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By Stian Reklev and Michael Szabo
WARSAW (Reuters) - International negotiations on how to set up new carbon markets to cut greenhouse gas levels broke down over the weekend in Warsaw, sources said, after developing nations refused to progress the issue before rich nations increase efforts to cut their own emissions.
More than 9,000 delegates from almost 200 countries are gathered in the Polish capital for November 11-22 United Nations-sponsored meetings aimed at forging by 2015 a new treaty to fight climate change, which would enter into force after 2020.
Sources said negotiators were unable to agree, before the start of high-levels talks beginning on Monday, proposals to develop new carbon markets and link them together through common accounting and transparency standards.
Talks on the issue have been shelved until June 2014, despite agreement in Warsaw expected by many.
A spokesman for the European Union Commission said the negotiations had proved very difficult and that it regretted that progress was not made.
"We remain interested in a political discussion on the role of markets in the 2015 agreement here in Warsaw," he added.
Reaction to the breakdown in talks was mixed.
"The profound lack of progress is obviously disappointing. We hope the parties regroup and find a way to progress the (talks) as soon as possible," said Miles Austin of trade group the Climate Markets & Investment Association.
Meena Raman of green groups alliance Third World Network welcomed the news, "given the grave lack of ambition from developed countries to reduce emissions".
Poorer nations, which bear the brunt of the worst effects of climate change, want rich governments to take on more ambitious and binding emissions reduction targets.
REVIEW THE FAILURES
Rich nations including the United States, Japan, and members of the EU, favor designing new market-based mechanisms to reduce greenhouse gas emissions as cheaply as possible.
But developing countries are reluctant to launch new markets when existing ones are not working. They say rich nations support markets as a way of outsourcing carbon-cutting efforts abroad to ensure they don't have to make any reductions at home.
"We need to review the failures of existing carbon markets to assess if they have any role to play in equitable and ambitious mitigation," Raman said.
The Clean Development Mechanism, one market born from the 1997 Kyoto Protocol, lets governments and companies in developed countries invest in carbon-cutting projects in developing nations, and in return they receive carbon offsets that they can use against their own emissions targets.
While the scheme has channeled more than $315 billion to developing countries, it is faltering due to a dearth of demand for offsets from countries that are reluctant to raise their ambition under a new global pact.
Environment ministers will discuss carbon markets on Tuesday, but observers said nothing on new markets was likely to be agreed.
"(It's) not a huge loss," said one negotiator from the developing world who requested anonymity because they were not authorized to speak to the press.
"We want to see a new market mechanism, but one that's designed to generate substantial net reductions the atmosphere actually sees, rather than a tool that relocates effort in a zero-sum game. So the outcome is disappointing from this perspective."
(editing by Ralph Boulton)