U.N. climate chief Christiana Figueres calls this fund a “golden key” in the negotiations; an important tool to reassure poor nations that wealthy nations are serious about global warming mitigation.  The Fund aims to raise $100 billion a year in climate aid by 2020.

Although there is little hope of securing a binding legal treaty in Cancun, negotiators are optimistic about this “Green Fund” proposal.  However, Mexico’s Foreign Minister Patricia Espinoza warned that the climate aid fund is only one part of a broader climate package which needs attention.   Unresolved issues remain, including methods for clean energy technology sharing and mechanisms to protect vulnerable forest land.

U.S. climate envoy Todd Stern concurred, saying “We are not going to move on the Green Fund, and the $100 billion, if issues central to the Copenhagen Accord, including mitigation and transparency, don’t also move.”  Stern reiterated that President Obama is still committed to trimming U.S. greenhouse gas emissions by 2020, despite the Senate’s lack of progress in passing comprehensive climate legislation. The U.S. is the world’s only major developed nation without a legal cap on greenhouse gas emissions.

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In order to implement a new round of emissions targets in the existing Kyoto framework, three-quarters of all parties to the Protocol, or 143 countries, must agree.  Before each country ratifies the treaty, extensive domestic negotiations and review commonly take place – “a process that may involve a considerable amount of time,” according to the U.N.  In light of these concerns, the United Nations has released for the first time a Kyoto “Plan B” set of contingency options should a new global climate deal fail to materialize.

A gap in coverage between Kyoto’s 2012 expiration date and when a replacement treaty might take effect could be very costly to the $20.6 billion global carbon trade.  The value of these traded emissions credits rests on stipulations as determined in the Kyoto Protocol.

To avoid this time gap, one facet of the U.N.’s “Plan B” would consider reducing the number of countries required to approve any proposals for new targets or proposals to extend the current caps through to 2013 or 2014, when climate negotiators hope to secure a more comprehensive update to the treaty.

After a disappointing showing in Copenhagen this past December, climate negotiators are looking forward to making progress in their third year of talks.  The next major conference will begin this November in Cancun, Mexico.

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“The scale of economic destruction would be equivalent to that of the two world wars and the Great Depression combined” if global temperatures rise by 3°C to 4°C, Xie Zhenhua wrote recently in the China Economic Herald.  ”Human beings cannot afford such disasters.”

In now appears that the group of BASIC countries (Brazil, South Africa, India and China) are becoming more amenable to the terms of the Kyoto Protocol, which they had previously resisted heartedly.  This resistance was a major reason why the United States never ratified the treaty, which is set to expire in 2012.  BASIC environment ministers will meet in South Africa later this month to incorporate elements of the Copenhagen Accord, the non-binding agreement formulated at the Copenhagen climate talks last December, can be worked into a broader global pact to succeed the Kyoto Protocol.

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Yvo de Boer, the outgoing executive secretary of the UNFCCC, said “The UN Climate Change Conference in Cancún must do what Copenhagen did not achieve: It must finalize a functioning architecture for implementation that launches global climate action, across the board, especially in developing nations.”

Mr. de Boer explained that certain issues in particular demand global attention, namely mitigation targets and action, an adaptation package, new technology mechanism, financial arrangements, deforestation issues as well as a capacity-building framework.

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China and India have formally agreed to ratify the Copenhagen Accord, the global climate agreement which stemmed from last year’s U.N. climate change convention in Copenhagen.

Over 100 countries have already approved the Accord, which aims to limit the increase in global temperatures to no more than 2 degrees Celsius, or 3.6 degrees Fahrenheit, above pre-industrial levels.  The Accord also calls for spending on the scale of $100 billion a year to assist emerging countries in making adaptations to climate change.

China and India are two of the world’s fastest growing economies, and in recent years their rates of energy consumption and carbon dioxide emissions have skyrocketed.  By joining the Accord, China and India have added legitimacy to the treaty and have demonstrated to the rest of the world that they are serious about addressing these important climate issues.

