WebConnect

3 December 2009

3rd December 2009, London - With the start of the 15th Conference of the Parties (COP15) in Copenhagen rapidly approaching, carbon market participants are asking important questions about the future of the global climate architecture with ever greater intensity. What form of agreement will Copenhagen produce? How ambitious will leading developed and developing countries be? Can Parties overcome their differences in time? What will Copenhagen mean for the carbon market?

IDEAcarbon’s research team presents three potential scenarios as to the outcome of Copenhagen in the December edition of CARBONfirst.

Based upon IDEAcarbon’s assessment of country positions and the negotiating process, these scenarios offer insight into what are the key areas of agreement and compromise, the obstacles and negotiating impasses. They give the conditions under which an ambitious, weak or moderate outcome would emerge from Copenhagen, and explain what the future would hold in each case in the attached December CARBONFirst report.

The potential scenarios include:

• an ambitious political agreement – a strong COP decision – that paves the way for the conclusion of a final, binding treaty by June 2010
• a moderate, largely political agreement covering the main bases of a climate treaty, including the architecture of a legally-binding agreement to be completed by late 2010.
• an agreement to simply carry on negotiating, with no end in sight.

In the first scenario, developed and developing countries find a compromise and are successful in bridging their differences on key aspects of mitigations and finance. In effect, all that is missing is the full participation of the US.

The second scenario, the declaration of a modest political agreement, forms the basis of IDEAcarbon’s central view. IDEAcarbon believes that Copenhagen will succeed in overcoming the majority of divergences in national positions that currently exist, especially on mitigation and finance, and that trust between developed and developing countries will grow.

The recent proposals from the USA, China and Brazil will certainly help matters. But Parties will still be reluctant to come forward with final commitments until they are fully satisfied with the comparability and equity of the commitments of others.

The third scenario would see Parties agreeing only to continue negotiations into next year and probably beyond, and would likely involve considerable refinements to the positions already undertaken. Announcing the release of the December edition of the Carbonfirst report, Alessandro Vitelli, Director, IDEAcarbon Strategic and IDEAcarbon Markets noted that: “The outcome, we predict, will be a COP decision that covers the main bases of the climate agreement, and will contain the key elements and the architecture of a final treaty.

This treaty will be finalised at COP16 in Mexico in December 2010, with a risk that it could be done sooner by June 2010”.

Shandi Modi, CEO of IDEAcarbon further added that “the global total of the (most ambititious) stated goals at counytry levels is close to emission reductions necessary to stabalise carbon emissions in 2020. Should the past few week’s commitments, especially from India and China, be escalated, there could be a strong basis for a large enough financial commitment from the US.
This would then be able to satisfy the legitimate needs for adaptation finance in developing countries, especially Africa, and enable a successful final outcome in Copenhagen. China is more than capable of leading the initiative on this to trigger such a result.”