FT Energy Source, FT Alphaville’s sister blog, has provided ample coverage of the 2009 Copenhagen Climate summit, but we would like to draw readers’ attention to one particular fallout: the associated slump in European Union carbon allowance prices following the meeting’s conclusion last weekend.
On Monday, front-year carbon prices fell to €12.45 — the lowest the contract has traded since April, according to analysis from industrial energy advisor Utilyx. The move was connected to the conference producing only a non-binding Accord, instead of any broad compulsory targets.
To call the outcome a disappointment would be understating matters.
Barcap’s energy team went as far as to describe it as:
Nopenhagen, fiascopenhagen, slowpenhagen, COP out, flop COP, bad COP, the great disappointment.
And as they added (our emphasis):
Call it what you will, but under no reasonable interpretations did the climate conference in Copenhagen (COP15) end as a success.
The last minute nonbinding ‘Copenhagen accord’ managed to even achieve less than our modest expectations of what was going to be delivered. What we expected was that developed country reduction targets would be agreed and this would be accompanied by specific financial commitments on adaptation financing. What was produced was the specific adaption financing commitments (US$100bn per annum by 2020) and a commitment to limit global temperature increases to 2 degrees Celsius. What was not produced was any indication of how this target was going to be achieved – the allocation of targets among states. What this lack of progress meant is that we went into the conference with a few negotiating ranges on the table, and we exited the conference with these same ranges on the table. Europe, given the lack of ambition of others, remained stuck on a 20% reduction and this lack of movement was the same for Australia and Japan.
Which means the big problem facing the the European carbon market — the near-term prospect of further industrial length — is still outstanding.
Most worryingly, it indicates some of the potential upside for EU carbon prices has now been eroded too, according to Barcap.