The deal reached in Durban will have very little impact on carbon prices.
Durban also produced a number of smaller agreements of which businesses should be aware of.
Outlined below are the outcomes on some of the key issues discussed at the summit and how they might impact business.
- Second commitment period for the Kyoto protocol
The commitment period of the Kyoto Protocol will be extended to either 2017 or 2020. This means that the international carbon market will still have be able to continue operating after 31 December 2012.
However, the deal reached in Durban will have very little impact on carbon prices. There will not be an integrated global carbon market any time soon. Differences in the way carbon credits are valued mean that they cannot be traded across markets.
The GCF intends to help poorer countries cut emissions and adapt to climate change by channeling US$100 billion per year toward the effort. South Korea, Germany and Denmark have pledged finance, but we expect that the bulk of the funding will need to come from the private sector.
Businesses should watch out for further announcements about the GCF and consider reviewing mitigation projects that could be eligible for funding. However, given the uncertainty around funding and the likely bureaucratic problems involved in accessing the GCF, you should not plan to rely heavily on it.
The Technology Mechanism will facilitate the development and transfer of technologies that can help countries reduce emissions and adapt to climate change. It will feature technological experts and provide support for countries seeking advice.
At this stage, the implications for businesses are limited because it has not yet become operational and the level of funding it will eventually have access to remains unclear.
- States also improved measuring, reporting and verifying emissions reductions (MRV) in both developed and developing countries. This should boost both the transparency of the reporting process and the quality of data that is collected when countries make emissions pledges and report on progress.
- Nationally Appropriate Mitigation Actions (NAMAs) Registry
This will be a global database that allows countries and businesses to share knowledge about existing projects and propose further actions to help curb emissions. The NAMA Registry will list projects that are designed to reduce greenhouse gas emissions.
- Reducing Emissions from Deforestation and Forest Degradation (REDD+)
Deforestation and forest degradation account for about 15% of global carbon emissions. The idea behind REDD+ is that this issue can be tackled by offering developing countries financial incentives to preserve forests.
In future, REDD+ credits could be a major part of carbon trading schemes so there could be significant commercial opportunities. But the key message for businesses at the moment is to wait and see.
« Previous | Next »