Plan Counts on Private Funding to Curb CO2

By JEFFREY BALL
COPENHAGEN -- Much of the money to fund a $100-billion-a-year effort to help poor nations deal with climate change tentatively endorsed Thursday by the U.S. would be put up by private companies and investors, not taxpayers, according to a senior Obama administration official familiar with the proposals.
Secretary of State Clinton tries to break the impasse at the Copenhagen climate summit by offering $100 billion a year for a decade to developing nations. Jeffrey Ball reports on how the offer was received in Copenhagen.
But whether the private investments materialize will depend on decisions both at the United Nations climate summit and well beyond it.
A bevy of businesspeople are attending the Copenhagen talks, looking for changes in climate policy that they believe will open avenues for private capital to profit from bankrolling carbon-reducing projects in the developing world.
Secretary of State Hillary Clinton on Thursday spoke of the U.S. and other countries "mobilizing" $100 billion a year by 2020 to help poor nations deal with climate change. A large chunk of this money would likely come from companies in the developed world buying "carbon credits" to offset greenhouse-gas emissions from their own factories, said the administration official.
The purchase of the credits would fund activities that avoid carbon emissions in the developing world: preserving forest land in Brazil, say, or installing solar panels in villages in Africa.
There would be some government money, which would go largely to projects unlikely to attract private capital. Among them, the administration official said: building dikes or storm-warning systems in low-lying, poor countries particularly threatened by a potential rise in sea levels triggered by climate change.
The prospect of buying and selling many billions of dollars in carbon credits is why hordes of bankers and investors are braving crowds and sometimes-violent protests to stay on top of the Copenhagen process.
"That's the only reason I'm still sitting here in the Bella Center," said Abyd Karmali, global head of carbon markets for Bank of America Merrill Lynch, referring to the conference center where the summit is being held. "The key for us is, in the actual text, is there anything that's actually creating the flow of private capital, and is there anything blocking private capital?"
Mr. Karmali is based in London, which has emerged as a center of the European carbon market that has operated since 2005.
One hopeful sign in Copenhagen for people in the carbon-trading business is a potential agreement to allow the sale of carbon credits produced by saving forests.
Trees consume carbon dioxide as they grow, and thus offset some of the world's greenhouse-gas emissions. But the degree to which any agreement in Copenhagen spurs the sale of tree-based carbon credits depends on a raft of arcane details. Among them: whether developing countries have to implement tree-saving policies on the national level, or just in parts of their countries, to allow the forestry projects within their borders to spawn carbon credits.
U.S. companies that emit large amounts of greenhouse gases -- particularly electricity producers -- have been pushing hard for rules that permit the purchase of carbon credits from trees, since those credits would dramatically reduce their cost of complying with any U.S. emission constraint.
Mr. Karmali estimates the sale of carbon credits from preserving trees could generate about $5 billion by 2015, most of it from U.S. firms. Curbing deforestation, in turn, could generate another roughly $20 billion in annual investments in developing countries, for instance, in technologies to monitor tree growth and materials necessary to make the projects work.
Poorer developing countries, however, have seen little money from the carbon market, and distrust of promised aid is high. "We don't want conditions" on how money from donors is spent, said Henri Djombo, minister in charge of the forest economy and environment in the Republic of the Congo. Too often, he said, donors say, "We will give you the money, but you do this."
The Obama administration official said it is fitting to have rules ensuring money is spent wisely, adding: "We have to also ultimately be accountable to our taxpayers."
Write to Jeffrey Ball at jeffrey.ball@wsj.com