The conclusion of COP 18 at the beginning of December last year in Doha marked the end of 12 days of negotiations and key decision made by the 194 member countries. The largest of which was the formal decision to implement a second, post Kyoto, commitment period until 2020. It is essentially an extension of the current Kyoto agreement. In addition a multilateral agreement commits both developed and developing countries to emission reduction targets by 2015. This is filling the hole that many believe was a key flaw in the original emission reduction agreements, of only developed countries having targets and commitments.
Whilst on the surface it appears as though the outcomes of Doha were simply agreements, when one scratches the surface a little further we see that these could have significant implications on the current carbon markets.
[pullquote align=”left” type=”simple”]The European Union is looking at a 30% reduction on 1990 levels. This is significant and will undoubtedly grow the current carbon markets.[/pullquote]
With the price of a certified emission reduction (CER) currently trading below one Euro, there is understandable pessimism surrounding the carbon markets and their future. However the growing requirements for emission reduction targets in developing countries and the increased pressure on the developed world to further reduce greenhouse gas emissions should see a carbon market resurgence within the next 12 to 24 months.
Developed nations will review their reduction commitments during 2014 with increased pressure to accept a target to reduce overall emissions by 18% below 1990 levels by 2020. The European Union is looking at a 30% reduction on 1990 levels in the same time period. This is significant and will undoubtedly grow the current carbon markets.
Factoring in that there is now a seventh greenhouse gas, nitrogen trifluoride, with a global warming potential of over 100 primarily used in the manufacture of LCD screens, we see an immediate increase in the overall carbon emissions of countries, potentially driving the need for carbon credits.
[pullquote align=”right” type=”simple”]…there is now a seventh greenhouse gas, nitrogen trifluoride, with a global warming potential of over 100…[/pullquote]
Whilst the outlook still remains bearish for the carbon markets with a current over supply of credits, the growing need for global emission reduction targets and the growing need for offsets to reduce carbon tax liabilities, the outlook for the carbon markets post Doha can be seen a positive, with carbon projects still viable in the coming years.