Dr Regina Betz and Johanna Cludius manning the Copenhagen Prediction Marklets stall at the international climate change conference this week. Photo by: Declan Kuch

Dr Regina Betz and Johanna Cludius manning the Copenhagen Prediction Marklets stall at the international climate change conference this week. Photo by: Declan Kuch

A legally binding agreement on climate change will not be signed until late next year, and Australia’s 2020 emissions reduction target will be between 15-19 per cent on 1990 levels — if the markets are to be believed.

The University of NSW’s Centre for Energy and Environmental Markets has set up the Copenhagen Prediction Markets, an online program where traders buy shares in the outcome of the climate talks.

On the market, traders can invest in outcomes such as Australia’s 2020 emissions reduction target and the deadline for a legally binding agreement. Like the regular stockmarket prices fluctuate with demand for particular shares.

Dr Regina Betz, one of the lead researchers on the project, told Greenlines from Copenhagen the project was established to see if prediction markets — which are commonly used for elections and sports — could accurately determine the outcome of multilateral negotiations.

‘‘We wanted to test whether such an instrument (prediction market) can predict the outcome of some that if very complex like these negotiations,’’ Betz says.

Betz is a former climate negotiator for the German Government. She adds the project was also partly born out of a selfish desire to get a better sense of what might happen at the talks, now that she is on the outside.

Betz is currently manning a store at the climate talks with a couple of other academics from the Centre. They are there to sign up delegates to be involved in trading - for which Betz says there is a lot of interest. The store includes real time monitors showing trend graphs for particular shares.

At the outset traders are given ’’experimental’’ dollars to buy shares in a number of outcomes.

The person with shares worth the most value at the end of the conference wins a year worth of carbon offsets for their personal emissions. The market is open to anybody with an interest in the climate change talks.

Betz says the market would have worked better with traders investing real money, but getting it passed the ethics board at the University of NSW would have been a ‘‘nightmare.’’

If current trading on the market is correct then Australia will adopt an emissions trading target of 15-19 per cent on 1990 levels, with the share price trading at $40.
Traders are predicting a legally binding agreement will not be signed until the COP 16 meeting in Mexico late next, with shares last sold at a hot $70.

Other shares include US reduction targets, the technical design of a carbon offset agreement and the combined 2020 target for developed nations.

Over the weekend the researchers added an additional market — trading shares of the most likely loophole in any climate agreement to represent the political state of the current Copenhagen talks.

Betz says the market seems to behaving rationally as event unfold at the conference, but she fears some traders are buying shares in outcomes they want to happen rather than what they think will happen.

The Copenhagen Prediction market closes trading at the end of the climate change conference this week.