Carbon traders bet on Bali climate talks' success

By Gerard Wynn

NUSA DUA, Indonesia (Reuters) - Traders are already betting on a new global climate deal to succeed the Kyoto Protocol, as talks in Bali on Friday inched towards a two-year negotiating agenda for an expanded global climate pact.

Financiers are buying rights to emit planet-warming greenhouses gases after present Kyoto commitments expire in 2012, hoping that countries will agree new, tougher emissions limits -- and drive demand for such permits.

"It's a great bet," said one trader attending the talks on the tropical Indonesian island. The new, more speculative offsets came at a substantial discount, the trader, who declined to be named, added.

The Kyoto Protocol allows 36 rich countries to meet limits from 2008-12 on their production of greenhouse gases by buying emissions rights from developing nations.

About 190 countries attending the December 3-14 meeting in Bali are edging towards launching negotiations on a successor deal to Kyoto, which is deemed too weak to win the battle against climate change.

Delegates were expected to draft on Saturday the first details of a negotiating agenda.

"You're seeing the hedge funds come in and say this is a great gamble," said Odin Knudsen, managing director of environmental products at JPMorgan Chase and former head of the World Bank's carbon finance unit, which pioneered carbon trading under Kyoto.

It's not just a new climate deal that bankers are betting on, said Knudsen, who highlighted the growing prospect of federal U.S. caps on greenhouse gas emissions, as well as continuing emissions limits for European companies after 2012.