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However, the “Copenhagen Green Climate Fund” planned in last month’s conference has not yet been implemented, making it likely that the donor countries will each determine how their aid packages are distributed and to whom.  Delegates from China, India, Brazil and South Africa have welcomed the pledge, calling the $10 billion expected to be released in 2010 an important symbol of rich countries’ willingness to help.

The Copenhagen Accord set forth a January 31^st deadline for nations to submit quantitative details on their voluntary emissions reductions targets and achievement strategies.  The United States has formally submitted its approval, and informed the United Nations of its intent to reduce carbon dioxide and other greenhouse gas emissions 17% from 2005 levels by 2020.  Todd Stern, the chief U.S. climate change negotiator, said final emissions targets will be submitted following Congress’ passage of energy legislation requiring carbon cuts.

“Since this year started we have seen a huge amount of interest – mostly from the U.S. – in carbon credits and it won’t be long before the voluntary market begins really to gain some momentum,” said Matthew Sullivan, CEO of carbon offset retailer the Carbon Advice Group.

The unregulated voluntary market is a mechanism for businesses to buy and sell credits – known as Voluntary Carbon Standard (VCS) or Gold Standards – for self-imposed and self-regulated emission reductions schemes.  It operates separately from the United Nation’s Clean Development Mechanism (CDM), and the European Union’s Emissions Trading Scheme (ETS), which together comprise the vast majority of the global carbon market.

Interest in both the CDM and the ETS has wavered since Copenhagen, as analysts and traders try to make sense of how the Copenhagen Accord, the non-binding agreement produced at the conference, will affect future demand and prices across the market.

A Deutsche Bank report found that companies specialising in energy efficiency and renewable energy such as wind and solar power outperformed peers across the wider global economy last year and expected more to come in 2010.

Clear proof of the threat posed by climate change meant that governments will only ramp up steps to curb carbon emissions and favour clean technologies, it said.

“The shift to a low-carbon economy to mitigate global warming will require the creation of new technologies, industries and jobs on a massive scale,” said Kevin Parker. Deutsche Asset Management had $695 billion in assets under management as of September 2009.

“The absolute imperative to prevent climate change is therefore also, I believe, the economic and investment opportunity of our lifetime,” he commented in the report.

Deutsche bankers looked on the bright side of a Copenhagen climate summit last December which failed in its main objective to drive global consensus on action to fight climate change.

Their report instead pointed to proliferating national green policies, regardless of a multilateral deal to fight climate change. Copenhagen failed to agree a mandate to agree a legally binding successor to the existing Kyoto Protocol.

“What matters far more is that national and local governments all over the world are not waiting for a supra-national framework,” said Parker.

“They are already pushing ahead with their own policies that will do far more than international regulation in the short to medium term to stimulate private investment.”

The report called for clearer, more transparent policies such as feed-in tariffs which typically guarantee particular prices for electricity generated from renewable sources over several decades, giving investors comfort to fund projects.

Since the 2009 low in global stocks, indices showed that energy efficiency stocks had risen 126 percent and clean energy and technology by 88 percent compared with wider global stocks’ 70 percent, Thursday’s report showed.

“Climate change is not merely an investment sector that may hold future promise; it is a sector that has already delivered and is continuing to deliver,” said Parker.

“That is why we believe institutional investors should be shifting their asset allocation towards climate change.”

(Reporting by Gerard Wynn, Editing by William Hardy)

Sourced from the Thomson Reuters Carbon Markets Community – a free, gated online network for carbon market and climate policy professionals.

Speakers include George Soros, chairman, Soros Fund Management, Al Gore, former US Vice President and chairman of Generation Investment Management, Kevin Parker, global head of Deutsche Asset Management, Anne Stausboll, chief executive of CalPERS and Rick Lacaille, CIO, State Street Global Advisors.

The meeting is sponsored by the United Nations Foundation, Ceres and the United Nations Office for Partnerships.

Deutsche’s Kevin Parker said: “In the wake of Copenhagen, we urgently need to figure out where the investments needed to solve climate change are going to come from. Investors cannot wait for an international agreement to begin shifting financial flows toward building a low-carbon economy.”

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