Oslo, 19 October 2011

Following broadly uneventful climate talks in Panama last week and with just six weeks to go before the UN’s annual global climate summit begins in Durban, South Africa, expectations of significant progress are extremely low, according to Thomson Reuters Point Carbon, the leading provider of market intelligence, news, analysis, forecasting and advisory services for the energy and environmental markets.

Last week’s conference in Panama City was the last chance for all UNFCCC parties to hash out the future of global climate change policy before the Durban meeting convenes on November 28. Like prior intersessional meetings, the goal was to narrow the options on key issues so that high-level diplomats have a smaller range of alternatives to choose from when they gather to negotiate the way forward on global climate change policy at Durban’s 17th Conference of the Parties (COP).

Negotiators did indeed manage to narrow the options on several minor issues, including accounting rules for emissions from land use, setting up a registry to log mitigation actions and structuring the global fund in charge of climate finance, however, on the issue of negotiating a second Kyoto commitment period stalemate prevails. There are even likely to be delays over setting the agenda in Durban and negotiations on a legal agreement are expected to continue for years.

According to Stig Schjølset, Head of EU Carbon Analysis at Thomson Reuters Point Carbon, “The key question is still whether the US and China are willing to commit to reduction targets within a legally binding framework. Even though the EU would accept such targets coming into force only in 2020, it will still be impossible for the US administration to commit to such targets at this stage. There is simply no support in Congress for legally binding reduction targets, and it seems very unlikely that this will change over the next years – even though such targets would only be effective from 2020. The position of China is somewhat more difficult to predict, but we do not expect China to be willing to take on absolute reduction targets by 2020 unless there is a clear commitment from the US to do the same. The current deadlock on this issue will thus persist and we find it very unlikely that the new EU position will impact the positions of other key actors”.

Consequently, the EU will have to decide in Durban whether it can take on a second Kyoto period without a commitment from other major emitters to be included in a legal framework from 2020. “We do not expect the EU to do so, and we maintain our view that there will be no second commitment period under the Kyoto Protocol”, Schjølset says.

According to Lisa Zelljadt, Thomson Reuters’ Regional Editor for North America, “The essential stalemate of the talks lies in the increasingly blurry divide between developing and industrialized countries. It is obvious that China, India, and Brazil are no longer in the same category as Angola, Haiti, and Bangladesh. Both groups of developing parties, however, continue to argue that they cannot - and should not have to - mitigate climate change without financial help from rich countries. The US lead negotiator, however, stated that his country will not agree to a climate deal in which the biggest emerging economies’ commitments are 'conditional upon financial support from developed countries'. We do not expect either side of this stalemate to change its position in Durban, and this makes it impossible to adopt a comprehensive, legally binding agreement at this stage”.

Zelljadt concludes; “The impasse in Durban reflects wider divisions on global negotiations more generally. For carbon markets, this stalemate means relevant policies are, and will continue to be, decided at the national and regional level, emissions trading programmes will be local, though potentially interlinked via mutually recognized offset units or even tradable allowances”.

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Senior analysts from Thomson Reuters Point Carbon will be attending the Durban talks and are available to comment before or during the talks on events as they unfold.

www.pointcarbon.com