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Bloomberg

A new carbon market that will spur emerging nations to cut emissions is the key element of next year’s planned global climate accord, a U.K. official said.

Winning United Nations support for a market that would give credits for emission reductions “would be the most important part of any international agreement,” Amber Rudd, parliamentary under secretary of state for climate change, said yesterday at a hearing at the U.K. Parliament in London. Rather than specify what nations must do, the meeting needs to agree on a framework, or “toolbox that countries can take down and operate” themselves, she said.

Certified Emission Reduction credits for December 2015 have more than doubled in value since June 4, when they matched a record low on ICE Futures Europe in London. Prices gained as the U.S. and China agreed to limit emissions and the UN climate secretariat published a report stating the market that creates those credits and others could be extended beyond 2020.

The Nov. 24 UN report shows that carbon markets will probably help give nations confidence to pledge bigger contributions to emission cuts during the next year or so because they will provide the ability to tap private investment capital, according to the International Emissions Trading Association. The Geneva-based industry group’s members include BP Plc and Morgan Stanley.

‘Greater Ambition’

“Good market mechanisms are one of the keys to unlocking greater ambition, which the paper hints at,” Dirk Forrister, president of the IETA, said yesterday in an e-mailed response to questions. “It gives options on how they could preserve the best elements of the existing market mechanisms, but upgrade them into a unified system that is simple to understand, use and make operational without losing time.”

UN CERs for December 2015 settled up 1.9 percent at 54 euro cents ($0.67) a metric ton, the highest since Feb. 10, on ICE yesterday.

Carbon-market linkages between the European Union, the U.S. and China will eventually emerge, particularly if nations can agree to cover similar parts of their economies such as power generation, David Hone, Royal Dutch Shell Plc’s climate change adviser, told the parliamentary committee yesterday.