The mood at Carbon Expo is upbeat as most expect a deal at Copenhagen

Speakers urge market makers to be more involved with influencing policy, while law firms, banks and brokers are confident they will make money whatever the outcome

Bryony Worthington
guardian.co.uk, Thursday 28 May 2009 12.23 BST

All major carbon-emitting countries should expect to be part of a deal at the Copenhagen climate talks in December or face consequences. That was the message from the UN's special envoy on climate change, Ricardo Lagos, who was speaking at the Carbon Expo conference in Barcelona yesterday.
His keynote lecture gave an insight into the UN's current thinking about the all-important deal. The world, he accepts, has changed significantly since the time that Kyoto was negotiated – a reference to the fact that the old labels of "developed" and "developing" countries, which underpin the existing protocol, are now out of date. And, he warned, a failure to agree to a new plan would likely result in protective trade measures being applied in those countries with domestic policies already in place – currently only the EU but soon to be joined by the US and potentially other countries including South Korea and Australia.
He outlined a mechanism for involvement that could help to encourage new countries in, instead of top-down calculated targets which would apply in the OECD, non-OECD countries could bid on voluntary targets but these would then be entered into a registry and become binding. This sounds a pragmatic solution to the current impasse created by the current scheme. The US will refuse to agree if China remains outside the deal, whereas China refuses to take on targets until the west has shown it is serious about repaying the climate debt it created through rapid and early industrialisation.
Nearly everyone you speak to here expects a deal will be reached. There is still, however, a great deal of nervousness that the policy makers gathering next week in Bonn under the auspices of the UN, may craft a deal that looks superficially attractive, but doesn't provide the clarity of purpose that private sector investors in the carbon market seek. For example, there is talk that the new treaty once agreed will only last for five to eight years, requiring renegotiation almost as soon as it has been agreed. This kind of stop-start policy making is useless for those planning long-term infrastructure investment.
The nature of the targets in the deal are also important – if there is not enough ambition then demand for clean technologies and emissions-reducing projects could dry up. Similarly, what happens if large sources of cheap emissions reductions from avoided deforestation are included? The fear is that without an additional mechanism to incentivise this sort of emissions reduction, there will be a massive influx of permits generated by countries choosing to protect rather than exploit their forest reserves, which would kill the carbon price and delay investment in all other forms of projects.
The solution, it would seem, is more interaction between the policy makers and the market makers. More than one speaker yesterday urged the industry to become more actively involved in lobbying to influence the policy process. One country delegate I spoke to expressed his surprise that more policy people weren't present at this conference, since their decisions would have such a direct effect on the people here.
It seems that even though the carbon market is, as one speaker put it, an entirely "artificial market" exposed to the whims of political will, there is an unwillingness to get too involved in that political process. It may be because private investment is relatively fleet of foot and often focused on achieving a short-term profit – certainly the law firms, banks and brokers here seem relaxed that they can make money whatever the circumstances. A World Bank report, published yesterday, showed that the value of the global carbon market doubled last year – apparently lending support to this view, particularly since over a fifth of the total trade was in the "secondary" market, meaning that it had nothing to do with activities that actually reduce carbon.
But more optimistically it may be that they also, paradoxically, have a longer term strategic view: climate change is not going to go away, so whatever the minutiae of the latest UN protocol says, they are in the right business.
And so the mood in Barcelona is generally upbeat – as you'd expect in a city that has just won the European championship and spent the night celebrating. Whether the reality of a hangover dampens optimism today remains to be seen.
• Bryony Worthington is director of Sandbag.org.