22 December 2009 – The failure of the UN Climate change conference in Copenhagen to reach a legally binding deal on reducing carbon emissions has led to a sharp fall in carbon permits on the European carbon exchange. Prices for December 2010 delivery fell ten per cent in early trading yesterday before recovering to end the day down 8.3 per cent at €12.41 per tonne.

Industry analysts fear that prices could drop as low as €10 during the first part of 2010, with oversupply and uncertainly over the level of emission reductions countries are willing to make, driving prices down. Countries have to submit their plans for cutting emissions by the end of January.

The talks in Denmark concluded last week with a hastily arranged agreement between major emitters of CO2 to work towards restricting the increase in global temperatures to less than 2 degrees Celsius, "on the basis of equity and in the context of sustainable development." In the event, a small number of developing countries refused to agree to the accord and preventing the UN giving it legal status. However, the Conference of Parties, the supreme body of the UNFCCC, decided in a tense and volatile final session to only "take note" of the Accord. In diplomat-speak this falls short of an "adoption", but will be sufficient to allow action under the Accord to start right away.

The Accord pledges to work towards restricting the increase in global temperatures to less than 2 degrees Celsius, "on the basis of equity and in the context of sustainable development."

The lack of detail as to what the individual countries CO2 emission limits will be and how they will achieve them has left the carbon market in a bearish mood. The EU did not increase its own target of reducing CO2 by 20 per cent by 2020, despite being willing to increase this to 30 per cent, had other countries cooperated. Such a move would have boosted carbon prices as the number of permits would have been reduced.

"This (accord) is a very disappointing outcome," said Trevor Sikorski, director of Barclays Capital," according to a report in the Financial Times. "I see nothing that should drive investment in low carbon technology."