The Heat Is Online

US, Saudis Block Climate Fund on Eve of Conference

US blocks key fund in climate agreement

Financial Times, Nov. 24, 2011

The US is refusing to sign off on a flagship global climate fund, as already fraught negotiations intensify ahead of next week’s UN climate summit and carbon prices plummet to new lows.

It was already feared that souring economic conditions and next year’s US presidential election would make it difficult for the UN summit – which opens on Monday in Durban, South Africa – to make headway on a new global warming deal before the main provisions of the  Kyoto protocol climate treaty expire at the end of 2012.

But officials confirmed on Thursday that the US, backed by Saudi Arabia, has still not agreed to adopt a blueprint for the  Green Climate Fund. The fund is one of the few measures to emerge from seven years of talks on how countries should share the burden of cutting greenhouse gas emissions, which risk raising global temperatures to dangerous levels.

First mooted at the 2009 Copenhagen climate summit, the fund is supposed to channel “a significant portion” of the $100bn a year developed countries have promised to mobilise by 2020 to help developing countries fight climate change.

At the same time, the price of carbon permits in the European Union, whose members are virtually the only wealthy countries willing to offer conditional backing for a new phase of the Kyoto pact in Durban, crashed to record lows .

The eurozone debt crisis is partly to blame for the price falls in the world’s largest emissions trading scheme, but a UBS report saying “the scheme is not working” and will suffer from an oversupply of permits until 2025 has also unnerved traders.

The price of European allowances under Brussels’ six-year-old emissions trading scheme fell to a record low of €7.80 on Thursday, and have tumbled 15 per cent this week. As a result, the EU could be more open to charges from those opposed to a deal in Durban that its own policies are inadequate.

In talks leading up to the Durban meeting, the US and Saudi Arabia dissented from the adoption of a report outlining how the Green Climate Fund should be designed.

The US, which has never ratified the Kyoto protocol, has said it wants more work on issues such as private sector involvement in the Green Climate Fund and which countries would contribute. Saudi Arabia wants compensation for oil-producing countries for revenues lost as a result of climate change actions.

The US State Department declined to comment on Thursday. The US special envoy for climate change, Todd Stern, has said the US is “a strong supporter of the basic [fund] concept” but considers its design “a little bit problematic”.

Chris Huhne, the UK secretary of state for climate change, on Thursday attributed this opposition to “negotiating tactics”. However, some people close to the talks fear that if the negotiations over a legally binding deal break down, they could take the climate fund with them.

Copyright The Financial Times Limited 2011