The latest inter-sessional climate talks at Bonn revealed just how much the future of global climate and energy action still hangs by a thread – and a badly frayed one at that.

Until now, the international offset market has limped along despite the looming threat of a gap between the first Kyoto Protocol commitment period, which ends in 2012, and the beginning of a new global agreement. There had been signs of a recovery in momentum at the June talks in Bonn (ENDS Report July 2010), with progress on rationalising negotiating texts.

But the latest round of Bonn talks have been marked by a slipping back into polarised positions by developed and developing countries. That has led to negotiating texts in both the Kyoto negotiating stream and non-Kyoto stream, which includes the US, growing longer yet again as individual parties refused to compromise.

And this means that leaders could once again be faced with a cascade of unfinished business by the time they arrive in Cancun, Mexico, in November this year, or even in South Africa in 2011. If that happens, there will be failure.

Nobody now expects a full agreement by Cancun this December, but they do expect agreement or at least major progress on key parts of the architecture. This includes: finance for adaptation; market mechanisms that engage business investment including tightening up existing and defining new forms of international offsets; technology transfer; monitoring and verification of emissions reduction commitments; and forest carbon sequestration measures.

Delegates claimed they had already factored in probable US failure to push through domestic cap-and-trade legislation this year. But in reality this is having a chilling effect as the EU ties further commitments post-2012 to US participation. There is real commitment within the US, as a plethora of regional cap-and-trade initiatives shows, and there is undoubted desire at federal level for a global agreement, though it is stifled by domestic infighting. But without the framework of a global agreement, good will and modest measures are not enough to complete the job.

Perhaps one of the most worrying signs from Bonn is that negotiating delegations are being cut back, and new ideas from third-party institutes and NGOs are drying up. Complaints from delegates are also growing over commitments to intensify negotiations through the summer holidays, even though this pressure was crucial to getting the Kyoto Protocol off the ground in the first place.

All this points to a dangerous loss in momentum, or as business would have it, we are in the “valley of death”, that will make it much harder to agree on the key elements of a new treaty in Mexico, unless there is a major new push and re-engagement from governments, business and NGOs.

There needs to be renewed pressure, not least from business, which operates in a globalised economy and needs greater certainty if we are to avoid a repeat of Copenhagen (ENDS Report January 2010) and not see the Kyoto framework slowly unravel. All parties are tired of endless and apparently fruitless negotiations, new demands, navel-gazing and filibustering. These have prompted European Commission lead negotiator Artur Runge-Metzger to compare proceedings to a “broken record”, playing out the discord that led up to Copenhagen.

But now is definitely not the time to slacken. What happens, or doesn’t happen in Cancun this year and South Africa in 2011 will determine the outcome of the process that began in earnest in Rio de Janeiro in 1992. There may not be a second chance to avoid the more devastating consequences of climate change.

And it is worth reminding ourselves why that matters for UK and EU business in the longer term. Even within the EU emissions trading scheme, which is secure for the foreseeable future, firms would face some of the business impacts of failure as low-cost international offsets dry up, and the EU would have to compete in a smaller, fragmented export market for clean technology and energy efficiency. Lower international ambition will make it harder for the EU to raise its economy-wide emissions reduction targets from 20% by 2020 relative to 1990 to 30%, in turn reducing incentives to decarbonise rapidly.