What do the Doha talks mean for the carbon market?

A general view shows the logo of the 18th United Nations Convention on Climate Change next to the Ministry of Environment (C) in Doha November 27, 2012.

REUTERS - U.N. climate talks in Doha, Qatar, were unlikely to have any impact on depressed carbon markets, analysts said.

Extended debate gave the Kyoto Protocol, the world's only global pact on curbing climate change, a fragile lifeline.

But it did nothing to raise ambition on cutting emissions, which could have helped to reduce a surplus of offsets and emissions allowances that have crushed markets.

AAUS

After years of haggling, the European Union came up with an internal agreement on how to deal with its surplus of international allowances, known as Assigned Amount Units (AAUs).

The EU text was agreed with minor changes in the final package of agreements known as the Doha Climate Gateway.

Under the EU deal, allowances would be carried over into a second Kyoto commitment period, but buying of them would be limited to 2 percent of the purchaser's national allocation.

There was no decision on cancellation after 2020 of surplus permits -- as demanded by developing nations.

But the handful of nations likely to purchase the allowances -- Australia, the European Union, Japan, Liechtenstein, Norway and Switzerland -- made declarations saying they would not buy them, ensuring they have limited market value.

CLEAN DEVELOPMENT MECHANISM

The $215-billion offset market allows governments and companies to invest in emission reduction projects in return for tradeable credits (Certified Emission Reductions), which they can use to meet international climate targets.

But the Clean Development Mechanism has suffered from the failure of the talks to deliver deep emissions cuts.

Prices have collapsed from above 22 euros in 2008, just before the failure of U.N. talks in Copenhagen to get nations to agree to binding emission caps, to about 50 cents.

A U.N.-commissioned report in September said that unless nations took on deeper cuts or a reserve bank was set up to buy surplus credits, the scheme could collapse.

Doha talks reached no agreement on a solution.

"As with Durban (climate talks) last year, the outcome will not surprise the market and so is unlikely to affect the price of EU allowances or CDM credits," said Jonathan Grant, director of sustainability and climate change at PwC.

(Reporting by Nina Chestney in London and Barbara Lewis, Andrew Allan and Ben Garside in Doha; Editing by Stephen Powell)