Page last updated at 17:15 GMT, Monday, 21 December 2009

Copenhagen deal causes EU carbon price fall

A power plant behind Bella Center, the venue of the UN climate conference, in Copenhagen
The UN climate conference took place at the Bella Centre in Copenhagen

Carbon prices in Europe dropped to a six-month low after agreements made at the Copenhagen climate summit to cut emissions disappointed traders.

The accord signed by the US, China and emerging major economies is weaker than a legally binding agreement.

Because of this the European Union says it is not willing to raise its carbon cutting target to 30% by 2020.

In early market trading, EU allowances for December 2010 delivery, dropped 8.7% to €12.40 a tonne.

A deeper cut in emissions targets would have increased demand for these allowances, pushing up prices.

Prime Minister Gordon Brown said the Copenhagen talks were "at best flawed and at worst chaotic".

He blamed a handful of countries for blocking a binding agreement and said the talks process had to be reformed to avoid the same happening again.

Energy Secretary Ed Miliband singled out China for vetoing an agreement on emissions.

The 193-nation UN conference ended with delegates simply "taking note" of a US-led climate deal.

The carbon market trades emissions under cap-and-trade schemes whereby emissions are limited and can then be traded.

Each state under the scheme gets an emissions allocation that it then divides among its worst emission-producing companies.

If it comes in under target, it can sell its excess allowance as carbon credits to other firms. If it comes in over target, it has to pay a penalty and then go to the market to buy credits to make up the difference.

Credits are measured in units of emissions reductions, each one being the equivalent to the reduction of one tonne of carbon dioxide.

Because the Copenhagen accord is not legally binding, those who have signed it are not obliged to reduce the cap on their emissions.

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