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Q+A: What Copenhagen outcome would excite CO2 markets?

LONDON (Reuters) - A United Nations climate summit in Copenhagen on December 7-18 is unlikely to excite carbon and renewable energy investors unless rich countries sharpen their emissions reductions targets.

The summit is most likely to impact the price of carbon, among all commodities, because tougher carbon caps imply more demand for emissions permits. Benchmark European carbon permits were trading at 13.60 euros ($20.50) a tonne on Wednesday.

WHAT COPENHAGEN OUTCOME WOULD RAISE CARBON PRICES?

* James Cameron, vice chairman of Climate Change Capital:

“More aggressive targets and the promise of implementation of domestic carbon markets would raise prices. So would the EU going to its higher target if it sees comparable efforts in other countries like the United States.”

(The European Union has said it may increase its offer to a 30 percent cut in greenhouse gases by 2020, from 20 percent.)

* Trevor Sikorski, head of carbon research at Barclays Capital:

“There’s not much from Copenhagen that’s going to raise carbon prices. You might get a bit of a sentiment bounce if Annex-1 (rich) countries agree targets and financing issues. If it looks like the European target could go above 20 percent it could drive prices upwards.”

* Simon Glossop at emissions traders CF Partners:

“Everyone will jump on some kind of (higher) commitment from (U.S. President Barack) Obama. If that moves the market it will move back down again because there will be a realization that it’s meaningless.”

“There is a risk prices will fall if someone says something detrimental to the carbon market, that they are not committed to cap-and-trade, or carbon taxes are the way forward.”

* Emissions trader:

“Determined statements from countries like India, Brazil, the U.S. and China could be seen as a signal by the market that this could be a serious play after 2012. Prices won’t rise to 20 euros in this case, only a couple euros probably.”

* Another emissions trader:

“Pledges by China and the United States are a step forward. If India follows up China and the U.S. on quantitative reduction targets, prices could rise to 14-14.20 euros.”

WHAT KIND OF OUTCOME WOULD Mobilize CAPITAL FOR INVESTMENT?

* Tom Murley, head of renewable energy at HGCapital:

“Nothing coming out of Copenhagen will make investors put capital to work. All Copenhagen can do is set the stage. Then we have to go out and have the casting call and find the casting crew to do it.”

* Emmanuel Fages, carbon analyst at Societe Generale/Orbeo:

“It will require real concrete announcements on the role and instruments of future carbon markets, so that investors can identify rules. You could have a ‘sentiment’ effect, whereby investors and funds would enter the markets seen now as more credible, more secure and here to stay. This will not be as immediate, but progressive over 2010.”

* Zeinegul Hassan, renewable energy analyst at Frost & Sullivan:

“Clearer positions on long-term commitments will help investors to decide on future plans. At the moment this isn’t clear enough. The U.S. position right now is not strong enough to boost investment. World leaders did not reveal all their cards. In early 2010 there will be clearer signals.”

Additional reporting by Michael Szabo; Editing by Gerard Wynn and Anthony Barker

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