De Boer Quits UN Post in ‘Sad Day’ for Carbon Market (Update2)

Climate Realists don't think so!!!

This is an indication of reality hitting the carbon market!

Bloomberg Business week

by Alex Morales 18 February 2010

Feb. 18 (Bloomberg) -- Yvo de Boer is quitting his post as the United Nations’s climate chief, casting doubt on the effort to establish a worldwide market aimed at reducing the emissions blamed for global warming.

De Boer, 55, will step down as the diplomat leading talks under the UN Framework Convention on Climate Change on July 1, the UN group said today in an e-mailed statement. He will join KPMG International as an adviser. No successor was named.

Some 190 nations aiming to craft a plan curbing greenhouse gases including carbon dioxide failed to reach an agreement at their last meeting in Copenhagen in December. That breakdown, along with signs President Barack Obama won’t push U.S. legislation copying European’s carbon trading system, has raised concerns that efforts to protect the environment are faltering.

“It’s a sad day for the carbon market, and we’ll be lucky to get somebody with Yvo’s dedication and hard work as a successor,” Trevor Sikorski, an emissions analyst for Barclays Capital in London, said today in an interview.

The NEX index tracking shares of 86 companies involved in clean energy was little changed today after tumbling 10 percent since the Copenhagen talks finished in December.

UN carbon credits have fallen 11 percent since the start of climate Copenhagen meeting, which was aiming to set limits for emissions of carbon dioxide after 2012. They closed 0.5 percent higher today at 11.45 euros ($15.58) a metric ton on the European Climate Exchange in London.

‘Adds to the Uncertainty’

De Boer’s resignation “adds to the uncertainty of the political process that is hopefully going to create the context for an international market going forward,” Alessandro Vitelli, director of strategy in London at carbon markets analyst IDEAcarbon, said today in a telephone interview. “It’s a slight knock to the guys buying and selling carbon.”

De Boer said markets must be at the heart of the measures to holding back climate change.

“A global market is the best chance of moving forward in a cost-effective way,” de Boer said in a telephone interview. “It’s up to business to deliver the results.”

U.S. Senator John Kerry, a Massachusetts Democrat, U.S. Special Envoy for Climate Change Todd Stern, European Commissioner for Climate Action Connie Hedegaard and the environmental campaign groups Greenpeace and WWF International all issued statements praising de Boer.

Praise for de Boer

“Yvo De Boer has provided years of global leadership and sound, science-based solutions to the international effort to halt the devastating impacts of global climate change,” Kerry said. “He brought the world’s major emitters, including China and India, to the table.”

Leaders in Copenhagen reached a non-binding political accord supported by the world’s biggest emitters. The pact wasn’t able to gain acceptance of all nations at the talks.

That leaves the $127 billion carbon market awaiting mandatory international targets that could boost prices and provide companies with greater incentives to cut emissions.

The Copenhagen talks became bogged down in discussions about procedure and were beset by walkouts and suspensions. U.K. Prime Minister Gordon Brown described the summit as “at best flawed and at worst chaotic.” Analysts said the unwieldy requirement to achieve consensus raised questions about whether the UNFCCC should remain the forum for treaty discussions.

Little Time

“He’s resigning in July, which gives his successor five months to get to grips with the job and shepherd the parties towards a successful outcome in Mexico,” Vitelli said. “His successor doesn’t have a great deal of time to get up to speed.”

Robert Stavins director of Harvard University’s Environmental Economics program, wrote on Dec. 20 that conducting negotiations among a smaller group of big emitters “could be an increasingly attractive route.”

The outgoing climate chief said that there’s “no case whatsoever” for narrowing down the talks.

“To move forward on this process with the 20 big emitters basically means turning your back on the 100 or so countries that hold no responsibility for climate change but will be confronted with the bulk of the impacts,” de Boer said. “It has to be a broader agenda.”

Plan for Successor

De Boer’s successor will be chosen by UN Secretary-General Ban Ki-Moon in consultation with the UNFCCC’s member countries, spokesman Eric Hall said in an interview from Bonn. A timeline for the appointment hasn’t been set.

“The important thing is his successor is bedded in quickly and can reinvigorate the UN process,” Ben Caldecott, head of European Union policy at London-based carbon fund manager Climate Change Capital, said in an interview.

Vitelli and Kristian Tangen, a senior analyst at Oslo-based Point Carbon, both said de Boer’s resignation probably won’t have an immediate impact on markets. The biggest market, the European Union Emissions Trading System, will continue until 2020 regardless of an international treaty.

It’ll also be a source of demand for carbon offset credits from the second biggest market, the UN’s Clean Development Mechanism, Vitelli said.

“There’s no sunset clause on the EU-ETS, so there’s a horizon that stretches out to 2020 if not later,” Vitelli said. “Likewise the EU has already enshrined the legality of offsets coming from the CDM after 2012,” when current international targets under the 1997 Kyoto Protocol treaty expire.

Push for Targets

Before Copenhagen, de Boer had pushed for nations to adopt legally binding emissions targets in order to provide businesses the clarity they needed to plan future investments.

“The market would be better with a more robust international agreement,” said Sikorski of Barclays Capital.

De Boer’s successor should be someone who knows the UN process and the sensitivities of the nations involved, said Bernarditas Muller, a delegate from the Philippines who negotiated at UN climate meetings since the first one in 1995. She declined to speculate on who may take the post.

“This time, perhaps we will have someone from a developing country,” Muller said today in a telephone interview.

Andrei Marcu, head of regulatory and policy for Mercuria Energy, the Geneva-based trader of oil and emission credits, said, “It’s logical that it’s going to be a senior person from a developing country. It could be either a diplomat or a politician. They will need to move very quickly because Copenhagen left us behind on the timetable.”

De Boer said he decided to resign so he could spend more time with his family, approach climate change from a business angle rather than a political one, and because he felt the Copenhagen accord showed the world is “politically committed to moving forward.

“While Copenhagen was a disappointment in a formal sense, in a political step it was an incredibly important push forward,” de Boer said. “The train has clearly left the station.”

--With assistance from Mathew Carr in London. Editors: Reed Landberg, Randall Hackley