Isra-Mart srl: Durban inches towards deal on Green Fund, shipping, and CCS

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The negotiations on the future of the Kyoto Protocol may remain deadlocked, but a breakthrough could still be delivered on the promised $100bn-a-year Green Climate Fund.

According to reports, ministers are close to agreeing the framework for how the new fund would operate, funnelling billions of dollars to help poor nations cut emissions and adapt to inevitable climate change impacts.

Critics, including leading economist Lord Stern, have warned that the talks have focused almost entirely on how the fund would operate with little attention paid to how it will raise $100bn a year from 2020.

However, negotiators remain optimistic that once the framework for the new fund is in place it will become easier to agree on the mechanisms that can be used to raise the necessary finance.

Earlier in the week, it had been suggested that the US and Saudi Arabia were blocking a deal on the new fund, but in an encouraging development US lead negotiator Todd Stern told reporters yesterday that he had "a fair amount of confidence this is going to get done in a positive way".

In another encouraging sign, a bidding war is already under way to host the headquarters of the proposed fund with both Mexico and Germany putting themselves forward for consideration.

Senior diplomats said that any agreement on the new fund would represent a major breakthrough and could also have a knock-on effect on the wider negotiations given influential countries such as Brazil and China have made the launch of the fund a condition of their continuing negotiations on a future global climate treaty.

There was also speculation ministers could agree one of the mechanisms for raising capital for the new fund, with officials expressing optimism that they were close to a deal on some form of international levy on shipping and potentially even aviation emissions.

UK energy and climate change secretary Chris Huhne confirmed significant progress was being made, telling reporters that "we certainly think the aviation and shipping areas are the most likely areas to yield early dividends when it comes to funding finance".

Despite the concept being agreed in Copenhagen two years ago, financing the Green Fund when it comes into force in 2020 has remained a bone of contention, with cash-strapped countries arguing over the proportion of private and public funds.

But a document is circulating that would funnel the receipts of a tax per tonne on bunker fuel, simultaneously helping to tackle the three per cent of global emissions shipping contributes. It uses the same assumptions as a paper by Oxfam and WWF, which estimated a $25 tax, adding just 0.2 per cent to shipping costs, has the potential to generate $25bn a year in receipts by 2020.

Under the proposals, around $16bn a year would go to developing countries to offset the higher import costs that would result from the levy and $10bn would go to the Green Fund.

International Maritime Organisation (IMO) secretary-general Efthimios Mitropoulos told news agency Bloomberg yesterday that the UN body was considering the proposal, as well as alternative plans to establish an emissions-trading programme. He added that a decision on the measures could be made next year.

However, he did not specify what would be an appropriate levy and insisted any deal must apply globally.

"For this system to succeed, ships should comply with the same global standards all over the world," he said. "Were we to move to different standards for different ships you would have a major problem."

However, significant obstacles to a deal remain. The US is reportedly intent on stripping all mention of specific funding sources from the UN Green Fund document, while Australia has said UN bodies should deal with the problem of rising emissions.

"[Australia] supports multilateral discussions on this issue," a spokesman for climate change minister Greg Combet told the Australian newspaper. "There have been fruitful discussions in the International Maritime Organisation and the International Civil Aviation Organisation in recent months."

Any deal on aviation emissions is also likely to prove even more elusive than an agreement on shipping, with the EU currently battling with China and the US over its plans to impose emissions levies on airlines.

In related news, an agreement that could help accelerate investment in carbon capture and storage (CCS) projects in developing countries will be submitted to delegations for final adoption on Friday.

Talks on bringing the technology into the UN's Clean Development Mechanism (CDM) carbon offsetting scheme have been going on for the best part of a decade and at last year's Cancun summit participating countries agreed to allow it inclusion if a list of criteria were addressed and solved.

A draft decision obtained by Norwegian NGO Bellona states that CCS "is a relevant technology for the attainment of the ultimate goal of the Convention and may be part of a range of potential options for mitigating greenhouse gas emissions".

If adopted, CCS projects in developing countries could therefore sell carbon credits through the CDM scheme.

"COP 17 is looking good at this time to provide a milestone achievement for CCS that can remove much of the uncertainty of recent years on the capacity of the UNFCCC to support CCS-related (and therefore very large-scale) mitigation activities in developing countries," wrote Meade Harris, European regional representative for the Global CCS Institute, in a blog on the organisation's web site.

"Such a decision could also help enhance the ability of many national governments to put in place the appropriate frameworks that can give CCS projects their social licence."