Reprinted with permission of Bloomberg New Energy Finance

Anyone expecting grand commitments to emission reductions and the provision of finance will have been disappointed with this year's UN climate talks, which ended on Saturday.

Held this year in Doha, Qatar, the summit produced only one new pledge to cut greenhouse gas output and only modest promises of financial support.

The deal will likely do little to prevent global warming from exceeding the 2°C ceiling thought necessary to avoid the most serious effects of climate change.

COP18 was not a wipe-out, however, with parties achieving two of the three main goals of the conference. They defied many commentators by agreeing to a second commitment period of the Kyoto Protocol.

With the first to end in 21 days, 'KP2' will last until 31 December 2020. Some 37 developed nations signed up, led by the EU and Australia, accounting for only 15% of global greenhouse gas output.

The deal in Doha requires industrialised participants to "revisit" their emission pledges by 2014 at the latest.

As expected, Russia, Japan, New Zealand and Canada did not sign up to KP2 and as such will not be able to use Certified Emission Reductions or Emission Reduction Units to reach their 2020 targets under the Convention.

Countries with excess emission permits from 2008-12 will, however, be able to bank them into the second period.

The restriction should help prevent trading of surplus emission permits dubbed "hot air". Some 33 countries said they would not buy excess permits left over from the first commitment period to meet their KP2 targets.

These surplus Assigned Amount Units (AAUs) come mainly from Russia, Ukraine and eastern EU member states, where industrial output slumped after the fall of Communism, causing emissions to plummet.

Another achievement of the climate talks in Doha was to streamline negotiations into one track, marking the conclusion of a procedural shift begun last year in Durban to focus the negotiations on achieving a new post-2020 treaty.

This year, discussion was spread across three parallel strands, with issues often debated multiple times.

Agreeing how to resolve this negotiating spaghetti was no easy task, however, and at times threatened to derail the summit, with delegates working 27 hours past their deadline. While the accomplishment may not have an immediate impact on the climate, it should help countries reach a new global pact by 2015.

Responsibility

On the downside, countries did not determine a timeline for agreeing a new deal by 2015 and – again – they clashed over the principle of common but differentiated responsibilities (CBRD). The issue of 'equity' has been a sticking point for almost two decades, creating a division between developed and developing countries.

At this year's summit in Qatar, India said again that equity and CBRD must be at the forefront of the talks – a position that is anathema to the US.

There was a little silver lining, however, when the US said it was willing to discuss how to share emission reductions fairly and knows it still has to work to do to cut its own greenhouse gas output. This is the first time that the US has said it is willing to discuss equity.

For developing countries, finance was one big disappointment for this year's climate summit: they had wanted the Doha deal to outline a roadmap to accrue $US60 billion over the three years to 2015. Instead the texts simply encourage developed countries to boost support from the $US10 billion a year raised over 2010-12.

On long-term finance, parties agreed in 2009 to ramp up support to $US100 billion a year from 2020. But this is a long way off and may well be more of a pipe dream.

Nonetheless, for some developing countries, even $US100 billion would not be enough: "It is estimated that more than $US1 trillion is required to enhance the developing countries' adaptation capacities," said Xie Zhenhua, China's lead negotiator, on 6 December.

‘Loss and damage’

One surprise result of COP18 was the inclusion of a mechanism for aid for climate-related disasters. The Doha agreement suggests for the first time a channel for developed nations to compensate their poorer counterparts for "loss and damage" from the effects of climate change.

The US and EU both vehemently opposed the initial wording, concerned that the measure could open them up to unlimited legal and financial liabilities. In particular, they wanted to avoid any mention of "compensation" or any other term with connotations of legal liability. Instead the money will be judged as aid.

The compromise language left some parties disappointed – as is often the way with compromises: "The package before us is deeply deficient. The outcome provides little more than a gateway to a long path," said Kieren Keke of Nauru, leader of the Association of Small Island States.

Some crucial questions do remain, for example whether these funds will come from existing aid budgets and how will they be disbursed.

Developing countries want a new institution but the US would prefer to use existing international institutions. This will be one issue to add to the agenda for next year's climate talks in Warsaw, Poland.

Life ban

COP18 was not without entertainment, it seems: 6 December saw the arrival of the self-titled "Monckton of Arabia" dressed in the Qatari white gown with tales of serenading Aziz, his camel. His efforts ended in failure though when the said camel flung him "into an elegant and spectacular parabolic trajectory".

When not falling off camels, Lord Monckton is better known for his sceptical views on climate change. On Friday, he was escorted out of the UN talks after taking the chair of Myanmar and claiming there has been no global warming in the last 16 years. He has since been banned for life from UN climate talks.

So, a score of two out of three is not bad. But perhaps that is more to do with modest ambition than great achievement.

Without action, global temperatures may rise 4°C by the end of this century, according to a new report from the World Bank. With mounting evidence of the dangers posed by global warming, is two out of three good enough?

"It was not an easy ride. It was not a beautiful ride. It was not a fast ride, but we managed to cross the bridge and hopefully we can increase our speed," said EU Climate Commissioner Connie Hedegaard on this year's talks.

Parties will indeed need to accelerate negotiations: they only have three more COPs before they are due to agree a new, global pact with binding emission goals for all countries.

EU carbon bounces back

European carbon recovered from new record lows last week, as traders reportedly covered short positions ahead of this week’s Climate Change Committee meeting in Brussels.

European Union allowances for December 2012 closed on the ICE Futures Europe exchange at 6.78 euros per tonne on Friday, compared with EUR 6.20/t at the end of the previous week. Continued auction sales amid a supply glut helped push prices down to a record intraday low of EUR 5.61/t on Wednesday.

They bounced back above EUR 6.00/t later that afternoon and made further gains on Thursday and Friday. United Nations Certified Emission Reduction credits tumbled further last week to end 7.5% down at EUR 0.62/t.