Reviewing Copenhagen

On December 19, 2009, the United Nations Climate Change Conference in Copenhagen, Denmark came to an end. The meeting did not result in a binding action plan for reducing global greenhouse gas emissions, but instead produced a nonbinding agreement called the Copenhagen Accord, which was largely negotiated by the U.S., China, India, Brazil, and South Africa. Member countries consider the Accord a work in progress, with the goal to convert it into a binding treaty at COP 16 in Mexico City, scheduled for November 29 - December 10, 2010.

The agreement consists of a three-page outline including an overall goal to limit global average temperature increases to no more than two degrees Celsius and a pledge to provide financial assistance to emerging countries' mitigation and adaptation efforts. The Accord will likely consist of individual nations' climate policies and require an international review of each at least once every other year. In addition, nations agreed to dedicate $3.5 billion toward the UN-REDD-plus program, a component of the Kyoto Protocol's Clean Development Mechanism (CDM) that offers incentives for emerging nations to reduce emissions from deforestation by creating financial value for the carbon stored by intact forests.

Following the conference, the price of EU ETS carbon emission permits dropped nearly nine percent from the beginning of the conference as a result of the lack of specific reduction goals from participating nations and the resultant uncertainty with regard to post-2012 demand. Emission allowances for December 2010 delivery closed at €12.41 per ton ($17.78), the lowest price in over six months. EU ETS carbon prices could face an additional threat in February when 2010 allowances are issued, adding to the current surplus.