversupply of AAUs following the US withdrawal, very few deals have been done.
Market reform
The private sector has slammed the CDM for taking too long to approve projects and issue credits, claiming that the bureaucracy is deterring private sector investment. This has spurred talks over reforming the scheme to be more streamlined, as well as prompted proposals for new, more simplified markets. Much of the private sector is also against banking AAUs as the size of the surplus may devalue carbon prices and deter future investment.
Options
Several new markets and a streamlined CDM could emerge from Copenhagen. CDM could be reformed so some project types would automatically qualify, while the process of generating credits could be made easier. New markets could see credits issued for emission cuts made in certain sectors, while some poor countries may be incentivised for cutting emissions through national plans to cut emissions.
Carbon Resources
